• Hidden attractions

John Edwards writes that Anhui province deserves more attention from UK investors.

For many people, both foreigners and Chinese, the only contact they are likely to have with Anhui is a trip to the beautiful Yellow Mountain (Huang Shan) in the south of the province. If so, impressions of Anhui are likely to be confined to precarious roads, buses without brakes and a poor, rural population.

Actually, this would be unfair; Anhui has developed quickly in the last few years. Every province bangs its own drum and speaks of the wonderful investment environment that it offers. But in the case of Anhui, this seems to be backed up not only by impressive economic figures but also by a number of foreign enterprises choosing to locate substantial parts of their China-based production in the province.

With capital and labour costs substantially lower than in the traditional manufacturing heartland along the Yangtze River and with good opportunities for investment in infrastructure and environment, Anhui deserves to be known for more than its scenery.

In the last five years, the value of Anhui's trade has risen 10 per cent year-on-year and the province has leapt from 18th to 11th in the nationwide foreign trade rankings. This makes it the highest placed of all the central and western provinces in China.

At the same time, Anhui has worked hard to improve its basic infrastructure. Over Yn4bn has gone into the road network alone (including some Yn1bn of foreign investment).

The highways between the major cities of Hefei, Wuhu and Bengbu are now some of the best in China. The three-hour journey between Hefei, the administrative capital, and Bengbu, the industrial heart of Anhui, has been reduced from three hours to only one.

A new road to Hangzhou is now half-finished and will connect Hefei even more directly to the prosperous Eastern Seaboard. All three cities have airports, and Hefei has daily flights throughout China and direct flights to Hong Kong three times a week.

As in many parts of China, there is still a gap between this impressive hardware and the more long-term problems of human capital and rule of law. The provincial authorities are the first to admit that "mind-sets"; lag behind those in cities such as Shanghai and Beijing.

But even here, there are encouraging signs. There is not the widespread abuse of intellectual property found in the neighbouring province of Zhejiang - a claim backed up by foreign managers. And Hefei is also home to some of China's leading universities, foremost among them being the Anhui University of Science and Technology (AUST).

Seven thousand graduates of AUST are currently in the US and an increasing number plan to return to China to set up their own companies. The provincial government is trying to encourage yet more to return by offering them a Yn200,000 cash inducement and state housing provision.

These highly educated, internationally experienced science graduates could form a useful pool of local junior and middle managers for multinational companies.

Links with UK
British business can also benefit from a largely positive image of the UK in Anhui. Following a perceived clamp-down by the US on student visa applications, an increasing number of local students view the UK as the number one destination for higher education.

The UK is also seen as a major trading and investment partner. The possibility of UK investment totalling up to £500m in the next few years has led to two visits to the UK by the provincial party secretary in the past 12 months and a planned visit by the governor in November this year.

This high-level familiarity with the UK and the more widespread awareness of UK strengths means that British businessmen arriving in the province may not face the negative stereotypes of the UK that exist in certain other areas of China.

For more information about Anhui, contact: john.edwards@fco.gov.uk


Opportunities for British business
• Agriculture. Anhui has long been the test-bed for central government's agricultural policies. Now is no exception; the province is trying to increase efficiency of production, pre-WTO, by rationalising small holdings into larger units and setting up intermediary buyers and wholesale markets. There is also a major move towards production of higher quality and lower volume and, in particular, towards the rearing of beef cattle. The UK already works successfully with Anhui in the areas of pig and duck breeding. Anhui is looking to the UK for more help in fine breeds, epidemic-protection and processing. They are also looking for help in the implementation of international food standards that will allow their produce to be sold to the East China hotel market and to be exported.

• Infrastructure. UK companies have been involved in highway construction, water supply projects and environmental projects. There is still World Bank and Asian Development Bank money going into the Chao Lake and Huai River projects and more road development is planned. A list of major projects can be found on the website: www.ahmoftec.gov.cn

• Manufacturing. An increasing number of foreign companies, including UK companies, are moving primary production to Anhui. It represents a compromise between the developed but expensive eastern provinces and the even cheaper but riskier western provinces.