As good as you, at a fraction

In Shanghai, the stunning commercial epicentre of the People’s Republic, we catch up with Geoff Mills, an engineer who has helped foreign investors set up in China since 1993. He understands the place as well as any foreigner can. His words send a chill down my western spine because, from where he sits, China’s global economic dominance is both inevitable and coming fast.

Foreign investors in China go through distinct phases, he says. First, they’re here only for the cheap labour, and keep their know-how at home. Next they see that the guys on the production line, who are brighter and better connected than they thought, start to suggest ways of sourcing components here. Then they begin to turn product design for the Chinese market over to the Chinese, still keeping the core of the clever stuff back at head office. The final stage is the final shift of intellectual property over to the Chinese. Why? Chinese graduates are better educated, work harder and earn a quarter of what their Western counterparts do. (In construction, a project director at the top of his game on a prestige job in Beijing, can expect to take home around £8000 per year.)

This process is underway in manufacturing, and will happen in every sector. “When that time comes the question will be whether there are enough check-out jobs for our kids in the UK,” he says.

Is there a future for British contractors in China? No, Mills says. There are over 45,000 construction firms there, and the best are as good as the best in the world, and are quickly learning how to operate internationally. Warranties on buildings are longer than in the UK, between 30 and 50 years, which creates a harsher liability environment for contractors. Contracts tend to push relatively more risk onto Chinese contractors, and they tend to accept it. Mills says that from the point of view of his clients, who want to put up factories and other capital assets, China is a great place to build.