Friday, January 18, 2008

Selling to the Chinese

I heard an amazing statistic on the Today Programme this morning. Apparently the whole of the EU exports more to Switzerland than it does to China. Take a moment to digest that.

China's markets are there to be sold to and I guess that's why Gordon Brown is making China such a key target of his foreign policy and why he's taken 25 businessmen there this week. Britain is in a prime position to explot the Chinese export markets. Too often we have been beaten to the punch by Germany or the US.

So how best do we explot the Chinese opportunity? Have they got trade barriers which we will find difficult to overcome? Which kinds of industries will benefit most? Answers in the comments please.

51 comments:

  1. Errr..

    Export what exactly? What do we have that they want? Dunhill lighters?

    What GB appears to be talking about is Chinese "investment" over here, i.e. they buy our companies and properties - wonderful long term planning. To do this they will require accountants, solicitors, bankers etc. But we won't actually "sell" them anything.

    And, being Chinese, they won't use our professional advisers for very long at all.

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  2. Much of the stuff about China is dramatically overblown. China is very big, but it is also very poor, and a very long way away. In general international trade flows can be predicted by the gravity model, which says that trade equals the GDP of one country multiplied by the GDP of the other, divided by the distance between them. So it should not surprise us that we export more to Switzerland than China. Similarly, the Eurozone exports more to the UK than to the US. The US economy is much bigger, but it is also much further away.

    Similarly, last time I looked, foreign companies had invested more in Belgium than they had in China.

    "The shock of the old" is often more powerful and more important than "The shock of the new"

    (Tim Leunig teaches economic history at the London School of Economics)

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  3. Interesting - I just heard the same interview in the car and my impression was that the Chinese are:

    1) Very shrewd ( and managed to get one over on Gordon last time he visited over Rover ).
    2) Are only interested in buying our remaining technology and means of production - not the goods themselves- after which they won't need us and we won't be able to buy anything from them.
    3) How easily seduced we are about brands and pseudo property like that.

    Frankly if the Chinese get 2) then we're stuffed. And Gordon's just the man to sell it to them.

    It is spun by Brown and getting British jobs ( a lie as we know now as the state can enforce no such thing ). And the pro-Labour BBC continued the spin by talking about cheap Chinese goods and inflation as part of Browns rewriting of recent history to show himself as a hero fighting inflation ( as long as it isn't real inflation - but Gordo's sock puppet rate of the CPI for gullible public servants ).

    Still Gordon should enjoy the holiday in a one party state - given that's his ultimate ambition for the UK.

    PS Prediction - the Chinese want aerospace technology - Gordo will give it to them. Gordon also could do with c £50 billion from a sovereign wealth fund for a little funding trouble he has .....

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  4. There's a world shortage of resources like steel and copper because China is devouring them like mad.

    Is the EU really exporting more of its steel and copper to Switzerland than China? Remember that eastern europpean countries have vastly increased their steel production

    Are the BBC being deliberately misleading? Possibly by selective reporting, in order to fool us for some uknown, but probably pro-Brown, reason?

    I would seriously question their figures.

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  5. They removed all the plant from Longbridge. They've bought the marques they wanted. It's hard to imagine anything else here because the aircraft production facilities that interested them went off to Taiwan ages ago.
    Brown's gone to beg for sovereign wealth fund investment in Northern Rock - it's their last chance to save the great Third Sector Economic Plan for Brown's Britain.

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  6. From the Europpean commission, no less:

    "Two decades ago Europe traded almost nothing with China - now it is Europe's single biggest source of manufactures and Europe's fastest growing export market. EU-China trade has doubled between 2000 and 2005 making Europe China's largest export market."

    http://ec.europa.eu/trade/issues/bilateral/countries/china/pr241006_en.htm

    Case closed. BBC wrong again. What a surprise.

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  7. They can make almost everything a lot cheaper, so exporting goods is difficult. We can sell them ourinventions , our technologies , our services etc.

    Having worked there for a short time, I know Chinese people to be among the friendliest, most respectful in the world, but do not share our concepts of contractual obligation. Getting the money up front was one of the best decisions I made before I went over there!

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  8. Iain, nobody but the Chinese are making money in China. Here is a joke I was told about Chinese business practice by a banker recently.

    A banks spends months negotiating the terms of a commercial loan to a Chinese enterprise. After a great deal of hard work the deal is signed, hands shaken and a hundred million dollars transferred to the Chinese company.

    Next day the bank gets a phone call from its Chinese customer.

    "Hello, It's Chen here. We want to meet to discuss the interest rate on the loan."

    "Discuss the interest rate?" says the banker, puzzled. "I don't understand. We've already agreed the interest rate. The terms are the terms."

    "Yeah," agrees the Chinese, "but that was yesterday."

    "I'm still not with you," says the banker. "How does that make a difference?"

    "Yesterday," explains the Chinese, "You had your money. Now, we got your money."

    It's a parody, but not a very gross one.

    The Chinese aren't about to buy manufactured goods off us. They will, as John Miller says, buy some services. The UK's competitive position in the provision of such services is a lot stronger than many suppose. We use an international language, our banks are sound and effectively regulated, the accounts of our companies are honest, and if anything goes wrong dealing with us you can get a contract enforced in our courts.

    One cannot say all of the above of, I dunno, India, Taiwan, or Russia, or actually even France (some of the above apply to France, but not all).

    The trouble is that increasingly Labour are unravelling the stuff around financial integrity - runs on banks, demonstrably shambolic regulation, and so forth.

    Given that these days this stuff is most of what we do, it is pretty worrying that the government understands so little of what makes brand UK worth anything that they're prepared to jeopardise it.

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  9. Mitch: correctamundo.

    Tim: I'm sure you've read Joe Studwell's book The China Dream on western firms investing in China. It shows the pointlessness of trying to flog stuff to people who are poor, have no respect for intellectual property and prefer to buy local.

    The only success I can think of is the whisky trade: Edrington Group is very successful out there (whisky is our fifth biggest export).

    Now India: there's a country with a bright future!

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  10. Maybe Gordo is trying to sell a splendidly tasty wee bank to the Chinese...knock down prices!

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  11. I have to agree with john miller. When you say "Britain is in a prime position to explot the Chinese export markets". In what way, given the general unreliability of our products and the high value of Sterling? I accept that our major companies are still willing to pay large bribes to seal a deal and the Chinese certainly know how to take them. Is that what you had in mind?

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  12. How do we exploit it?

    Hong Kong.

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  13. We're not going to sell anything but luxury goods - unless we find oil, that is.

    I wonder if these figures include skills - such as consultants - that are exported?

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  14. mitch said...
    “From the Europpean commission, no less:

    "Two decades ago Europe traded almost nothing with China - now it is Europe's single biggest source of manufactures and Europe's fastest growing export market. EU-China trade has doubled between 2000 and 2005 making Europe China's largest export market."

    ….
    Case closed. BBC wrong again. What a surprise.”

    No, you are wrong. Iain is talking about EU EXPORTS to China and to Switzerland. Do you not understand that, although the exports to China have doubled, the value of those exports is still relatively small?

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  15. I can't understand why you are surprised at this. It is like 'coals to Newcastle'. What can we possibly have that they can't make at a tenth [hundredth?] of the price.

    The unseemly scramble to make dosh from China when they have such an awful human rights record appals me.

    Maybe if we all stopped buying their stuff until they reformed they might come to their senses.

    Tienanmen Square anyone ?

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  16. Being involved in Mergers & Acquisitions on an international front, I concur with the opinion of most here regarding the Chinese. I know of very few companies who have gone into partnership with the Chinese who have made any profit at all. It may well be a future market, but for many it will be an expensive wait. On the other hand, India is an excellent opportunity, far easier to work with! Two days ago, together with our Indian partner, we held a seminar for businessmen interested in cooperations. It was a big success. Their vehicle production companies are investing heavily in Europe and are actually producing here. They already own some well known Tier 1 suppliers .

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  17. Mitch,

    Public perception of the BBC is as usual out of date and inaccurate. Here is the BBC source lifted directly from the commission website;

    • Trade flows: EU exports to China are growing strongly – 21% in 2006 – but the EU still exports less to China than it does to Switzerland. The EU bilateral trade deficit with China follows the same trend as the US deficit: over the single day of the Joint Ministerial Trade Committee Meeting, the EU-China Trade deficit will widen by about €350 million. A part of this is accounted for by a shift in production from other markets in Asia to China, but it nevertheless points to an increasingly unbalanced trading relationship in which the EU export potential to China is hampered by barriers to trade. A study published by the Commission in 2006 (see below) reported that about €20billion in trade opportunities are lost every year to EU businesses because of market access barriers in China. The EU continues to pressure China to address these problems.

    Perhaps the Broown one is trying to unblock some of these barriers, however my experience of selling to China is that you get nowhere without a local distributor - they are the only players who have the power to collect payments.

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  18. I am travelling at the moment and have just met two businessmen separately with operations in China. Both had been there for several years and neither saw any prospect of making any money there. More significantly, they did not know of anybody else who had. As has been noted, it's a very difficult environment, as the Chinese have no respect for intellectual property and have an outdated, mercantilist view which means they want to keep the best opportunities Chinese. Certainly it's good to promote trade with China, but I don't see that it's a bigger opportunity than other countries around the world. It's a long way away and a difficult environment.

    I wonder if the Swiss trade figures include reexports. I would assume they do, which would mean they overstate the significance of Swiss trade to the EU. Goods sent from Germany to Italy or France to Austria going over those Alpine passes but not stopping in Switzerland would be counted.

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  19. Bugger the Chinese Iain, they want to take over the world, which we should prevent.

    We should be looking at the potential market in India. Afterall the French have just been there and identified £500bn of capital infrastructure projects, and we cannot let the Napoleonic cheese eating surrender mnokeys get a march on the UK.

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  20. Trouble is, penfold, just you try getting a contract enforced by an Indian court.

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  21. Brown - what a prat. I think he hides how thick he is by never seeming to understand the question.

    He wants to sell stuff to China.

    Who doe he take with him?

    Richard fucking Branson.

    What a fucking shambles.

    The only thing they want from us is our new Nuclear Aircraft Carrier blue prints

    and if the Chinnese havn't already stolen them, Branson and Brown are just the boys to show them to um for free.

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  22. Penfold said:-

    "we cannot let the Napoleonic cheese eating surrender monkeys get a march on the UK."


    Hello Penfold, having many relatives of French origin, I cannot allow your racist remarks to go without comment.

    Your attitude is typical English and obviously you have swallowed hook line and sinker the ravings of your BBC and governmental led stereotypical nonsenses!

    In fact.France is way ahead of England on many fronts, and has been for a long time. For example, transport infrastructure, education, energy provision to name but a few.

    But, why bother to catch up with us when you are obviously content to let your "little" country sink into a mire of its own making. Its so much easier to sit back and do nothing(it obviously suits your national character)

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  23. From what I have read above, Brown is going to need all his legendary schmoozing skills to get anything out of this.

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  24. It's not about exporting to the Chinese, it is about being on the ground there to produce local things for the Chinese to consume.

    For example, the USA does not export Coca-Cola, it simply grants a licence to a local bottler and collects the annual fee.

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  25. How can this possibly be true about trade with Switzerland. Whenever anyone suggests that Britain leaves the EU, we are told all trade with the EU would halt immediately as it is a key benefit of membership...

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  26. Our relationship with China is surely mostly investment in their industries, their investment in ours, and design, import and value adding rather than export to them that shows up as such?

    Why would anyone expect us to be exporting much there at the moment? That may change but for now it's the wrong question and wrong measure to be looking at.

    Brown is clearly right to take an interest and hopefully he'll come back with more than a panda.

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  27. The produce a lotbut we have a considerable edge on high technology. If only the British nuclear industry hadn't been deliberately destroyed by government we would be able to sell them reactors. In stead we will probably be buying some from the Canadian company which used to be a subsiduary of BN but they were ofrced to sell to the Japanese. If we wish to have anything to export to them in future we will have to support, or at least cease regulating out of existence, our high technology industires. Meanwhile the people who created Dolly the sheep are mostly working in Singapore because GM which is going to be one of the 21stCs main industries, is unwelcome here.

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  28. We can't compete with chinese manufacturing costs because they don't have a bloated welfare state to support.
    However, due to China's shortage of arable land compared to it's population size, food is always going to be a major import requirement.
    Since our farmers are being paid by the EU for not growing crops, how about stopping these payments and then let our farmers grow crops to sell to China? Win Win!

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  29. We are a high priced service economy. The Chinese need nothing from us that they can't get at home for less than $2,000 per year.

    As somebody once said to me about India, not so long ago: there are 700 million shoes in India, and 700 million people. Before most of them buy any fancy goods off you, they will but the other shoe.

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  30. Gordon will be trying to convince the Chinese not to take up places at independent boarding schools for their sons and daughters on the grounds that it reinforces elitism.

    Perhaps he might end up taking calls from Mr John Walker, Alexandra Haig and Mr Glen Grant.

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  31. A former employer used to exhibit at Chinese trade shows. The item that drew most interest invariably went "missing" for a short time on its return journey.
    Then at the next year's show there would be a Chinese lookalike on display.

    Not so different from the old Soviet era show in Leipzig come to think of it.

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  32. Seeing as the Chinese can make anything from a plastic toy to a space rocket what the hell can we sell em? diddly squat is what.
    They just want to be seen on the world stage before they buy it and move it to china.

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  33. We tell them to get the hell out of Tibet, stop supporting North Korea and to stop eating anything that has a pulse especially Tigers, Cats and Dogs. Oh, and they also have to disband the Tiger Farms and especially the Bear-bile harvesting laboratories - these enterprises are only in existence in order to big up the sexual energy of your average Chinese man. My advice is to use a Western alternative - buy a few plod videos.....

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  34. Not wishing to be pedantic. Do you intend to register the new word you have invented "explot". It could be used to denote a plot no longer in existence, for example, the foiled Gunpowder Plot.

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  35. Wrong question. Imports are a good - we get the stuff we want, and if the Chinese dump their goods on us, we get them cheaper, which means we get richer. Exports are a cost - what we have to produce th at we don't want to get the things we do, and if we're getting lots of lovely cheap Chinese goods for bugger-all manufacturing effort, that's great. If they choose to put up trade barriers against goods they could get cheaper from us, tough on them. The mercantilist fallacy is dead, but it won't lie down. I shudder to think that Iain wants to be an MP - but then, Mandelson thinks the same silly things.

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  36. I,m off to open an english take away

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  37. An interesting statistic is that Russia (vodka, nice chicks, bad food) has a smaller economy than Italy (rioja, nice chicks, good food).

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  38. I have just read with incredulity that Comrade Brown has promised £50m – of our money – to the Chinese despite claiming he is there to ‘drum up’ business to benefit this country! Whilst he probably feels an affinity with his Chinese Comrades – this goes beyond the usual drunken sailor spending habits of Lefties – and is a gross insult to the police who have just been refused a pay rise.

    And I would like to know why Comrade Brown is treating the Chinese as if they were impoverished when they have bought over $700 BILLION worth of American Treasury and Agency debt? Unless Comrade Brown hopes they’ll buy this country’s debt – amassed since 1997 – as a form of ‘cooking the books’ to try and hide the fiscal horrors he’s created?!

    As for the Bolshevik Broadcasting Corporation’s reporting – it’s performing its usual function as this Labour Government’s Pravda.

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  39. I believe that the liberal democracies face a real problem with China. It is a problem that the BBC are currently ignoring. Such ignorance is demonstrated by childish news reports, which say that Great Britain was a minor country in Marco Polo’s day and that China was great power then and “the wheel has come full circle”.

    The problem is that modern day China represents a triumph for state communism and a defeat for liberal democracy.

    In the late 1970s state communism suffered a severe crisis. The Soviet Union and China represented the two greatest communist powers. The former was running out of money and could no longer rely upon the myth that everyone was building communism and had to suffer now to make gains in the future. In addition, it had proved impossible to maintain the level of coercion that had been used to subdue its enemies. Senior party officials in the satellite communist states were openly embracing Christianity and getting away with it. China had suffered the cultural revolution. An overt attempt to subvert the Confucian tradition of seniority. The Chinese were also running out of money.

    The Chinese communists decided that the way forward was to liberalise the economy. There was a strong communist tradition of trying to do this. Lenin had authorised the New Economic Policy, which was a neo-capitalist system but it had been sunk by Stalin. In addition, some of the Soviet satellites were effectively running systems which allowed minimal elements of capitalism. Notably, Zhivkov’s Bulgaria.

    The liberalisation of the economy was a huge success and helped China to ‘blind’ the liberal democracies to the fact that they were still an authoritarian communist regime. They were helped by the fact that western politicians were increasingly influenced by multi-national companies, who could only see benefits from such liberalisation.

    The medium term result of the liberalisation was to make the Chinese communist party enormously rich.

    The Soviet Union chose the route of political liberalisation. This was a complete disaster, from a Soviet viewpoint. In a very short time: the Soviet Union lost its empire; split up into its constituent parts and lost major state assets to individuals, who were chiefly former communists with connections which allowed them to effectively rob the state.

    Now the liberal democracies face a real dilemma. China is to be the future superpower. Yet there is no way that the Chinese communist party is going to emulate the Soviet example and initiate their own destruction. We will have a communist autocracy as the most powerful country in the world.

    There are currently two ways that the liberal intelligentsia in this country are dealing with the problem. The first is to ignore it. This is what the establishment is also doing. The second is to produce idiotic theories that Chinese communism will collapse under its own weight. The sort of ideas retailed by Will Hutton in his latest book “The Writing on The Wall”.( remember that book that lauded the coming Blair Revolution, “The State We‘re In”. Well, we are definitely in a state now, Will).

    Rich institutions do not collapse under their own weight. They buy up poor institutions, just as the Chinese communist party is buying up large parts of Africa. They are also investing in western countries.

    By the end of this century we will know if increasingly impoverished liberal democracy can triumph against a seriously well funded communist state, which owns large parts of the world, including many of our own major companies. I wouldn’t hold your breath, if I were you.

    I haven’t even mentioned what will happen when ordinary Americans realise that they are no longer “top dogs” (a position that they seem to believe is theirs by divine right) and the ‘commies’ have come back. We can expect fireworks.

    If the world still exists in 110 years time then you can expect British schoolchildren to be reading hagiographies to communist heroes, such as Castro. There will have been a ceremonial reburial of Karl Marx in Beijing. Mao will be the great helmsman and Simon Heffer, Iain Dale and, indeed, myself will have been erased from the pages of history. Capital punishment will be back and career politicians will be having a “field day”, in our own communist party.

    I hope this doesn’t happen but someone had better realise that we are “sleepwalking” into Chinese world domination and the corollary of that is communist political domination . If this happens then Lenin‘s world revolution will have succeeded.

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  40. Selling? Northern Rock, I assume...

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  41. john miller said...

    "Export what exactly?"

    Any half-decent manufacturing capacity not already ruined/destroyed/sold off to India, Korea, etc during the disastrous Thatcher-Blair years.

    No doubt Channel 4 News and Al-beeb will soon have Chinese economists in expensive suits joining Indian economists in expensive suits in telling us how great it is for the UK to be left with an economy based on nothing but nuts and bolts assembly lines, City spivs and McJobs.

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  42. m.hristov has said, with great eloquence, all that I might have said.

    Selling to China is a delusion, we have nothing tangible that they want. No foreign country or country is ever going to make any money out of China.

    Any raw materials they need will be pillaged from Africa as buy up that continent.

    I wish we had paid the police and nurses their dues instead of giving their pay to the Chinese. China does not need such pocket change - it is doing fine selling rip-off merchandise, dodgy toothpaste, poisonous dog food and toxic toys.

    Perhaps if we gave them Viagra to the value of £50-million we might just save some endangered species.

    Victor

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  43. Brown is talking rubbish and he knows it. He pretends that we are still free to set trade relations with China as we think fit. Of course, we no longer have control of trade policy - we have given this power away to the EU.

    When will people wake up????

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  44. While the cat is getting attention away his Jockmice are slipping out yet more favourably treatment.

    "Scottish and Southern Energy plc ("SSE"), the UK’s second largest energy supplier, has said that it will keep its electricity and gas prices for domestic customers at their current levels for the rest of this winter and until at least the start of British Summer Time."

    Why is that whilst English customers have to face massive price hikes Scottish ones don't?

    After all the largesse the Scots are getting spent on them by the nationalists this is now getting really fishy.

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  45. Brown has broken britain. Where does Brown find 50billion for Northern Rock with national debt exceeding 500billion?

    Brown has signed Britain laws over to the Euro borg and sold the country to China.

    Coincidentally a flight from china suffers double engine failure 25ft above Brown's head on his way to China.

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  46. My thoughts exactly, what\exactly do we have that the chinese could possibly want, the country is being Gutted.
    If the Military coup or civil war dont happen soon, we are finished.
    Zeitgeist
    http://www.zeitgeistmovie.com

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  47. What's the worst that can happen? They all move into Notting Hill and west London property prices double again?

    The once fragrant delights of Provence were destroyed by the English many years ago. Slack-jawed Russian oligarchs and their Amazonian hooker girlfriends bribe the maitre'ds of any decent restaurant on the Med to get the best tables and lobster before we are barely over our morning swim and into our first bottle of gin. The children of the African kleptocracy steal the places of our children at Harrow and Eton. We don't even bat an eye at Aussie press barons taking over our beloved organs of free expression.

    They are hungry for a piece of Anglo culture and who can blame them for that? Damn those Tudor and Stuart adventurers and their successors. Damn them all to W (h)11.

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  48. Mr British Patriot - did you see this edifying piece of rubbish before or after you had already decided the world had gone to Harrowgate in a handbasket? I suspect the latter.

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  49. Anon7.09pm said
    the world had gone to Harrowgate in a handbasket

    surely you meant to Harrogate in a Harrod's hamper?

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  50. I stand corrected Troll Patrol

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  51. The truth will out. Brown's "drumming up business" actually included a power station that is fuelled by natural gas instead of coal, apparently the first of its kind in China and has been developed "with the help of a UK firm", according to the BBC.

    It turns out that the UK firm was Camco International, who don't build power stations, rather they arrange Carbon Credit schemes. The upshot is that rather than selling the Chinese any valuable services or technology, UK companies have bought carbon credits from the powerstation for £50m - presumably because somebody has convinced the UN certifiers of carbon credits that building a gas fired power station is worth some credits because it emits less CO2 than a coal fired power station.

    Net effect is that in order to avoid a UK government charge on increased emissions, UK companies have given £50 million to China, and the Chinese have increased their CO2 emissions by building a gas fired power station, which presumably they would have done anyway (because £50m is unlikely to be enough to change the decsion between gas and coal fired paower stations).

    No wonder the Chinese said they were pleased to see him.

    Next stop on Brown's trade mission was India, where he announced a £825 million giveaway to fund education in India. That is more than the government spends in most English counties in a year.

    Brown is just giving away tax payers money to buy publicity and friends.

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