Missionary zeal

Last month marked a highpoint in Sino-Dutch relations with the visit to China by Queen Beatrix of the Netherlands. The queen's party was shadowed by a parallel economic mission, consisting of 40 Dutch company chief executives and headed by vice prime minister Annemarie Jorritsma. A Dutch economic mission has visited China almost every year since 1992.

This year contracts worth US$290m were signed, dominated by shipbuilder IHC Holland's US$131m order for the delivery of dredging equipment. Smaller contracts included Shell Solar which will supply 80,000 household solar heating systems to Xinjiang and AG/Ultragas to provide liquefied petroleum gas filling stations, gas con-version systems and car gas conversion kits. SHV opened its joint venture Beijing SHV Gas Corporation. In the financial sector, ABN Amro opened a branch office in Beijing, while MeesPierson bank opened a representative office in the capital. And on March 30, KLM inaugurated twice-weekly flights between Shanghai and Amsterdam. The national carrier resumed twice-a-week services to Beijing only as recently as 1996.

Boost to trade figures
Apart from these headline-making deals, the most important function of the business visit was to maintain contacts with Chinese counterparts. "It is crucial to show your face, around here once in a while," says the director of one small Dutch company.

The 1992 mission gave Sino-Dutch trade a small boost but the stimulus was short-lived. A similar boost was given by the visit of Premier Kok to China in 1995 which involved a gift of goods and services worth up to US$650m and US$265m in soft loans designed to benefit Dutch businesses. Some of these loans 24 have yet to be spent, and can still be used for projects involving Dutch companies until the year 2001.

Trade volume between Holland and China is small but it has been growing at an average rate of 13 percent in recent years. However, according to the latest Chinese customs statistics, overall trade went down some 10 percent in January 1999, possibly as a result of the Asian financial crisis.

Given the relatively small size of Sino-Dutch trade, single orders can influence trade figures considerably. For example, the purchase of seven Fokker aircraft in 1992 boosted the 1993 figure, which then fell in the following year (see chart).

According to a report issued in March by the Dutch Ministry of Economic Affairs, the composition of exports changed consider-ably in 1998. Exports of agricultural products grew 70 percent, with a particularly strong rise in dairy products. This was a result of a coordinated campaign to boost sales of agricultural equipment and produce. For example, a Dutch training and demonstration centre was opened in Beijing in 1997 with the aim of trying to instruct Chinese peasants how to breed fatter pigs and poultry for less money. The project, costing several million dollars, was sponsored by the Dutch government and 40 participating companies.

Dutch consumer goods exports have fared lowing the devaluation of many Asian currencies. By contrast, the study reveals that Chinese consumer goods exports to the Netherlands have surged, with a marked increase in personal computer shipments.

Dutch investment in China has grown steadily and seems to have been relatively unaffected by the Asian financial crisis. Household names such as Philips, Heineken, Unilever, Akzo Nobel and Shell have made big investments. The main Dutch banks, ABN Amro, ING Bank and Rabobank, all have representative offices.

In total, there are around 50 Dutch joint ventures in China, many of which are relatively small-scale. For example, last year Dutch Telecom announced a joint venture with a People's Liberation Army subsidiary China Electronic System Engineering Corporation (CESEC). The US$ 10m venture was intended to research possibilities into the CDMA standard for mobile telephones. The Chinese government's recent decision to expand the CDMA network in China is a welcome development for the joint venture but some doubts remain concerning the status of CESEC given the government directive last year for the army to withdraw from all business activities.

Holding back the floods
Holland, a country with considerable experience in holding back water, is keen on exporting its expertise in this area to China.

In 1998, two memorandums of understanding were signed involving the Dutch government and private sector companies concerning water management and improving port traffic in the Yangtze River Delta region.

Last month, specialist Dutch water companies including Grontmij, Van Essen Instruments, Ham and D Blankevoort attended water seminars held in Beijing and Shanghai.

Mr. Sylvo Thijsen, director of consultancy and engineering at Grontmij, says: "Holland was on the verge of major floods in 1993 and 1995, which led to an emergency law under which dykes were improved. In China, we propose a long-term, step-by-step approach. We don't want to start to build dykes immediately but after a gradual study taking five-to-ten years." Grontmij's Hong Kong office has already conducted a feasibility study of an 800km stretch of the Yangtze River.

Thijsen says Chinese dykes need to be made two-to-four metres higher so as to repel serious floods, like the ones experienced last year. However, financing is the main problem faced by Dutch water managers. A spokesman for Bouwcombinatie The Maeslant Kering, a group which constructed a huge double-flood barrier near Rotterdam, thinks that "a similar project near Shanghai could be three-to-four times as big and also four times as expensive."

Pension provision
The Dutch are also expanding in supermarkets. A hold strengthened its position in Shanghai last year with the acquisition of 22 existing supermarkets. The group created its own distribution system which supplies its shops on a daily basis.

Its ‘Tops' stores are highly competitive and seem popular with the customers. "Local shops try to compete, and we are being imitated all the time," says manager Mr. Erik Plas. "But if you walk around a Chinese supermarket you see there's simply no logic or philosophy behind it."

Tops sells a wide range of goods varying from fresh fish to frogs and the occasional Dutch specialty such as chocolate drops which have yet to win much favour with the local population.

Holland, also admired for its work in the provision of pension funds, has been invited to help China establish a national pension system. The central city of Chongqing has been nominated as a pilot city. The World Bank, ING Insurance and Dutch pension fund providers have travelled to Chongqing to discuss a `three pillar system' involving the creation of individual pension funds with contributions from the state, work units and the citizens themselves. Talks have taken place about the allocation of social security numbers and designing a computer programme which would enable individuals to check savings levels on an on-going basis. If the project is deemed a success, it might be taken nationwide.

Much has been done to try to help small and medium-sized Dutch enterprises wanting to do business in China. Government-subsidised small support points have been established in several Chinese cities with the help of the Netherlands Centre for Trade Development and the Export Information Service. They are run by a Dutch sinologist and a Chinese assistant.

Support points
At the moment, there are support points in Jinan, Nanjing, Wuhan, Chengdu, Tianjin and Hangzhou, with a new one likely to be established in Shenyang. Eventually, there are plans to establish a network of 10 support points designed to help enterprising small companies expand their business in China. "It's a lonely existence," comments a representative in one of the newly opened support points. But others say they are kept busy by receiving many requests for information.

Dutch businesses can also take advantage of Holland House in Guangzhou and the Rotterdam Commercial Representative Office in Shanghai. Holland House was set up in 1987 to promote bilateral trade through seminars and match-making programmes.