Lord Green,

Sir David Brewer,

Business leaders,

It is a great pleasure for me to attend the China-UK SME CEO Forum hosted by UKTI and CBBC.

I remember well in June last year I attended the SME breakfast meeting also hosted by UKTI and CBBC. This was shortly after my arrival in London as Ambassador of China.

It was through that event that I started to learn how important SMEs are in the UK. So it is no surprise that SMEs are at the core of UKTI and CBBC strategy.

It was also through the breakfast last June that I gained my earliest knowledge of SMEs in this country. I used this briefing to influence my visits across Britain.

One year on, I have visited many places in the UK. I have specially included visits to SMEs in my programmes every time. The result is that I am greatly impressed by the strengths of SMEs across Britain.

In Scotland, I accompanied Vice Premier Li Keqiang when he visited the Pelamis Wave Power Project. You may know how this company is a global leader. It is the first business in the world dedicated to the research and manufacturing of ocean wave power generation equipment.

In West Midlands, I visited the Brandauer engineering business. They live up to their claim of 'turning the seemingly impossible concepts into a manufacturing reality'.

In Wales, I visited Cenin Cement. This pioneering and award winning firm makes cement that reduces CO2 emissions by a striking 95%.

SMEs make up over 99% of businesses in China and the UK. This represents more than half of the economic output and employment.

It has been a while since the SMEs of our two countries have entered each other's markets. Our meeting today is symbolic of the importance of SMEs. Their value goes back to the early years of the People's Republic of China.

Over half a century ago, the 48 Group – 'The Icebreakers' opened the gate of China-UK trade.

Back in the 1950's many of the original 48 Group members were SMEs. Since then SMEs have all along accounted for the bulk of China-UK economic cooperation and trade. This matches the overall trend, as 70% of China's trade has been done by SMEs.

The 2009-10 fiscal year saw China become the 6th largest investor in the UK with 74 projects, creating 1,572 jobs for the UK. Most of these investors from China were SMEs.

Today we are here to discuss how we can support SME's. These strike me as the key points:

• How can we encourage the development of both Chinese and British SMEs?
• How can we build each other's markets?
• And how to strengthen our cooperation?

I believe that the answers are not as simple as more trade or investment.

I think the answers lie in how we can bring into full play the unique features and strengths of our SMEs.

We are not just buyers and sellers. We can be - and should be - long-term partners that cooperate at a more strategic level.

Let me share with you what I believe we should do.

We need to facilitate the cooperation between SMEs in China and the UK. We could do this with a fresh perspective of the three letters S, M and E.

"S" stands for strategic planning by our two governments.

A Chinese saying goes like this:

'Once the key link is grasped, everything else falls into place'.

We must set targets and make plans if we are to promote the cooperation between our SMEs.

To be specific:

• We should see our respective strengths and identify key areas of cooperation.
• We need to establish targets for each phase and map out routes reaching into the long term.
• We should include specific indicators such as trade volume and the share in total two-way trade.
• We can specify the roles and responsibilities of the government departments and industrial associations.
• And through the creation of incentives give a spur to SME cooperation.

"M" stands for market-orientation. It is the fundamental principle for SME cooperation.

It means first and foremost being market-based.

It is the route to grasping the opportunities and finding areas where cooperation can be optimised and interests maximised.

China has recently used strategic planning to reorient its economy. This is a core thrust of China's recently published 12th Five-Year Plan.

Through the Plan China will restructure its economy and boost consumption and demand at home.

The expected result will be a big jump in Chinese imports. In the next 10 years, China's cumulative imports are expected to exceed 1.5 trillion US dollars. By 2020, China's total retail sales will reach 10 trillion US dollars. This is a size similar to the market of the Euro Zone today.

It is surely obvious that this strategic planning in China offers great opportunities for British SME's.

I am certain many British SMEs will respond to this opportunity. These SMEs can do so from a position of great strength. As I told you, I have seen with my own eyes many businesses in UK with world beating advantages. Many have leading expertise:

• In components.
• Advanced technologies.
• Creative ideas about design.
• High added value and services.

That is why by cooperating with their Chinese partners, SMEs in this country will better share in the opportunities.

In summary, China's development offers British SMEs great potential. The key is to recognise the business opportunities arising from the strategic reforms now underway with China's industrial and consumption patterns.

I would stress that the letter M within SME should also emphasise the basic principles of the market economy.

SMEs are often constrained by capital, resources and core technologies. Every project and each opportunity of cooperation matter to the fortunes of the business.

Against these challenges I believe that SMEs will only prosper through attention to key principles:

• Long term relations must be an aim.
• Mutual cooperation and benefit must be an objective.
• Close attention to reputation and building trust is vital.
• Sharing opportunities and risks.
• And respect for the protection of intellectual property.

Our last letter is 'E'.

'E' stands for efforts.

In recent years, China and the UK have put significant efforts into boosting SMEs. This has come through a number of ideas and suggestions on supporting the development of SMEs.

The objective has been deepening the cooperation between SMEs in China and the UK.

One example has been highlighting SME cooperation in the China-UK Economic and Financial Dialogue. The same has been done within the Joint Economic and Trade Commission sessions.

Another area of cooperation has been strengthening the interactions between the chambers of commerce and industrial organisations. There has also been the establishment of the China-UK SME Summit Forum.

These are some examples of the growth of regular exchange mechanisms. All of this is reinforced by improving communications such as launching websites on information about SME cooperation.

As you know, early this year Vice Premier Li Keqiang visited the UK. During this visit business leaders of China and the UK held a forum where SME cooperation was one of the important topics. This event is symbolic of the high importance - and efforts - that both our governments place on nurturing SMEs.

So far I have covered the positives on SMEs. But for this discussion to be productive we must explore the areas we should work harder on.

The reality is that previous dialogue and exchanges point to many factors constraining China-UK SME cooperation. These are some of the major observations:

• British businesses have yet to build full understanding about China's investment climate and its market.
• More attention needs to be paid to Chinese procedures, steps and channels foreign business must go through to enter the Chinese market.
• By comparison Chinese businesses have just started their investment in the UK.
• These Chinese businesses lack experience of managing and operating internationally.
• Chinese marketing networks and ability to fend off risks tend to be weak.
• By contrast with Western markets Chinese brand names have far less influence.
• And visas to facilitate efficient business exchange are also an ever-present issue.

All these factors suggest we must intensify our efforts to find ways to advance the success of SMEs.

The success of China for the past 30 years provides compelling evidence of the value of international trade and exchange. The case for the crucial contribution that SMEs make is clearly made.

So what are the further practical actions to facilitate advance of SMEs? How can we support the "going global" of SMEs of China and the UK? How can we deepen, upgrade and advance their cooperation? I believe that efforts should include:

• Give full play to the roles of the government departments and chambers of commerce of our two countries.
• Build up initiatives, provide advisory and other services to serve as bridges. This forum is just a good example in this regard.
• Strengthen policy guidance and encouragement.

Last month, the Chinese Ministry of Science and Technology issued a publication that focused on SMEs. This analysed the benefits from the innovative development of science-and-technology-based SMEs

There were thoughts about, helping the Chinese SMEs go global. There were points about encouraging well-established SMEs to engage in international cooperation and exchanges. The publication showed the advantages to be gained by expanding businesses into overseas markets.

Other efforts could be to:

• Create favorable conditions for SME cooperation. A key way is facilitating personnel exchanges.
• Making sure visas are available. We should avoid denying visa applications that could stand in the way of a prospective contract.
• We should streamline the administrative procedures of examination and approval.
• We need to lower unreasonable investment thresholds and remove obstacles to our joint projects.
• We could step up financial and credit support. On that aspect I am glad to learn that the China is involved in setting up a China-EU special fund for SME cooperation.
• China is ready to discuss with the UK on how to make full use of that fund to ensure that our SMEs will truly benefit from this initiative.

To sum up:

• We must put in place more effective information exchange platforms and dialogue mechanisms.
• We need to create more favorable investment and operation environments.
• We should provide more powerful policy and financial support for our businesses.

Ladies and gentlemen,

Our SME cooperation is at a crucial stage. It is blessed with new opportunities through the strategic re-direction of the Chinese economy.

I believe that there is a strong case for optimism for the future of SMEs.

But that positive climate will only be sustained if we have well thought through strategies.

We must stress the market principles.

We will have to make unremitting efforts.

Those factors - and a recognition of the value of SME's - can contribute to the ever growing China-UK economic cooperation and trade.

Thank you.

※            ※           ※

On 1^st June, UK Trade and Investment (UKTI) and China-Britain Business Council (CBBC) co-hosted the China-UK SME CEO Forum. Lord Green, the British Minister of State for Trade and Investment and Sir David Brewer, Chairman of CBBC, together with nearly 200 business leaders from Chinese and British small and medium-sized enterprises (SME) were present at the event. Ambassador Liu Xiaoming was invited to the Forum and delivered the above keynote speech.

Lord Green addressed the Forum. He commended Ambassador Liu on his speech, especially on his summary of China-UK SME cooperation by using the three letters S, M and E. He believed that Ambassador Liu's proposals about enhancing China-UK SME cooperation were constructive. He said that the UK economy is at a crucial juncture of adjustment and restructuring, and SME cooperation of the two countries holds out great promise, as the two economies are cut out for each other. He expressed the hope that British SMEs will better grasp the opportunities China's development offers and build a long-term partnership with their Chinese counterparts.

(Ambassador Liu Talks with Lord Green (Left) and Sir David Brewer (Right))