In the 25 years since the Beijing communist authorities began loosening the shackles of central economic planning and state ownership, the Chinese economy has boomed, with average annual growth of roughly 10 per cent a year.

Of course, ask any Chinese official what Chairman Mao would have thought of the reforms that have so far created a middle class of 200 million people, and you will get an answer as evasive as Peter Mandelson on textile import tariffs.

Winston Churchill was talking of Russia when he described the country as a riddle wrapped in a mystery inside an enigma, yet it is a phrase easily adopted to describe China, a nominally communist country that has more billionaires than France.

But one thing is clear amid the industrial smog of bureaucratic obfuscation: this stirring economic giant means business. It might once have built walls to keep foreigners out, but now it is doing all it can to encourage them in. Last year, non-Chinese companies invested more than $60 billion in China.

One British business that is leading the long march is Rolls-Royce. The Derby-based company, which recently won Cathay Pacific’s Star Award in recognition of its commitment to China, has offices in Beijing, Dailan and Hong Kong and a marine factory in Shanghai.

Through joint ventures with HAESL in Hong Kong and XRA, a state-owned enterprise in China, it employs more than 1,000 people in the region producing components for its jet engines. But China is not just a workshop for the company, it is also a market. Eleven Chinese airlines are operating more than 200 Rolls-Royce-powered aircraft.

Richard Margolis, a former diplomat who is now Rolls-Royce’s top man in China, is upbeat about the country’s prospects and dismisses the myth that doing business in the region is difficult or risky.

"Dealing with the Chinese is usually very straightforward," he says. "Of course there are some cultural issues to overcome. The Chinese have a natural reserve and they like to get to know you before they will do business. For them it is a matter of trust.

"But there has been a massive transformation in the quality of people working for the Chinese government and in business. Many are now overseas educated, bright and given responsibility to make decisions. The Mao-era brakes have been taken off the economy and the result is some great corporations."

Yet despite the obvious progress of the last 20 years, there are still areas where China lags the rest of the world. The country does not have a well-developed legal or financial system and standards of accountancy are often woefully inadequate.

International companies often complain that the Chinese government protects local businesses from competition and that there is little respect for intellectual property (IP) rights.

Dr Tim Moore, the chief executive of SGAI, a Cambridge-based technology consultancy says his company has to produce the parts for Hornby’s new digital Scalextric at four different sites in China to avoid the entire product being copied.

"Design and development costs are ten times cheaper in China than in the UK but you have to be very careful or you might find a counterfeit product out there before you know it," he says.

Xingguo Fu, the director of WTO affairs at the Chinese Ministry of Commerce, says China is doing all it can to enforce IP protection but admits there are significant cultural difficulties.

"In China there is an old proverb that says it is not a crime to steal a book because the dissemination of knowledge is for the good," he says. "Against this backdrop, it is hard to make progress," he adds.

Mr Fu, who is dressed in a presumably genuine Ralph Lauren sweater, says there are half a million officials in China engaged in the battle against piracy.

"We have both civil and criminal punishments for piracy and we are running a huge advertising campaign trying to educate our people about the damage copyright and patent infringement can do. We even have an IP week to promote the issue," he says.

"Thirty years ago Japan faced the same problem but now it has its own patents to protect and we hope to be in the same position soon."

But if the number of are hawkers selling counterfeit goods on Beijing’s streets is anything to go by, the scale of the challenge is immense.

Another issue Dr Moore's company faces is a high churn rate among its Chinese staff. "There is a very different culture to job loyalty in China," he says. "The economy is growing so quickly and there are so many opportunities that our best people often jump ship."

To mitigate the problem Dr Moore uses "golden handcuffs" and a staff bonus scheme. Despite the problems, Dr Moore says dealing with the Chinese government is "much easier" than dealing with the British government.

"There is less red tape than in the UK. Occasionally you have to 'oil the wheels' a little to get things done - particularly when importing goods - but in general, the way the Chinese government behaves is great."

Mr Margolis at Rolls-Royce agrees. "Sometimes we have disputes with our suppliers – usually over quality control but this happens every where in the world. If we cannot resolve the problem directly, we go further up the tree to the state holding company and they are always very helpful."

For more on business in China, click here

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