Rich rewards for a friend of China

WHEN two giant pandas arrived at London Zoo in 1974, they became an immediate attraction. Visitors flocked to see Ching Ching and Chia Chia; the press became obsessed by their inability to breed; and eventually the country mourned their deaths. The pandas, a gift from the Chinese government, were a symbol of the thaw in relations between London and Peking. And it was Sir Edward Heath who brokered this deal.

The former prime minister and Father of the House of Commons has been Britain's most effective ambassador to China since he first reopened diplomatic relations with Peking in 1972. He has visited the People's Republic 24 times, including his first trip in 1974, when he was given two 18th-century vases by Mao Tse-tung. In Peking they say that Sir Edward (along with Richard Nixon and Henry Kissinger) is one of the few Westerners who has ever really understood Chinese culture. Richard Branson relied on him last month to lobby for permission for his balloon to enter Chinese airspace.

Sir Edward has never made any secret of his political dealings with Peking, but he has been less forthcoming about the extensive business interests he has built up based on his knowledge and experience of China. Questions have been asked over the years about how he has afforded a period house in Salisbury described by visitors as "magnificent" and full of Chinese rugs and oriental ornaments, a succession of yachts called Morning Cloud and a champagne lifestyle on his MP's salary and ex-prime minister's pension.

Now, an Independent on Sunday investigation has revealed for the first time the extent of Sir Edward's business interests and found that he does not declare them specifically in the Commons Register of Members' Interests. He is paid by four companies, including the China Ocean Shipping Company (Cosco), which is owned by the Chinese government. Zu Chao, manager of Cosco's foreign affairs department in Peking, explained that Sir Edward had been hired because "he is a friend of China but he is also very British".

He is also paid by an influential think-tank, run by a Saudi sheikh: he is a member of the governing board of the Centre for Global Energy Studies, founded in 1990 by Sheikh Yamani, the former Saudi minister for petroleum and mineral resources. A spokesman for the centre, which charges pounds 1,300 for six issues of its oil report, confirmed that board members were paid "an honorarium" in return for endorsing the organisation's research and approving its financial statements. Lord Healey, the former Labour chancellor, and Baroness Hooper, a former Tory energy minister, are also on the board and both declare the interest in the Register of Lords' Interests; Sir Edward does not declare his in the stricter Commons register. Instead he lists his chairmanship of an unlimited private company called Dumpton Gap which has not filed accounts with Companies House since 1994.

Sir Edward last week denied that he was in breach of Commons rules, saying that he was not required to declare the interests as he did not use Parliament to promote the companies he was involved with. He insisted that the arrangements had been cleared by Sir Gordon Downey, the former Parliamentary Commissioner for Standards, in March 1996. His aim was to promote British business in China, he said.

However, evidence of the former prime minister's financial links to a Chinese state-owned company in particular will spark controversy about his relations with Peking. Sir Edward provoked anger by agreeing to attend the swearing-in ceremony for the new Chinese administration for Hong Kong in July 1997. Tony Blair and Robin Cook both stayed away.

He was also branded an "apologist for murder" by both Tory and Labour MPs when he compared the Tiananmen Square massacre, in which more than 2,000 pro-democracy protesters were killed, to the killing of 14 civil- rights marchers in Londonderry in 1971. "There was a crisis in Tiananmen Square and after a month in which the civil authorities had been defied they took action about it very well," he said. In his autobiography, he explained his position, saying: "We in the West must learn to be rather more cautious about judging the political arrangements in other parts of the world by our own subjective standards."

In September, Sir Edward travelled to China for a 10-day business trip. In Peking he met Zhu Rong Ji, the Chinese Prime Minister, and had lunch with several other senior ministers. He also held meetings with executives of companies he is involved with. On 14 September he had a meeting with Cosco's president, Chen Zhong Biao, and on the 16th he had lunch with the company's senior executives to discuss opportunities in the UK. After the meal they presented him with a bronze plate engraved with the company's logo in recognition of his work. On 15 September, he attended a meeting with executives of CGU, which runs the China Index Fund, in Peking. He flew to Shanghai and Hong Kong for other commercial engagements.

The former prime minister has worked for Cosco since 1993, advising the organisation on doing business in Britain.

Richard Taylor, Cosco's UK manager, said Sir Edward's role was to make "introductions" to relevant people and oil the wheels of diplomacy between the British and Chinese ends of the business.

"China was opening to the economic world very quickly, there was not the knowledge at that time within the company as to how to conduct business within the First World," he said.

"We use Sir Edward to further the trade aspect between the two countries because he has always maintained that the UK lags behind the rest of the world in trade with China ... He does a lot behind the scenes."

According to Mr Zu, the company has in the past paid Sir Edward's air fares and hotel costs, although not on the most recent visit, as well as presenting him with gifts.

The former prime minister also makes representations to the Chinese government on behalf of British companies wanting to invest in the People's Republic. He is an adviser to the Kleinwort Benson China Investment and Development Fund, for which he is paid an annual fee equivalent to that of a non-executive director, thought to be pounds 15,000-pounds 20,000. "It is paid but how much is not disclosed," said Peter Churchill-Coleman, a spokesman for the company. "I hope it is all in the Parliamentary register."

Sir Edward is also a paid consultant for Commercial Union's China Index Fund, set up last January. Joseph Mariathasan, a director of the fund, said he attended advisory council meetings twice a year and had been at a board meeting in Peking on 15 September. He confirmed that he would receive expenses if he was travelling on behalf of the company. "Sir Edward adds value in opening doors for us with the Chinese authorities," he said. "When he goes to China he can see Zhu Rong Ji - very few people have access to a Chinese premier like that."

In addition, Sir Edward acts as an unpaid informal adviser to Batey Burn, a consultancy which advises British companies on setting up in China. Its two directors are Peter Batey and Richard Burn, who are both former political secretaries to Sir Edward.

John Beyer, a spokesman for the China Britain Business Council, said companies often needed a link man such as Sir Edward to help them to get access to China. "You need help to get introductions in China - you can't just go and set up an office there, you need government permission, a Chinese sponsor," he said. "The Chinese say they are very attached to old friends and [Sir Edward] is an old friend of China, someone who has done a lot for them. They like to work with people who have done them good turns and they have done good turns for."

Sir Edward insists that only interests which directly affect Parliament should be declared. "I don't ask questions in Parliament about them, I don't speak in Parliament about them, I don't deal with ministers about them," he said. However, other MPs who do not use their position in the Commons to further the interests of companies that pay them do declare their interests in the register in order to be as transparent as possible.

During a debate on new rules for MPs' interests in 1990, he argued that the Commons should rely on the "integrity of honourable members". The idea that politicians "should be full-time members of the House of Commons, should have no other interests so that we could look after our constituents" was "not the tradition of the House, never has been and it never will be if we are to be effective".

That was before the cash-for-questions scandal and the report by Lord Nolan. Sir Edward may find the extent of disclosure of his interests under closer scrutiny now.