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28 February 2019

Chatham House: Britain needs to decide what it wants from China

British Chancellor Philip Hammond's canceled trip to Beijing highlights the difficult trade-offs the UK faces in its relationship with China.

[...]Seen from Beijing, China has been very clear about what it wants from a relationship with Britain, but Britain appears unable to decide what it wants from China. The defining emotion is confusion, the direction nebulous.

After hailing a so-called 'golden era' of bilateral ties during a state visit by President Xi Jinping in 2015, Chinese leaders now see the shock of the Brexit vote steering the relationship in a totally new direction without, apparently, a clear agenda. All of the suspicions that the Communist Party's leaders had about the dangers of Western democracy have been confirmed in spades. They may have also learned a more pointed lesson from the Conservative party about the dangers of externalizing internal party conflicts.

In contrast, China has a very clear set of priorities for the relationship.

Firstly, Chinese companies continue to look to the UK to provide a secure home for investment, providing opportunities to enhance their global brand value or to make new acquisitions without the fierce resistance encountered in continental Europe and the US.

Secondly, as China faces choppy economic waters and a trade war with the US, it is looking to build alliances with Western powers committed to the principles of free trade and globalization, like the UK, though not at the expense of relations with the EU.

Thirdly, Beijing is eager to be recognized by established economies, and has high hopes of the UK acting as a cheerleader for China's global ambitions as George Osborne did with the UK's membership of Asia Infrastructure Investment Bank. All three could theoretically be one of China's prized 'win-win' outcomes, and perhaps also benefit the British economy.

It is also important to remember why China has prioritized the relationship with the UK over other major European economies. While British media often focus on China's interest in education and tourism connections, Beijing has long admired British expertise in financial and corporate governance. As far back as the 1950s, Mao Zedong was championing the desire to become more like Britain's developed economy.

Today, while France and Germany have been important for providing manufacturing technologies, the UK is a more useful partner for the next stage of Chinese development: a shift to a service-based economy; the move to currency convertibility via Chinese yuan trading in the City of London; and a welcoming and absorbing of Chinese investment abroad. [...]

Some parts of the world do not understand the sense of humiliation today's Chinese feel when they look back on the past, at least in the version that is popularly presented domestically. So it is no wonder that Williamson's comments have sparked rage in Beijing. The UK is traditionally viewed by the Chinese as a former colonial power which inflicted humiliation on China in the Opium Wars. Seen in this light, the government must show its people that it can stand up to strong words from Britain. [...]

Full article on Chatham House

© Chatham House

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