Contradictions of the ‘Golden Era’ in UK–China Relations

Reuters photo

By

Kira Godovanyuk

The rise of China has prompted many international actors to reconsider their approaches to the country. At the 20^th Congress of the Communist Party of China (CPC) in October 2017, Xi Jinping announced that, by 2049, the country will occupy leading positions in the world. The United States has declared China a strategic competitor, a threat to the country’s national security, and essentially started a trade war. The European Union wants to develop a unified approach to its Chinese trade policy. However, the Italian government’s decision to join the Belt and Road Initiative has disrupted the “European concert.”

The United Kingdom demonstrates solidarity with Washington, although it is forced to tread carefully since it is now de-calibrating its foreign political strategy in the run-up to Brexit and considers Beijing a key economic partner.

Trade and Investment Interests

At a meeting in London in October 2015, Prime Minister David Cameron and President of China Xi Jinping announced a “golden era” in bilateral relations and strategic partnership in the 21^st century. After losing the Brexit referendum and handing in his resignation, David Cameron was appointed the vice chairman of a UK–China Fund, which has a registered capital of approximately £1 billion.

The United Kingdom has consistently supported Beijing’s investment projects. In particular, in 2015, it became the first western country and the first G7 member to join the Asian Infrastructure Investment Bank (AIIB). In April 2017, the United Kingdom laid a new railway route between London and Yiwu (Yiwu is located in China’s easternmost Zhejiang province) as part of the New Silk Road. The initiative is primarily intended to increase the trade turnover between the two countries.

Speaking at the Belt and Road Summit in May 2017, Chancellor of the Exchequer Philip Hammond noted that the United Kingdom was the westernmost point of the infrastructure project and, therefore, a natural partner of Beijing. In December 2017, UK Export Finance confirmed that it was ready to allocate £25 billion as part of the bilateral economic and financial dialogue to support the projects of UK companies as part of the Belt and Road Initiative.

In 2016, the United Kingdom was China’s eighth-largest global partner, and its second-largest trade partner in the European Union (its trade turnover was £55 billion). In 2017, China’s investment in the UK totaled £20 billion, and the United Kingdom is the fourth largest importer of Chinese-made goods. In 2018, mutual trade turnover reached £63.4 billion.

Today, China’s investment projects in the United Kingdom include, for instance, shares in such major infrastructure facilities as Heathrow Airport, and Manchester Airport, London’s tallest skyscraper (The Cheesegrater), and two Premier League football clubs – Southampton and West Bromwich Albion.

Continuing her predecessor’s policies, Theresa May made an official visit to Beijing with a delegation of UK businesspersons in January 2018. The visit resulted in trade agreements worth over £9.3 billion. At the press conference, the Prime Minister confirmed the country’s intention to “intensify” the “golden era” in the UK–China relations and announced a new ambitious UK–China educational programme of humanitarian contacts (155,000 Chinese students bring annually the UK economy approximately £5 billion to the UK economy every year).

Addressing the Parliament of the United Kingdom in November 2017, China’s Ambassador to the United Kingdom expressed his hope that, after Brexit, the countries would continue to build solid trade and investment relations.

The developers of the Global Britain concept expect that Brexit will make it possible for the United Kingdom to develop independent trade relations with third countries. A step in that direction was made during Theresa May’s visit to China, where prospects of a free trade agreement after Brexit were discussed. However, China has put a hold on things, preferring to wait for the outcome of the United Kingdom’s high-profile divorce from Brussels. Beijing has never concealed the fact that it viewed the United Kingdom as a gateway to the EU market. A no-deal Brexit could have a negative effect on the pace of the trade and investment cooperation between the two countries, while Frankfurt or Paris are ready to replace the City as Europe’s main financial center, which is where China’s financial assets will “flow.”

At the same time, some in the UK political elite are concerned that the inflated economic expectations of the “golden era” in the UK–China relations hinder a proper assessment of the political threats China may pose to the United Kingdom.

Political Dilemmas

The National Security Strategy and Strategic Defence and Security Review adopted in 2015 mentions both China and India in economic contexts. The objective of the government is to make China the United Kingdom’s second-biggest export destination in the next decade. Unlike Moscow, Beijing is not said to challenge the international order.

Bilateral relations between the two countries are developing along the lines of the global strategic partnership established in 2015: summits, an annual dialogue at the high ministerial level (ministers of foreign affairs and ministers of defense) and expert dialogue.

The first foreign visit of the new Secretary of State for Foreign and Commonwealth Affairs Jeremy Hunt (who came to office after the resignation of Boris Johnson) was to China in late July 2018. The agenda included talks held as part of the UK–China strategic dialogue. The visit was also memorable for a gaffe on the part of Hunt: the Foreign Secretary referred to his Chinese wife as Japanese; later, he joked that it was a “terrible mistake to make” for a foreign secretary.

It should be noted that the United Kingdom’s political establishment is wary of the Belt and Road Initiative, which they view as an instrument of China’s geopolitical and geo-economic influence. During her Beijing visit, Theresa May did not sign the memorandum to support the Initiative.

The media continuously write about the China-phobia of the United Kingdom’s politics. Today, Chinese investors are building the Hinkley Point Nuclear Power Station at the site of an existing NPP in Somersetshire in collaboration with French construction firms. Although the project was granted preliminary approval during David Cameron’s tenure, Theresa May had another expert assessment carried out in summer 2016 to estimate possible damage to national security immediately upon assuming office. The government was wary of a Chinese investment company getting direct access to the United Kingdom’s strategic infrastructure. The cost (£20.3 billion), which is twice the cost of the 2012 London Olympics, was also cause for doubt. As a result, the start of work on the project was delayed, causing displeasure on the part of China.

In 2012, information surfaced that China’s telecommunications company Huawei had made donations to the United Kingdom’s leading political parties. The Chinese technology giant has been present on the UK market since the early 2000s when BT (previously British Telecom) agreed to purchase equipment from them.

Debates are raging in the United Kingdom today about whether Huawei (which has been accused of industrial espionage in the United States and declared a threat to U.S. national security) should be allowed to participate in building 5G networks in the country. The UK’s National Cyber Security Centre concedes that risks of information leaks involved in cooperating with the Chinese technology giant may be minimized. At the same time, analysts point out that a direct ban on using the Chinese supplier’s equipment may result in financial losses of up to £6.8 billion. The United Kingdom’s telecommunications company BT has decided to remove Huawei’s equipment from its 4G network over the course of the next two years. The United States, Australia and New Zealand have already banned the use of Huawei’s 5G equipment.

Debates are going on concerning Beijing’s influence on academia. Cambridge University was reported to have received £3.7 billion in 2012 for the Centre of Development Studies from the family of former Prime Minister of China Wen Jiabao.

However, the influential Royal United Services Institute (RUSI) believes that “unlike Moscow, Beijing’s interference is not aimed at subverting the West, but represents a rigorous, ruthless advancement of China’s interests and values.”

“Paper Tiger” vs. the Chinese Dragon?

The Brexit referendum provoked debates on the United Kingdom’s place in today’s international relations system. The Global Britain concept proclaimed three priority foreign policy areas: the United States Europe and the Indo-Pacific.

The United Kingdom demonstrates an interest in the Indo-Pacific, where Beijing is active both militarily and as an investor. On the one hand, the United Kingdom’s geographical distance from the region prevents it from becoming a leader there. On the other hand, London still has a chance of becoming part of the existing “quadrangle” (the United States, Australia, India, and Japan / the Quadrilateral Security Dialogue) using such cooperation channels as the Five Eyes alliance and the Five Power Defence Arrangements [1]. The United Kingdom is actively seeking opportunities to become part of the region’s new configuration via strategic ties with individual countries of the “quadrangle” and in opposition to Beijing.

In 2018, a wave of Chinese spy fever swept Australia. According to Minister for Foreign Affairs of Australia Julie Bishop, Canberra and London face two major powers that wish to change the status quo in global politics, Beijing and Moscow, respectively.

The United Kingdom officially sided with Japan, Australia, and the United States on the issue of disputed islands in the South China Sea [2]. In 2018, London sent three Royal Navy warships to protect its interests in the Indian and Pacific Oceans, thereby signaling to Beijing that the United Kingdom supports “freedom of navigation.”

After Secretary of State for Defence Gavin Williamson confirmed in February 2019 the United Kingdom would be sending the HMS Queen Elizabeth, its Navy’s flagship, to the South China Sea, Chancellor of the Exchequer Philip Hammond had to abandon his planned visit to China. China was expected to lift the ban on sales of British poultry meat and cosmetics during the Chancellor’s visit. Former Chancellor of the Exchequer George Osborne said that the belligerent rhetoric that scuppered profitable agreements was ineffective and “quite old-fashioned.”

The proposal of the Secretary of State for Defence to engage “hard power” potential in order to oppose countries breaching international rules (meaning China and Russia) prompted an international reaction. He believed that otherwise, the United Kingdom would be seen as a “paper tiger.” The Ministry of Foreign Affairs of the People’s Republic of China called Gavin Williamson’s statement “a return to the Cold War rhetoric.”

The Secretary of State for Defence had said previously that Whitehall was considering the possibility of opening at least two military bases abroad, one in the Caribbean and another in the South China Sea (in Singapore or Brunei). Director of the Information and Press Department of the Ministry of Foreign Affairs of the Russian Federation Maria Zakharova called London’s plans “counter-productive, militarist and provocative.”

The interests of the United Kingdom and China overlap in other regions as well. China now leads in terms of the volume of trade and investment in Africa and is actively building up international development aid. Beijing has defined the Northern Sea Route as a mainline of the Polar Silk Road and is using soft power to boost its standing in the Arctic. The United Kingdom’s Arctic strategy notes that the country is interested in the Chinese project being in compliance with international standards, including environmental standards.

China continues to be a controversial area in the United Kingdom’s foreign policy. The main dilemma is how to find a balance between promising trade and investment cooperation with China, which is particularly important given Brexit, on the one hand, and political ambitions to oppose China’s strengthening on the other.

In April 2019, the House of Commons Foreign Affairs Committee recommended that the government conduct a restrained policy with regard to China and craft an extensive strategy by 2020. MPs are asking themselves whether they should recognize this as the “golden era” of UK–China relations.

1. A series of agreements between the United Kingdom and members of the Commonwealth (Australia, New Zealand, Malaysia and Singapore) signed in 1971.

2. It is territorial dispute concerning islands in the South China Sea (one of the principal maritime trade routes in the region); the dispute involves China on the one hand and Malaysia, the Philippines, Vietnam, and Brunei (with the US, Australia, and Japan on their side) on the other.

This article was originally published by the RIAC and is reproduced with their kind permission

Kira Godovanyuk

PhD in politics, senior researcher at the Centre for British Studies at the Institute of Europe of the Russian Academy of Sciences, expert at the RIAC.