United Kingdom Prime Minister Theresa May finished up at the last weekend her first official visit to China, having secured a joint trade and investment review. The ambition is that this will be the first step towards a new post-Brexit trade deal when the UK leaves the European Union (EU) next year.
The visit, which comes hot on the heels of December’s UK-China Economic and Financial Dialogue summit, sought to build on the momentum of Chinese President Xi Jinping’s London visit in 2015, which saw relations enter a “golden era”. Since that landmark trip, the 2016 Brexit vote has only increased the emphasis London is putting on consolidating ties with key non-EU nations with its EU exit on the horizon.
Through this Brexit lens, by far the most important element of the bilateral relationship with Beijing is economics, and UK business leaders signed an estimated $10 billion (Dh36.78 billion) of deals during the visit. The UK already receives the largest amount of Chinese foreign direct investment of any EU country, and is Beijing’s second-largest trade partner in Europe, after Germany.
Meanwhile, China is the UK’s second largest non-EU trade partner.
The pre-eminence of economics in bilateral ties was heavily underscored in the trip to Beijing, Shanghai and Wuhan. This built on UK Finance Minister Philip Hammond’s visit to the country last month to work out final preparations for a “stock connect” linking the London and Shanghai exchanges, and had agreed to examine the possibility of connecting their bond markets as well.
Representatives of more than 40 companies, universities and trade associations travelled with May as she sought to demonstrate that the UK will be able to boost post-Brexit trade ties with Beijing from infrastructure, and green finance and technological innovation. Take the example of UK energy and technology businesses, which are eager to gain market opportunities in the massive Chinese market, and where the UK is well-positioned as a leader in key sub-sectors, including energy management systems, offshore win and tackling air pollution.
The potential opening here is huge, given that China faces serious air and water pollution and it is more reliant on imports of oil than the United States. Moreover, Beijing is committed to moving its economy away from energy-intensive, inefficient industries towards cleaner energy and greater energy independence.
The planned Chinese domestic investments in these areas are huge and include potentially around 50 trillion yuan (Dh29.15 trillion) between now and 2020 for enabling urbanisation, with a focus on efficient, clean and low carbon infrastructure. Plus an expected 2-3 trillion yuan in renewable energy over the next 10 years; around 466 billion yuan in Ultra High Voltage transmission, and 3.8 trillion yuan on ‘smart grids’.
Outside the economic realm, after last year’s 45th anniversary of the China-UK diplomatic relationship, there was also discussion on security issues. Here, China last year tried to expand military cooperation with the UK, including for the first time last year sending warships to London for a tour.
For many, it might appear that the bilateral relationship is overwhelmingly one-way traffic, especially given that the Chinese economy is now a multiple of that of Britain’s. However, for all that Beijing may be the more powerful partner, it is grateful to the UK Government for softening up, in public at least, on human rights concerns about China, especially after bilateral relations temporarily went into a deep freeze in 2012 when then-British prime minister, David Cameron, met the Dalai Lama.
While this stance is certainly not without controversy, including with British Labour Party leader Jeremy Corbyn, who had raised human rights issue with Xi in 2015 in London, Brexit means that the May team increasingly sees that enhancing ties with Beijing, albeit not in an unqualified way, is in the UK national interest. Xi could be in power well into the 2020s, and, especially with Brexit, it is widely viewed in London that there is an opportunity to develop a relationship that could make a significant contribution to UK prosperity for a generation to come.
In this context, Washington had previously aired its concerns about the degree to which London is perceived to be cosying up to Beijing, especially under the previous government of Cameron when then-chancellor of the exchequer, George Osborne, had pledged to make the UK “China’s best partner in the West”. This had ruffled the feathers of the administration of the then US president, Barack Obama, following the UK’s decision to become a founder-member of the Asian Infrastructure Investment Bank (AIIB), which is being championed by Beijing to be a potential alternative to the World Bank.
An unnamed senior Obama administration official was widely quoted in March 2015 to be “wary about a trend towards constant [UK] accommodation of Beijing, which is not the best way to engage a rising power”.
Meanwhile, an official White House statement urged London to “use its voice [in the AIIB] to push for adoption of high standards”.
Taken overall, the UK Government’s desire to warm ties further with China is not without controversy, both domestically and internationally. Yet, May’s visit was a qualified success, which saw a number of new business deals struck and should reinforce the dominance of economics in bilateral relations.
Andrew Hammond is an Associate at LSE IDEAS at the London School of Economics.
