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  • Dr Gerard Lyons

POINT OF VIEW - THE FUTURE UK-CHINA RELATIONSHIP

The UK needs a fresh template for its relationship with China. Central to this should be a differentiation between strategic and non-strategic areas. 

In 2015, the UK's and China's relationship was red hot - a "golden era"- with President Xi making a State Visit to the UK. Now, it looks set to cool.

In common with many other countries, the UK is recalibrating its relationship with China. This makes sense. The Sino-British relationship has become more complex. Many factors account for this, including: a changing environment in the West; greater awareness of controversial issues; and China’s growing economic and political might.  The need for a fresh approach is because, to use the words of the European Commission in describing its relationship with China last year, simultaneously, in different policy areas, China is a cooperative partner, a negotiating partner, an economic competitor and a systemic rival.  Strategic areas for the UK should include defence, security and intelligence. The latter, as we have seen, can stretch into technology and telecommunications. In these areas, China appears to be viewed as a rival, reflected in Huawei being dropped from the 5G network. China, meanwhile, is a believer in the Bandung principle and the non-interference by any country in the internal affairs of another. This can be seen as one of its red lines. In contrast, there are many non-strategic areas, where China and the UK can be viable partners. These include trade, economic ties, financial and investment flows. The U.K. government should avoid micro-managing its economic relationship with China but facilitate an environment in which the private sector can grow.  The importance of principles and values figured prominently in the UK Foreign Affairs Select Committee’s report on the Sino-British relationship last year, reflecting a desire for the UK to attach greater weight to non-economic issues. Thus embracing human rights and the rule of law look set to become more central, alongside the protection of intellectual property and non-discrimination, with the later allowing access for both into each other’s markets - in non-strategic areas at least. China is now the UK’s sixth largest export market, having been 26th at the turn of this century. Its position and importance is likely to grow, not only as the size of its economy increases but also because, in the next stage of its economic growth, the UK is likely to become more important for China’s development, as it moves up the value curve and aims to become a more service sector economy.  China is also the UK’s fourth largest source of imports and has invested heavily over the last decade in the UK, in areas such as finance, real estate, telecommunications and logistics, as well as Chinese students being an important source of income for the UK’s university sector. China has also assumed an important role in the UK nuclear industry.  The UK and China already have a good economic and financial dialogue, reflecting London's importance as a global financial centre and the growing financial and trade ties between both countries.  In a relatively short space of time China moved from being a follower to a leader in key aspects of technology.  This begs the question why the UK cannot seek itself to build its capacity further in technology, necessitating investment and innovation as well as increased spending on research and development.  As China’s global role increases there are many areas where cooperation between the UK and China is necessary. These include climate change, the environment and health.  Of course, an ongoing issue in recent decades has been the need for global policy fora to evolve, to reflect the changing shape of the world economy. This contributed to China’s establishment of the Asian Infrastructure Investment Bank (AIIB), as a competitor to the Asian Development Bank, and to the UK moving early to support the AIIB. China’s Belt Road Initiative (BRI) encapsulates many of the challenges as well as opportunities from China’s peaceful rise. It has been criticised as a form of financial colonialism and a way for China to exert its influence. Yet, it also provides an opportunity for the UK. The importance of London as a global financial sector, plus the underpinning of English Common Law across many countries, allows the UK a strong position as the BRI expands.  I advocate the UK pushing the case to establish a permanent secretariat for the G20. Currently there is a rotating presidency, which while politically attractive as it gives each G20 country a turn to host, comes with a cost. Some key issues, such as human rights, do not always figure as central themes for all. Having a permanent secretariat might allow this to change - particularly if we push for such a secretariat to be based in London. China is the world’s second largest economy. We are the sixth. Both are members of the UN Security  Council. While we should not overplay our hand, we should not underestimate ourselves either. There will be some areas where we will need to stand our ground, but there will be many areas where the UK and China will be able to engage and cooperate as our bilateral relationship matures.

© 2018 - designed by Dr Gerard Lyons