A Chinese golden era is worth pursuing - but not at any cost

George Osborne wants a closer relationship, but that should not be at the expense of EU ties

Chancellor of the Exchequer George Osborne meeting with China's Finance Minister Lou Jiwei at the 2015 IMF/World Bank Annual Meetings in Lima, Peru earlier this month (Reuters)

Britain and China are embarking on a “golden era”, to be celebrated this week with the state visit of President Xi Jinping. There has, unsurprisingly, been controversy about it, with Jeremy Corbyn seeking a private meeting with Chinese officials over human rights, and the Prince of Wales not going to the grand banquet at Windsor Castle.

But the visit will be very much the full works, with all the grandeur we can muster, in an effort to rebuild our relationship with China following the rift that occurred after David Cameron met the Dalai Lama three years ago. It follows a charm offensive by Prince William and George Osborne, on separate visits to China earlier this year.

We are seeking to reset our relations with the leadership of the world’s second-largest economy. You can see this in cynical terms – that we are acting for our narrow economic advantage – but I suggest that there is something bigger happening here. This is part of a drive, led by Osborne, to reposition ourselves so that we look more towards the world and less towards Europe. The thinking behind this is that, irrespective of what happens to our political relationship with Europe, the balance of our economic activity will shift away. That is not an excuse to thumb our nose at the EU. That would be absurd. It is simply because growth will be greater elsewhere. That is already happening: in the past three years there has been a shift in our exports towards North America and China.

This leads to a bigger question. Where will economic leadership come from? China will overtake the US and become the world’s largest economy at some stage in the next 30 years. But will that really constitute leadership? Its wealth per head will remain far lower. It probably will not have the technical expertise, or maybe the other qualities that combine to give intellectual leadership. The US, by contrast, seems set to keep pushing forward.

Nothing, however, is forever. If you look back over the past millennium as to where such leadership came from it seems that no particular part of the world retains leadership for very long. China was the most advanced economy during the Middle Ages; Italy in the Renaissance; Britain in the early 19th century; but Germany and the US by the end of that century – and of course the US today. The world as a whole goes on advancing, because innovations created in one region pass with great speed to others. But most of that advance is catch-up.

Now look at China’s position today through this lens of history. It has moved cautiously but steadily from a command economy to a semi-market one and in so doing has enormously enriched an increasing proportion of its people. It is a huge development success story. It now has some areas of expertise that exceed those of many advanced Western nations.

It can build a nuclear power station. We can’t. So we have asked China to build one at Hinkley Point for us. But the engineering and expertise behind this, and behind the network of high-speed railway lines it has built, have come from the West. China is by far the world’s largest car manufacturer. But the vehicles it produces either use Western technology or in some cases are direct rip-offs of Western designs.

Now some would contend that this is just an interim phase. They would point to the numbers of patents the country is filing as a sign that intellectual leadership is passing to China. They would look at the rising quality of Chinese universities. Though some of their research might not pass international scrutiny, universities in Hong Kong have been shooting up the rankings. Give China time and it will become the new US in intellectual competence as well as economic might.

Do we simply want access to its market, or are we interested in participating more fully in the relationship?

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The alternative view is that the combination of characteristics of the US, in particular its higher education system and its entrepreneurial zeal, will ensure that it remains the frontier nation for many years to come. The rest of the world will continue to play catch-up.

There is nothing wrong with catch-up. We all learn from each other, and in any case it would be wrong to argue that all Western innovation happens in the US. There are areas where the frontier is being pushed forward in Britain and in Europe. However, whether China becomes a true frontier nation, rather than a nimble follower, does matter to our future relations with the country. Do we simply want access to its market, or are we interested in participating more fully in the relationship? Of course we want access, but if it becomes a frontier nation alongside the US, then there is a lot more we can do together. Maybe this will not herald a golden era, whatever that is, but good relations with the new economic superpower are better than bad ones. It applies to the EU too.