What’s in it for China? Why is Xi Jinping wasting his time visiting what the Beijing-controlled Global Times newspaper sneeringly described two years ago as “not a big power ... just an old European country apt for travel and study”?
Ignore the propaganda. The fact is that China needs Britain every bit as much as Britain needs China – and on a host of levels.
When the Chinese state tries to invest its huge stock of foreign currency reserves in Western companies and infrastructure (rather than ploughing it into low-yield Western government bonds) it often still comes up against national protectionism.
An attempt by a Chinese state company to buy a minor American oil firm a decade ago was blocked by Congress on national security grounds. The Europeans are still sometimes antsy too about letting Chinese money in. But Britain has always been less discriminating. And now George Osborne has flung open the gates entirely.
There aren’t many Western countries that would allow Chinese state companies to invest in their domestic nuclear industry, or their telecoms and water supply infrastructure, or their high-speed rail. Britain is actually encouraging it.
Make no mistake, this helps China. China needs this UK financial outlet not only to get a half-decent return on its foreign exchange reserves, but to help its domestic firms gain valuable technical experience. China is interested in investing in UK nuclear because it offers an opportunity to test out a China-designed power station, which Beijing hopes will be sellable around the world.
Henry Tillman of the merchant bank Grisons Peak is a meticulous chronicler of Chinese foreign investment flows and he says Britain has special attractions to Beijing. “The numbers show the Chinese are more comfortable investing in the UK than in the rest of Europe because of its economic performance, more certainty over the currency and because the government here is more open to partnership,” he says.
The idea sometimes circulated that we are beggars at the banquet of the great Chinese economy is nonsense.
We should recognise our strengths. The Chinese are trying to turn the renminbi into a world trade currency like the dollar, the euro and sterling. The City of London, as the pre-eminent global financial hub, has the capacity to help make that happen.
And then there are our universities. We hear a lot of about how world-beating the Chinese education system is – not least from Tory ministers. So why do so many Chinese students – 59,000 new undergraduates last year – wish to study in Britain?
There’s a lot of Western angst about China’s growing economic influence outside its borders. Two Spanish journalists recently wrote a book about Chinese labourers abroad, concluding that China is engaging in “an unstoppable and silent world conquest”. This is an old paranoia. “[The Chinese] are the most remarkable race on earth and I have always thought them to be the coming rulers of the world,” wrote the Victorian war hero Field Marshal Garnet Wolseley in his 1904 memoirs.
We should calm down. While China remains a domestically repressive regime, Britain should maintain an appropriate distance. Britain certainly shouldn’t compromise its values by refusing to mention human rights abuses by the Chinese government. There should be no kowtowing.
And the activities of Chinese firms here need to be scrupulously regulated and monitored – especially in the nuclear and telecoms sectors. We should take a harder line over “dumping” by Chinese steel makers of their excess production on global markets – the sort of practice that helped doom Redcar. Yet the Chancellor is right to argue that economic partnership is firmly in the long-term interests of both our countries.
Ben Chu is the author of ‘Chinese Whispers: Why Everything You’ve Heard About China is Wrong’
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