Talking Point

Raise the red lantern

Is Britain trying too hard to court Chinese investment?

Xi, peng and the queen

Nobody does it better: Your Majesty we are here to help build your high-speed railways

Was a British bureaucrat having some fun by asking the orchestra at Buckingham Palace to serenade the Chinese president with a rendition of Nobody Does It Better, the theme tune to the 1977 James Bond classic The Spy Who Loved Me?

Perhaps the choice of song for Xi Jinping was a throwback to the days in which Britain’s favourite special agent routinely routed his shadowy foreign rivals. Or maybe it was a sly reminder that – when it comes to pomp and circumstance – the Brits are still hard to beat.

Xi’s invitation to the UK was delivered in person by Prince William when he visited Beijing in March. His grandmother, Queen Elizabeth invited Xi to make China’s first state visit to the UK in a decade.

China’s leader also had a sense of the moment, although his message seemed more that the British needed to take their chance to work more closely with their guests, or risk missing out. “As an old Chinese adage goes, ‘Opportunity may knock just once – grab it before it slips away’,” he reminded the attendees at the banquet held in his honour on Tuesday night. In fact David Cameron’s government has been actively making the case for much tighter relations with China. But the effort has also led to criticism that his administration is a little too keen to seize the moment with its new partner from the east.

So it’s an era of closer ties between London and Beijing?

That’s the mood music for the trip. Xi praised the British as “the Western country that is most open to China” in a pre-arrival interview with Reuters, commending this “visionary and strategic choice” as wholly in Britain’s long-term interests.

It is George Osborne, Britain’s Chancellor of the Exchequer and Cameron’s likely heir as prime minister, who is widely regarded as the cheerleader-in-chief for a closer relationship with China, which he wants to become the UK’s second-largest trading partner by the end of the decade (see WiC297). And this pragmatic pivot reflects the new realities of a situation in which most countries in the world are turning towards the Chinese just as once, in America’s heyday, they pivoted to the US, said Martin Jacques, an outspoken Sinophile, in an opinion piece in the Guardian this week.

A reframing of relations is inevitable because of the changing times, Jacques believes: “At the time of the last state visit to Britain by a Chinese president, that of Hu Jintao in 2005, the UK economy was still slightly larger than that of China: today China’s GDP, by the most conservative measure, is over three times greater. We are fast becoming a minnow by comparison.”

Osborne wants British companies to cash in on China’s new economic heft. Exports have been growing – from £4 billion ($6.2 billion) in 2004 to £16.7 billion last year – but imports from China have grown faster, leaving the UK with the largest trade deficit with the Chinese of any of the five largest economies in the EU.

In fact Britain sold just 5% of its goods to China last year, which trails even Ireland (population: 4.6 million) as a market for its exports. But as WiC discussed in more detail in its Focus edition on trade ties between the UK and China two years ago, the British hope that they are going to have more success as China’s economy matures. The belief is that while Germany was the main beneficiary of China’s initial boom by supplying its economy with industrial goods, Britain is better positioned to surf the second wave of Chinese growth with sales of services like accountancy, consulting and those relating to the legal profession – all areas in which the UK excels.

British policymakers have also been pushing hard to promote the country’s capabilities as a financial hub for servicing China’s currency, the renminbi, which is starting to feature more prominently in global trade and investment.

Xi gave a careful nod to London as an “important pump station” in the world economy in his pre-trip interview, and hinted at further support for the UK’s candidacy as an international centre for the renminbi. “When conditions are in place, China is ready to consider strengthening the connectivity of the financial markets of the two countries. London can leverage its unique strengths in the financial field to get actively involved in the modernisation and globalisation of China’s financial markets,” he promised.

And the Brits see China as a new source of investment capital?

The UK is already the most popular destination for Chinese foreign direct investment in the European Union, but Osborne is hopeful of more capital from China, especially for projects to update Britain’s aging infrastructure.

More than £30 billion of deals were signed during this week’s visit. In the flagship venture China General Nuclear Power Corporation (CGN) will partner with the French utility EDF to build a massive nuclear power plant at Hinkley Point in southwest England.

Not many Western nations would wave through Chinese involvement in nuclear power, but Britain has already been more welcoming than most to Chinese companies. Take Huawei, for example: despite warnings of cyber attacks and state-sponsored spying the Chinese tech giant has become a key player in the UK’s telecommunications industry.

Tellingly, Huawei unveiled a major investment in a research project led by the University of Manchester in the ‘wonder material’ graphene this week, in a deal that will deepen scientific collaboration between Britain and China.

Cameron and Osborne clearly want investment and seem a lot less concerned than leaders from other countries about foreigners buying their nation’s assets. When Osborne visited China last month his trade delegation is said to have handed out a catalogue featuring £24 billion-worth of projects, including a £200 million ring road in the northern city of Leeds, a £325 million stake in a science park in Cheshire, and a £400 million gas storage site. There was also a pitch for the proposed high-speed railway line between London and the north of the country, a project awaiting final approval at governmental level.

Truth be told, Chinese investment in the UK has been relatively limited to date, concentrating mostly in property or assets expected to deliver safe returns, such as the 10% stake in Thames Water held by the China Investment Corporation. Chinese firms also own portions of two of the country’s airports (Heathrow in London and another in Manchester) but Britain has actually invested about six times as much in China as the Chinese have in the UK, according to the most recent government data on investment flows, for 2013.

Osborne will be hoping that his China charm offensive remedies the imbalance, and that he can secure wider financial backing for an upgrading of Britain’s roads, railways and power supply.

The British have also announced changes in the rules for Chinese visitors, who were previously issued with six-month visas at a cost of $130. The new scheme will launch two-year tourist visas (for the same price) that allow the holder to leave and return without the need for fresh paperwork. Ministers are said to be exploring a pilot scheme for a 10-year tourist visa, with unlimited multiple visits, just for China.

British tourism bosses hope the changes will boost visitor numbers, following complaints that the country’s more onerous visa regulations have seen Chinese tourists opt for rival destinations like France, which reported eight times as many Chinese visitors last year.

“It’s focusing on one of the real attractions that we have. The Chinese population like coming here for our culture, our heritage, our retail,” a spokesperson for the prime minister’s office told Reuters.

And the matters best not mentioned on the trip?

The tour has a determinedly commercial agenda, avoiding issues that have caused disagreements in the past, like concerns over China’s human rights record. Three years ago Cameron also felt the full fury of Beijing’s displeasure in a diplomatic spat over Tibet and Sino-British ties went into a lengthy deep-freeze.

Since then Cameron has markedly changed his tone, while Osborne talked up the vast improvements in the two nations’ relations during his September visit to China, promising a “golden era” in the decade ahead.

“Whatever the headlines, regardless of the challenges, we shouldn’t be running away from China,” he told a gathering at the Shanghai Stock Exchange. “Let’s stick together to grow our economies.”

“It should be diplomatic etiquette for foreign leaders not to confront China by raising the human rights issue,” the Global Times noted approvingly of Osborne’s tour. “Keeping a modest manner is the correct attitude for a foreign minister visiting China to seek business opportunities.”

There has been little direct mention of human rights concerns on Xi’s trip this week, although Jeremy Corbyn – the new leader of the opposition Labour Party – is said to have raised the issue in a private meeting with Xi, avoiding the potential embarrassment of mentioning it over dinner at the Palace.

Not that the Chinese delegation was too concerned about Corbyn creating a scene. “I think the state banquet is for Her Majesty, it is her show,” Liu Xiaoming, China’s ambassador to the UK, explained before Xi’s visit. “Jeremy Corbyn or others are their guests. I think British people are very, very smart, and they know how to behave on occasions like this.”

Other critics have voiced their opposition obliquely, including John Bercow, the House of Commons Speaker, who delivered a thinly coded rebuke on welcoming Xi’s address to members of the parliament on Tuesday. “Your visit is the latest in a recent line of Asian leaders that began with Aung San Suu Kyi, that champion of human rights in Burma,” he said pointedly.

Xi indulged in a little point scoring of his own during his personal address, acknowledging that Westminster was the “oldest parliament in the world” but reminding listeners that the Chinese had started codifying their own laws long before Britain had sowed its parliamentary roots.

“In China the concept of putting people first, following the rule of law, emerged in ancient times – about 4,000 years ago,” he explained. “There was already a saying – the people are the foundation of the country and only with a stable foundation can a country enjoy peace.”

On Wednesday Xi was finally challenged directly, when the BBC’s political editor asked him live on air: “Why do you think members of the British public should be pleased to do more business with a country that isn’t democratic, isn’t transparent and has a deeply, deeply troubling attitude towards human rights?”

Xi responded immediately, insisting that China combines “the universal value of human rights with China’s reality”, although the British media picked up more on his admission that “we know that there is always room for improvement”. In fact Xi had qualified the comment by implying that all countries could do better, and not just China. Few of the Chinese newspapers chose to highlight the same exchange, although those that did so included Xi’s emphasis on the reference to other countries need to improve their human rights’ records.

What was the message for the audience at home?

There was a clear sense that Xi’s visit had been carefully choreographed, with thousands of flag-waving Chinese drowning out the chants of a smaller number of protesters on London’s streets. The welcome party – mostly Chinese students at UK universities – sported banners voicing messages like “Welcome Big Buddy Xi”. There was also evidence that Xi has his eye on the public relations impact at home, with a visit to David Cameron’s local pub. “The Chinese are desperate to order fish and chips. They’ve asked about it repeatedly,” an unnamed source told the Sunday Times. “It’s all part of the president’s view of himself as a man of the people.”

Despite his portrayal as an average punter with a pint, Xi’s reception will be seen as further validation of China’s surging status on the international stage. The message wasn’t lost on Chinese media, which reported on the tour with an unexpectedly respectful air for British pageantry, including the 103-gun salute, a ride in a horse-drawn carriage and the white-tie banquet hosted at the Palace.

The British were determined to “pull out all the stops” for Xi’s visit, the China Daily explained, while the Beijing News noted solemnly that Xi and his wife had stayed in the same suite at the Palace occupied by Prince William and the Duchess of Cambridge on their wedding night. “Xi Jinping and the Queen take the same carriage,” another headline marvelled in the same newspaper.

A similarly awestruck tone was missing from the coverage in most of Britain’s broadsheets, where there were fears that the hosts were trying too hard to impress.

An editorial in the Independent lamented the “extraordinarily lavish and almost obsequious” welcome for Xi, questioning too why he was not being pressed more on political concerns.

“China is in no sense the world’s most egregious violator of human rights. It is a more open and freer society than it was 20 or 30 years ago and Britain’s leaders will always argue that engagement is the way to make an improving situation better,” the Independent’s editorial acknowledged. “However, there is a difference between engagement and the kind of forelock-tugging flattery that Mr Cameron and George Osborne seem bent on dishing out.”

The Spectator – the oldest continuously published magazine in the English language – was similarly aghast at the preparations for Xi’s trip, predicting that his visit would “resemble the reception of Queen Victoria as Empress of India”. Again, the concern was that Cameron’s government was giving far too much face to its visitor, and overly concerned with not giving offence.

“Our relationship with China has become a fawning one, completely at odds with the lectures on human rights that we give to other, less economically powerful dictator states,” the magazine complained.

The Financial Times was a bit more hedged in its own coverage. It published an editorial in which it argued “the UK is right to roll out the red carpet to Xi” because of the “size of the commercial opportunity”. However, it also cited some of the more waspish criticism of the UK from foreign diplomats, such as a quote from a retired US official describing the affair as “a case study in the kowtow”.

Who is special now?

Cameron presented a bolder front to the British media, insisting that he had addressed more sensitive matters, including confronting Xi over the ‘dumping’ of cheap steel in the European market.

In a case of unfortunate timing, unions warned this week that one in six British steelworkers will lose their jobs following the closure of a Thai-owned plant in the northeastern town of Redcar – as well as the shuttering of two more plants by the Indian conglomerate Tata, which blamed the move on a flood of cheap imports from China. Caparo, another steelmaker, also went into administration on Monday.

Pressed for more action against Chinese dumping, Cameron talked tough. “Will we raise it with the Chinese? Of course, we’ll raise all these issues. That is what our relationship with China is all about. It is at such a high level that there is no subject off the table and all of these issues, including the steel industry, of course will be discussed,” he insisted.

But the prime minister’s critics say he is too supine in his approach, and argue Beijing doesn’t respect those it sees as supplicants.

They are also contrasting Xi’s reception in the UK with his recent visit to the US (see WiC298), where his American hosts were unafraid to touch on more awkward topics such as hacking and the South China Sea.

The Global Times has no time for such a view. “Apparently the concept of a ‘golden era’ between the two countries has made some people uncomfortable,” it sniped. “This has hurt the twisted dignity of those who still consider the West the centre of the world.”

But certainly there’s growing awareness that the Americans are unimpressed by some of the cosying up to the Chinese, especially when Britain was the first Western country to break ranks and sign up for the Chinese-led Asian Infrastructure Investment Bank (WiC275).

Last week Cameron told China’s state broadcaster that the UK doesn’t see its involvement with the new bank as conflicting with its special relationship with the US. Nonetheless, other countries have been remarking on Britain’s careful courting of the Chinese. “According to several diplomats, the regular encrypted cables sent back to European and North American capitals over recent weeks have been filled with snide remarks and criticisms of the UK’s kowtowing in the run-up to Xi’s state visit,” the Financial Times reports.

Back in the Guardian newspaper Martin Jacques said that there would be “understandable unease” as commercial imperatives force the British to pivot away from the Americans and more towards China. But he finished with a warning that Britain will actually need to do more to see things from the Chinese point of view. “There is a powerful presumption in the West that China should be like us: it never has been and never will be,” he warned. “We must learn to accept this and try to understand China on its own terms rather than ours.”

Meanwhile scope for miscommunication abounds on both sides. For example, Xi was praised for quoting Shakespeare during his speech to the UK’s parliament, but it is worth pointing out that the line his speechwriter chose from The Tempest – “What’s past is prologue” – was an odd one. It sounds straightforward enough until you look at the context: in Shakespeare’s play it is used by Antonio as part of a speech in which he tries to persuade Sebastian to kill his sleeping brother and seize his crown. Given this background, WiC wonders whether the choice of this particular quote was just a matter of the speechwriter being unfamiliar with the bard or rather that he or she was so familiar with the playwright’s work that a subtle message was intended.

We may never know…


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