19 June 2018

China’s rise is too big to ignore


With Brexit on the horizon, the UK must seek its fortunes beyond our nearest continental neighbours. Although we may talk about “developing countries” and emerging economies to whom we can hawk our wares, the biggest game in town is — by quite some distance — China.

There could therefore hardly be a better time to consider Anglo-Chinese relations, the subject of today’s Centre for Policy Studies Margaret Thatcher conference at the Guildhall in London. The think tank — which, full disclosure, houses CapX — brought together a host of eminent politicians, businessmen and academics to discuss what the future holds for both countries.

Since Deng Xiaoping’s economic reforms in the late 1970s, the scale of China’s extraordinary rise has been well documented. It is hard to overstate the scale of the change. Or to predict its many and far-reaching consequences.

Martin Jacques, the author of When China Rules The World, told conference delegates that by 2030, China may account for as much as a third of global GDP, with an economy larger than the US and Europe put together. Bear in mind that China’s economy was one twentieth that of the United States as recently as 1980 and you get a sense of just how extraordinary this economic expansion has been.

None of this is to ignore the big challenges that China faces as its economy continues to canter along. Above all there is the economic imperative of diversifying away from a system based on cheap labour towards a sophisticated high-tech economy. That does seem to be happening, with companies such as AliBaba, Baidu and Huawei helping establish the country as a global tech player.

The most pressing issue at the moment is the  trade war with America, which has the potential to blow the global economy even further off course.

For Jacques, we in the UK have really not fully taken heed of what China’s expansion will mean. While there is, in his words a “growing consensus” about the country’s success and future prospects, we remain “very, very Western-centric” in our outlook.

There are the seeds of a change in approach, from British schools and universities opening campuses in China to the enthusiastic support from David Cameron and George Osborne for the Asian Infrastructure Investment Bank. Osborne in particular made strenuous efforts to court Beijing, including moving to let China’s central bank issue Renminbi-denominated debt in London.

This sort of constructive approach certainly seems more fruitful than that adopted on the other side of the Atlantic, where Donald Trump seems determined to engage in economic chest-beating with the Chinese government — simultaneously delighting and imperilling the prospects of many of his own voters.

Behind Trump’s wrongheaded rhetoric towards China lies an assumption that if things are going to improve dramatically for China, they must get worse for the rest of us. It’s a simplistic, politically appealing zero sum game approach to trade that has no real grounding in either theory or real world experience.

As Jacques pointed out, those in the US who think they can avert the rise of China through tariffs and trade wars are “living in dreamland”. Rather than try to somehow subvert China’s progress, it makes more sense for the West to work with Beijing in a relationship of mutual interest.

This is broadly the approach set out by Trade Secretary Liam Fox, who seems to share Osborne’s enthusiasm for a “Golden Era” of UK-Chinese relations. And while Beijing may not share the minister’s enthusiasm for unvarnished free trade, there remain ample opportunities for British firms to do business in the enormous, world-leading market that China represents.

As Fox, who is speaking at the conference later this evening, sets out in the Telegraph today, our strengths in finance and professional services also make Britain an ideal partner for China’s trillion-dollar Belt and Road infrastructure mega-project.

What is certainly doomed is any attempt to try and foist Western values on a country whose civilisation is many thousands of years older than our own. Chinese political reforms will be the product of the demands of the Chinese people, not finger-wagging from overseas.

But, as both Lord Powell and Sir Malcolm Rifkind made clear in their remarks on the state of Anglo-Chinese relations, enthusiastic economic engagement does not mean Britain has to abandon its political values.

Instead the watchwords for the UK, and indeed other Western nations, should be principled engagement — making the most of the opportunities that China’s economic expansion presents, without abandoning the ideas on which our own success is built.

John Ashmore is Deputy Editor of CapX