30 November 2022

The ‘golden era’ is over, but there is still room to have a relationship with China


Earlier this week Rishi Sunak set out a new vision of Britain’s relationship with China.

The headlines were clear enough: David Cameron and George Osborne’s ‘golden era’ is now over, and the relationship between the two countries must ‘evolve’. The People’s Republic represents ‘a systemic challenge to our values and interests’, and wishful thinking will have to give way to ‘robust pragmatism’. This was clearly not a speech that would have been welcomed in Beijing.

There are many reasons why the Government, and increasingly the wider UK establishment, is losing patience with China.

For a start, there are significant concerns about human rights. Images of anti-Covid restriction protestors (and a BBC cameraman) being roughed up in Chinese cities have been widely commented on, the latest in an increasingly long line of human rights concerns. NGOs such as Hong Kong Watch have been active in bringing attention to the national security crackdown in Hong Kong, which led to the opening of Britain’s borders to those able to apply for a British National (Overseas) passport. (So far at least 140,000 Hong Kongers have applied to move to the UK.) The situation in the western province of Xinjiang, where perhaps one million Muslim Uighurs have been interned, has also been prominent in the British press. 

There have also been a steady flow of headlines about reported Chinese bullying of UK allies. China banned salmon imports from Norway after a Nobel Prize was awarded to Chinese dissident Liu Xiaobo. Beef, dairy, and alcohol imports from Lithuania were stopped when Vilnius opened a Taiwan Representative Office, in an apparent rebuff to Beijing’s sacred One China policy. Perhaps most high-profile of them all, Australian exports of coal and wine were restricted after Canberra called for an investigation into the origins of Covid.

China’s heavy-handedness has also been commented on in Britain. When Xi Jinping visited in 2015, heralding the start of the golden era that Mr Sunak has just ended, the Queen was overheard calling Chinese officials ‘very rude’. Worse still was the beating up of a Hong Kong activist in October this year by Chinese consular staff in Manchester – Bob Chan was dragged into the consulate’s grounds before given a kicking – an incident exacerbated by China making an official complaint about Mr Chan’s ‘illegal entry’ to the consulate. 

What all this amounts to is an ascendancy for the China hawks. Like those in the US, there is a groundswell of opinion amongst many at the top that almost any interaction with China is bad and should be heavily restricted.

The worry is that we will throw the baby out with the bathwater. The UK cannot simply turn its back on the world’s second largest economy, and to be fair to Mr Sunak, he stated just that. We cannot, he said, ‘simply ignore China’s significance in world affairs, to global stability or issues like climate change’. 

The latter point is significant given that China accounts for a third of global emissions. To put this in context, earlier this year Beijing announced that it would increase domestic coal production by 300 million tons. This one decision will generate more than three hundred times as much carbon dioxide as the UK emitted in 2021. No matter what (naïve) pressure groups like Just Stop Oil think, the UK and its allies cannot stop climate change on its own. We have no choice but to work with China on this.

Then there is the problem of ‘de-Chinafying’ our supply chains. There has been a lot of discussion, especially since Covid, of reducing Western economic dependency on China. France’s finance minister, Bruno Le Maire, announced in 2020 that his government would seek ‘to decrease our dependence on a couple of large powers, in particular China, for the supply of certain products’.

But the challenge is huge. Despite efforts to diversify its supply chain, 150 out of 180 suppliers to American tech giant Apple continue to have operations in China, and it is estimated that it would take around eight years to move just 10% of Apple’s production capacity out of China (where 90% of its products are currently produced).

Our think tank, the Evenstar Institute, will publish next week research that shows that the UK’s national security supply chain, like Apple’s, is heavily reliant on China both directly and indirectly: for example, many British military uniforms are made in Cambodia, which we show receives two thirds of its garment industry materials from China. It is all very well for Western governments to demand that production be onshored or ‘friendshored’, but our research also shows how hard it is to achieve this given how low current production capacity is outside of China.

The upshot is simple. Whilst Mr Sunak is right to call for more circumspection in dealings with a country that actively wants to change the world order – something that would damage the standing of the UK and its main Western allies, including the United States – there are many areas we can and should collaborate on. 

In areas where we need to diminish our dependency, we cannot be blind to the challenges of unwinding a global economic system many decades in the making. Much more support is needed to reduce the risk to the supply chain risk, including expensive investment in skills and new sources of components and raw materials. It would be supremely ironic if we managed to damage our economy more through overly-aggressive de-Chinafication than anything Beijing could do to us.

The golden era may have ended, but there is still room to have a relationship with China. To do so we need strong, honest, and balanced political leadership, and Mr Sunak’s speech last night shows that he seems to understand that too. The proof, as always, will be in the execution of this vision.

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Sam OlsenSam Olsen is the author of the blog What China Wants and founder and CEO of Evenstar.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.