What China wants from Britain

What are we to do about China? To turn a phrase beloved by the Chinese Communist party (CCP) on its head, Beijing is increasingly ‘interfering in our internal affairs’. Yet if you hoped to answer that question by reading the recent integrated review of defence and foreign policy, the most you would find is that China is a ‘systemic competitor’. But recognition is not a strategy; at best, the review indulged in ambiguity, or perhaps obfuscation.

The Prime Minister wants good relations with China. Who doesn’t? Certainly, a new Cold War would be disastrous, for us and for the CCP. But if we do not set clear boundaries, we risk being manoeuvred into a state where ‘Chinese communism has the superior position over Western capitalism’, as Xi Jinping himself prescribed in his first policy speech to the Politburo in 2013. China’s superior position means not just economic dependency, but our norms and values taking second place to those of the party.

Yet Communism ‘with Chinese characteristics’ is, well, peculiar to the Chinese political genius. The CCP does not want to change our system wholesale. On the contrary, over the last decades it has done very well out of it. There is no desire to export the Chinese style of government across the globe.

However the party does what it can to protect the CCP’s aims, even as those aims grow in ambition and inevitably rub up against those of the existing international order. In party discourse, the world is now ‘multipolar’, a way of saying that the United States and its allies can no longer set the rules unimpeded. And in the longer term, by 2049, the centenary of the party’s rule, China will be a ‘modern socialist country that is prosperous, strong and culturally advanced and harmonious’. Or, clipped of its coat of jargon, top dog.

The CCP relies on two strategies: the use of its economic heft in a ‘stick and carrot’ approach and the application of a ‘united front’ strategy. Under the latter, countries are divided into enemy, neutral and friendly. Then, using economic and diplomatic sticks and carrots, Beijing seeks to isolate the main enemy, America, and to move other potentially hostile entities — such as the UK — to a neutral, or preferably a friendly, position. These strategies are supported by well-funded external propaganda, which promotes a narrative of the inevitable and irresistible rise of China.

Geography, trade, defence and security mean that Britain is not in the top flight of CCP foreign policy concerns. But neither are we unimportant. 

On the positive side, we are geopolitically experienced and a permanent member of the UN Security Council; we remain one of the world’s biggest economies; our science, technology and innovation are strong; the City of London vies to be the top global services centre; and at a time when protectionism is rising, we espouse the sort of open economic governance from which China has so spectacularly benefitted. On the negative side, the party wants to change our vocal response to its abuse of international law (Hong Kong, South China Sea), our stance on human rights (Xinjiang’s Uyghurs, dissidents within China), and our belated recognition that we need to defend our values here in the UK (CCP interference in media, academia and politics).

These factors mean that the CCP sees us as influential and therefore via the provision of carrots hopes to make us malleable, or if that fails malletable, via the application of the stick.

Brexit, Covid and complacency have already lost the UK government time in setting out policies and new structures to maximise good relations with China, while better protecting our security, values and interests. Understanding of the CCP, transparency of our intentions and vigilance should be the watchwords. They don’t seem to be in evidence. Take two areas, UK science and technology research, and the City of London.

Our security services have long been aware of Chinese theft of scientific research,  particularly that with military or surveillance applications, via the back door. But until recently no one tried to shut the front door. The CCP hires UK brains via university research or buys them through the acquisition of companies. But so far there is no Sage-style government structure possessing the teeth to stop unacceptable transmission of technology, not to mention advising quickly on what areas of science are too sensitive for co-operation, or which Chinese scientists or institutions are linked to the Chinese military and security services.

Back in the 1980s, talk in the City was of the arrival of the ‘wall of Japanese money’. Now optimism is pinned to Chinese coattails. Never mind that the CCP has focussed and curtailed Chinese investment since 2016, or that in 2019 it represented 0.2 per cent of the UK’s stock of foreign investment. Yes, you read that correctly. Or that service exports to China were 1.7 per cent of UK service exports. It is the future that counts and London can be the centre of finance for China. Or so say those with (in)vested interests.

The trouble is that this ignores what the party says and does. It fully intends to make the Chinese yuan a major global currency (it will not succeed until it opens the capital account, which it won’t in the foreseeable future) and to ensure that Shanghai and Shenzhen become the pre-eminent centres. As the former Chinese ambassador put it: ‘China must build a strong financial sector if it is to achieve national revitalisation.’ A major CCP concern is to escape US financial interference. So it is doing what it did with other goods: learning the trade through co-operation and joint ventures — and then ousting the gullible from their market dominance. The government and the City should work with China but must do so while being conscious of its intentions.

In the days when lunching was legal, one banker said to me, ‘We have no choice. We just have to roll with the punches’. This defeatism assumes that the CCP is ten foot tall. Don’t bank on it, my financial friend. The same was said of the Soviet Union and of Japan. China’s challenges may be beyond its governance system, in particular debt, demographics and especially drought (nearly half the country’s industry, agriculture, power generation and population suffer from serious water scarcity). And no country has escaped from the ‘middle income trap’ when only 30 per cent of its working population has a secondary education. Again, you read that correctly: 30 per cent.

Whatever ‘systemic competitor’ means, it means we need to understand the CCP and its aims better. It requires the government to set out a strategy and to keep updating it. There will be ‘struggle’, as the party itself defines its relations with the democracies. There will be costs. But how much do we value our values and way of life?