Saturday, December 19, 2015

China-UK: A strategic friendship

In the coming days or weeks, American warships plan to conduct what is now called FONOP (freedom of navigation operations) in the South China Sea. This will involve sailing closer than 12 nautical miles to the artificial  islands created by China and could lead to a direct clash between the US and China with potentially portentous consequences.
In such a confrontation, governments will be compelled to take sides. It remains to be seen as to just how the UK, one of US’s closest allies will react. In the old days, you could expect London to line up with Washington, but there are changes blowing in the wind.
These are best brought out by Chinese President Xi Jinping’s recent visit to Britain and his grand reception there. While at one level this was  yet another manifestation  China’s economic power, it was also, at the political level, a move to break out of a subtle US-led containment strategy. Chinese media exulted over the “redder than red carpet” welcome and analysts spoke of the strategic shift in British attitudes towards China as a result of the first visit in a decade by a Chinese president.  
British Prime Minister David Cameron was criticized by many in Britain for kowtowing to Beijing. His former strategy adviser Steve Hilton who teaches in Stanford University declared the visit to be a  “national humiliation” and excoriated UK for not “standing up” to China. Sinologist Francesco Sisci has pointed out, studying the Chinese version of the UK-China joint statement, that this is the first time China has committed itself to a “complete and global strategic partnership for the 21st century.” More significantly, the Chinese have got a commitment from the UK to “recognize the importance each side attaches to its own political system.”
The first order of business for UK is business, and, as Chancellor George Osborne noted, it is “China’s best partner in the West”. The UK, it may be recalled, broke ranks with the US and became the first western country to become a member of the China-led Asian Infrastructure Investment Bank. Currently, UK is China’s second largest trading partner among EU countries, while China is the UK’s main investment destination in Asia.
During the visit deals worth more than $60 billion  were signed and as Osborne and Cameron emphasized, this was just the beginning. Among the important signs of the future were Chinese commitments to take a one-third stake in  a $28 billion nuclear power plant in UK and participate in other nuclear power projects as well. BP signed a deal to supply a Chinese company 1 million tonnes of LNG for the next 20 years in a deal worth $ 10 billion. Coinciding with the visit was the issuance of an offshore renminbi note worth $800 million  in London by the Chinese Central Bank. This is the first time such a note has been issued outside China and it is aimed at taking advantage of London’s status as a global financial centre to make the yuan an international currency. Separately, China announced a direct flight between Manchester and Beijing, as well as a $ 130 million commitment to a China cluster in a business development area of the city.
Xi’s visit was not about trade and investment only. It has an important strategic component viz. shaping China as a truly global power. Recall that the end station of both the land and maritime components of the Belt Road Initiative is Europe. As China shifts its economy towards high end manufacturing and services, it is targeting the European market where its two largest partners are Germany and UK.
 There is another angle to the UK ties.  Xi is hoping is that as China’s relations with the US go north, the UK, an old mentor of the US could play the role as a bridge to what remains the world’s foremost economic and military power. For UK, the China gambit is important as well. In recent times it has been buffeted by the Scots threatening to leave the union, the pressures from within the Conservative Party for a Brexit or exit from the European Union, an action that will inevitably lead to many banks and fund managers decamping to the Eurozone. Incidentally during the visit, Xi went out of his way to urge Britain  to remain in the EU.
Inevitably, there will be comparisons between Xi’s visit and the forthcoming visit of Prime Minister Modi to UK. Not being head of state, Modi will not be accorded the glitter of a royal welcome, but he will make it up with a massive rally of overseas Indians at the Wembley Stadium. While that is good for the ego of the diaspora and the PM, it will not have lasting consequences. India cannot match China in terms of economic deals; we have the potential of becoming an economic player, but we are not one as yet. For the present, we will have to be satisfied with patting ourselves on the back rather than have someone kowtowing to us. As for South China Sea, having steered clear from America’s Asian pivot, the UK can remain a bystander, while India has already made moved closer to the US a position which could bring us into a confrontation with China. 
Mid Day October 27, 2015

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