China may account for a third of global GDP by 2030, with an economy larger than the US and Europe put together.
With Brexit on the horizon, the UK must seek its fortunes beyond our nearest continental neighbours. The British government understands this, but tends to be rather vague about exactly who we should be forging new economic ties with. Although we may talk about developing countries and emerging economies, 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 the Centre for Policy Studies’ Margaret Thatcher Conference at the Guildhall here last month.
The conservative think-tank brought together a host of ministers, leading business figures 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 the prophetic 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.
While China’s growth has comfortably outstripped that of developed Western economies, it is also striking how quickly it has developed compared to neighbouring India.
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.
There are also serious questions about the integrity of the Chinese financial sector, including its massive $15-trillion shadow banking system. The most pressing issue at the moment, though, 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, which has continued under Theresa May’s government, is certainly more fruitful than that adopted on the other side of the Atlantic. 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. His antiquated economic outlook has also managed to sour relations with previously solid US allies such as Canada and Germany.
Behind Trump’s wrongheaded rhetoric towards China lies an assumption that if things are going to improve dramatically for one country, 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 stop the rise of China through tariffs and trade wars are “living in dreamland”. Rather than try to somehow subvert China’s progress, it makes much 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 addressed the conference, has set out, the UK’s strengths in finance and professional services also make Britain an ideal partner for China’s trillion-dollar Belt and Road infrastructure mega project. It’s an initiative which is both exciting and disconcerting, with its potential to both boost global trade while also cementing China’s dominance in Asia.
Certainly, there is uneasiness in some quarters about the authoritarian model China has adopted – with free speech curtailed and the internet tightly censored. Equally, neighbouring countries are understandably nervous about Beijing’s increasing assertiveness and build-up of military hardware.
But what is surely doomed is any attempt to try and foist Western values on a country whose civilisation is many thousands of years older than our own. If it ever does materialise, political reform will come about from the demands of the Chinese people, not finger-wagging from overseas. Indeed, any attempts to interfere will be easy pickings for nationalists raising the spectre of “meddling foreigners”.
But, as former foreign secretary Sir Malcolm Rifkind made clear in his remarks on the state of Anglo-Chinese relations, enthusiastic economic engagement does not mean countries such as the UK have to abandon their own political values.
Instead, the watchwords for the UK and other 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 the Deputy Editor of CapX, the news website belonging to the Centre of Policy Studies.