Even before the crisis we remain engulfed in, there were those so distrustful of China’s actions and ambitions, they demanded the UK keep it at a long arms-length. So much so in fact they insisted we allow Huawei no part of our G5 telecom network, or the Chinese state any involvement in the funding and building of HS2. Indeed, that the coronavirus pandemic had its – ‘suspicious’ – origins in China, has only acted to increase demands we societally distance ourselves from it. I will not enter into the reasons why there is opposition to engaging with China on a commercial basis, other than to say that when it comes to international relations there is always conflict between objective economic practicality and – subjective – morality. To best understand the – seeming – dilemma we face, imagine a future where the UK does indeed economically distance itself from China.
In a future of cold relations between the UK and a China whose economy advances and its middle class expands. we are being asked that the UK not capitalise on either. Not fully capitalise as it lucratively sends ever more tourists overseas to sightsee, spend and take-up space, and equally generous fee-paying students to study and also take up lodgings. Also miss the chance to sell British branded luxury and iconic cars China’s ever wealthier households wish to own to signal their success. Fail moreover to capitalise as China’s businesses and especially banks seek a ‘western-hub’ from which they can operate during the eastern hemisphere’s hours of ‘darkness’. In not engaging closely with China there is every likelihood the UK would also miss out on the economic advances of those who choose not to follow along our arms-length path. And be in no doubt that a great many nations around the world will turn a self-interested ‘blind-eye’ to real or perceived injustice or hegemonic ambition emanating from Beijing, and deal commercially very closely with it.
What then of the argument the UK economy can still perform well without closely connecting with China? Suppose first the UK fails by December 31st to reach a seamless exit agreement with the EU27? In this event both sides of the Channel and Irish Sea could not fail to suffer economically harmful frictions to the free-flow of goods, people and services. There is of course the alternative that a deal is done. In this event – which I believe most likely – we still have to deal with the reality of in what economic state the EU emerges from this crisis. Now, just as with this virus proving most threatening to individuals with pre-existing medical conditions, so the same is true for sovereign economies. And for Spain, Italy, Greece, Cyprus and others across the euro-zone, each entered this crisis suffering acute pre-existing problems. And with tourism proving such an important element of the economies of each, one has to fear for what awaits over the next few years. Indeed, even ‘once’ mass travel returns there is every likelihood so much damage will have been done that a new wave of economically weakening emigration will be recorded across the EU. Of course if the experience of recent years is repeated the UK would prove a natural beneficiary of prime-age immigration from across the EU. This said, much will depend on the terms – or not – of how the UK finally leaves the EU. Either way, the EU faces a troubled economic future, so far from making up what we lose from China.
What of the US in the UK’s economic future? To answer we mustn’t simply extrapolate the past but consider how the trade war between it and China will end. In the event we see a continuation of the tit for tat tariffs then the US economy can hardly offer strength to the UK. Indeed, remember the Democrats are no less hawkish on China’s trade policies than Trump. Alternatively, if the Chinese do give the US what it demands, a weaker $ relative to the yuan, this will lift wealth within China at the expense of across the US. In short then, can our economy really afford to turn its back on China?
