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The Great British China Rethink – Analysis

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By Andrew Small*

The speed of the shift in the UK’s China policy has been dizzying. Only a few months ago, the British government was laying out its tortured compromise position on Huawei’s role in the country’s 5G networks in the hope of placating both Beijing and Washington. There are still serving members of the cabinet who lined up enthusiastically behind Prime Minister David Cameron’s announcement of a “golden era” in Sino-British ties. Recent weeks, by contrast, have not only seen a U-turn on Huawei but a panoply of measures in response to Beijing’s imposition of a national security law on Hong Kong, steps to rebalance the country away from Chinese imports, and plans for closer coordination on China among other democracies. What changed?

In the short-term, three issues have loomed large: Hong Kong, Huawei, and the Covid-19 pandemic. But to make sense of why they played out as they did, it is helpful to revisit the “golden era” and the period that followed it.

On critical decisions relating to China, the UK’s policy has usually been balanced between its political and security concerns and the opportunities presented by an economy set to become the world’s largest. Although this framing is somewhat simplistic, particularly given the complex trade-offs involved in the trade and technology relationship, it tended to map the breakdown of positions in Whitehall fairly closely. The Foreign Office, Ministry of Defence and intelligence agencies tended to tilt in a more critical direction, while the Treasury leaned in favor of ensuring a climate that would facilitate closer commercial and financial ties. The synthesis was typically a position that was well in line with the mainstream western approach to China, albeit with a dash more free-market vim, given the UK’s traditions, and the strategic nuance that came from arguably the most capable pool of China expertise in any European government.

During David Cameron’s tenure as Prime Minister, that sense of balance was lost. After an early public meeting with the Dalai Lama sent UK-China relations into a freeze, Cameron pivoted sharply in the opposite direction. The Treasury, led by his closest political ally, George Osborne, was given virtual carte blanche to drive British China policy. The short-term focus was on drawing Chinese investment into the UK’s austerity-wracked economy but the pitch to Beijing was a longer-term one. The City of London would be the most welcoming international hub for Chinese companies and for the renminbi’s internationalization. The UK would provide the most open environment in Europe for Chinese investors, even in sensitive sectors, enabling Beijing to take advantage of the country’s gateway position to the EU single market. The offers had a strategic overlay too: at a time when views on China in the United States and many European capitals were already growing bleaker, the Chancellor promised to be China’s “best partner in the west”.

This approach translated into a few consequential decisions. These included the go-ahead for Chinese involvement in the UK’s nuclear sector, and the move not simply to join the Asia Infrastructure Investment Bank – as many other countries did too – but to pre-empt the outcome of consultations among G7 partners in a rush to be first in. Yet it was far from being an “era”. Driven by Cameron, Osborne and a handful of figures in the Treasury, and seen at times with incredulity in other parts of the British government, the whole effort had only the shallowest of roots. When the Prime Minister and Chancellor left office after defeat in the Brexit referendum in 2016, it was effectively over. Cameron’s successor, Theresa May, was steeped in the world of domestic security and she quickly infused that more skeptical view of China into the UK’s decision-making processes again.

Any attempt to think more seriously about China policy, however, was virtually impossible. For nearly four years, the British political class was wholly absorbed with a single, all-consuming problem: Brexit. Indeed, almost nothing about the UK position on any wider strategic matters was going to be clear until the questions of when, how and whether Brexit would go ahead were resolved. The period from 2016 to 2019 saw two early general elections, three Prime Ministers, and multiple showdowns in parliament over Brexit deals. Yet even when an agreement was finally passed by the House of Commons in December 2019, there was still little certainty about what vision of Britain’s role in the world would define the aftermath. Would it be the open, free-trading, regulation-light “Singapore-on-the-Thames”? A Britain more deeply strategically rooted in the transatlantic alliance and the wider Anglosphere? Or a sovereignty-centric, nationalist, “Britain alone”, charting a distinct economic and strategic path of its own? Each choice, which represented different strands of the Brexiteer vision, would have radically different implications for the relationship with Beijing.

Yet, when politicians finally emerged from the dark tunnel of domestic Brexit politics to contemplate the world around them again, it was a very different place to the days of the 2016 referendum. The supposed choices were now set against a backdrop of intensifying strategic competition between the United States and China, a fracturing global trade order, the securitization of economics and technology, and a hardening authoritarianism in Beijing. If they had ever been realistic options for the UK to chart its future course a few years earlier, it was very far from clear that they were now.

Virtually the first issue confronting the UK after Brexit was the question of Huawei’s role in the country’s 5G networks. While a provisional decision had already been taken under May’s government in April 2019, the splits over the issue in cabinet were so finely balanced that it was destined to be revisited once she left office. The telecoms providers in the UK were Huawei’s fiercest advocates. Beneficiaries of the Chinese company’s subsidized equipment, the largest of them – BT – had been the pioneer that helped to provide Huawei with its foothold in the west. 5G rollout speeds and cost would be affected if they were forced to phase out its equipment, even if far less so than the companies’ hyperbolic claims. Beijing had also made it clear that the decision was a litmus test for the wider UK-China economic relationship, which heightened the nervousness of a Treasury that was already navigating the damaging impact of Brexit. GCHQ exhibited a mix of self-confidence that it could manage the risk, skepticism that the national origin of the equipment provider was really one of its most pressing cyber concerns, and political care not to buck any emerging consensus. It would repeatedly come up with advice that amounted to: “we can work with whatever you decide”. As a result, despite the clear reservations of the foreign, defense and wider intelligence communities, the outcome of the Boris Johnson-led government’s deliberations in January 2020 was almost the same as the previous April, albeit with a cap on the level of Huawei equipment.

Yet the political context was very different. Conservative MPs lifting their sights beyond Brexit liked neither the China that they saw emerging under Xi Jinping’s leadership nor the implications for the transatlantic relationship if they stuck with the government’s attempts to straddle the differences between Washington and Beijing.

The United States had been livid about London’s decision, not least given that it was potentially norm-setting for other US allies too. The US side made clear that while there may be short-term costs over matters such as the plans for a free-trade agreement, the real damage would be more lasting: in failing to take a clear position on China, the UK would effectively be on the wrong side of the strategic issue that Washington now saw as its most important challenge in the decades ahead. It would result in a long-term erosion of defense, intelligence, industrial and technological cooperation, and likely other areas besides. The outcome would effectively leave the UK to fend for itself in the nascent bloc politics that was now emerging: already outside the EU, it would be increasingly adrift from the United States and other Five Eyes allies such as Australia that were also aghast at the British approach. The benefits also looked rather thin: slightly cheaper 5G costs, and the dubious advantage of a better relationship with a China that saw the UK as weakened, amenable to pressure, and, since the British government had decided to cut itself off from the EU single market, far less useful to its European ambitions too. The dynamics with Washington and Beijing smacked less of “independence” and “sovereignty” than vulnerability and isolation.

The government nonetheless remained resistant to reaching the inevitable conclusion. It seemed set on maintaining the Prime Minister’s famous commitment to both “having” and “eating” his cake, partly out of the hope that a change in the US administration might give it more breathing room again. But the political currents in the Conservative party made it very difficult to pass any legislation to support this position. China – even beyond the Huawei decision – was becoming a post-Brexit focal point not just for the right of the party, which included some of the staunchest Atlanticists and Brexiteers, but for moderate MPs who were now facing up to what these choices implied, and struggling to make sense of why opening the door to deeper access for the Chinese state in the country’s digital infrastructure was a sensible course of action regardless of the US position. By February, the numbers in parliament were shaping up for a rebellion that would see an outright ban on Huawei instead.

This trend was given considerable momentum by developments during the Covid-19 pandemic. Beijing’s cover-up of the initial outbreak of the virus, the exposure of the UK value chains’ vulnerability to a country that was prone to weaponizing its position, and the level of diplomatic, economic and military belligerence that China exhibited considerably deepened concerns across the British political spectrum. The most egregious case was Beijing’s imposition of a national security law on Hong Kong. The shock of seeing the territory’s freedoms stripped away is catalyzing a wider pushback in the west, but the UK is even more deeply implicated given its close relationship with its former colony, and the special responsibility it bears for the fate of the citizens it handed over to Chinese rule under the guarantee that Beijing would maintain the “one country, two systems” principle. That this treaty was negotiated by a Conservative government, which gave only limited rights to Hong Kong’s British (National) Overseas passport holders to boot, heightens the sense of responsibility – and even a touch of guilt – on the Conservative benches. But with the change in leadership for the Labour Party opposition in April 2020, the China issue has started to become increasingly bipartisan too. Where under Jeremy Corbyn the Labour Party was only roused on foreign policy issues that involved an “anti-imperialist” stance on Venezuela, Syria, or Palestine, under Keir Starmer the Opposition is outflanking the government in its ”toughness” on Chinese human rights abuses, Hong Kong, and the wider China relationship.  The result is a remarkably broad consensus on China that has come about in barely a matter of months.

Some of the UK’s proposals seem to have a refreshing boldness about them. Creative energies in the British government are being applied towards everything from supply chain assessments to sanctions. The suggestion of a new D-10 club of democracies, has captured wider attention. But this is, in part, also a reflection of the country’s unmoored situation. While none of the steps that London has taken so far on Huawei or Hong Kong would have been affected by its EU membership, the longer-term policy solutions certainly are. It is clear that the rising challenge from China means that the UK needs to augment its technological, industrial policy and standard-setting capacities through cooperation with other democracies. Any plans to rebalance value chains will need to take place in close coordination with partners too; in none of these areas is it possible to pursue an autarkic approach. For its part, the EU is seized with precisely the same issues – supply chains, data, industrial strategy, digital regulation, and getting the defensive economic instruments in place to deal with Chinese non-market practices.

Ordinarily, the UK’s plans would have been closely aligned and integrated with the emerging agenda in Brussels. Yet even as it champions new economic partnerships among democratic allies, the UK is simultaneously seeking to pursue a divergent approach on standards, trade and other forms of economic cooperation from the EU in the context of its Brexit negotiations. Indeed, the UK has excluded wider strategic matters relating to its future relationship with the EU from these negotiations altogether. The dissonance at times borders on the comical. Anyone listening to recent debates in parliament about alternatives to Huawei and technology cooperation with allies, could have been forgiven for emerging with the sense that Europe didn’t even exist, let alone that the UK will be turning to European firms for its 5G network equipment.

For some British EU critics, this is purportedly because the Europeans are less robust in their China policy – just look at the lowest common denominator approach to Hong Kong, they say. This may be true when it comes to questions of, say, the application of sanctions, yet on geo-economic and technology matters the analysis strains credulity. Indeed, in its most recent proposals to apply the EU’s potent competition policy instrument to deal with Chinese subsidies, Brussels is taking steps that even Washington has not yet contemplated. The outcome for now is a counterproductive bifurcation in the UK’s approach to China. It is pursuing efforts at coalition-building through almost any other channel it can – an expanded G7, a D-10, an augmented Five Eyes, potential membership of CPTPP – even as the United States, Japan, India, and others are intensifying their own consultations with the EU in all the relevant areas.

From a US perspective, the Damascene conversion over China is welcome, but having run into a brick wall in talks with London over the Huawei issue barely a few months earlier, there is still a concern to see if it sticks. The UK is perceived by many administration officials as vulnerable, particularly while it continues in the Brexit limbo that has seen it fail to settle the economic relationship with its principal European trading partners. A potential Joe Biden administration will tend to view this situation less indulgently if it continues to pose an obstacle to a more concerted allied approach. There are still question marks in Washington over how resilient London will prove under Chinese pressure, and the convulsive lurches in the UK approach to China in recent years hardly imply a well-settled policy. Yet the current course of action will be hard to reverse. If, in the coming period, we see heightened British restrictions on Chinese investment and technology cooperation, sanctions directed at Chinese officials, a larger symbolic British military presence in the Pacific, incentives to reduce reliance on Chinese in strategic economic sectors, and many of the other moves being mooted, the need for closer integration with partners will only grow. And the wider political dynamics in the UK underpin this trend: opinion polls conducted through the pandemic indicate extremely high levels of distrust in China among the British public.

For all that the shifts in the political debate on China in the UK reflect genuine – and in some cases strongly morally held – views, recent months have also demonstrated how dependent the British position has become on decisions taken in Washington, and the limitations on its scope to pursue an autonomous approach. This is partly a function of the fact that critical Chinese technologies are still dependent on US intellectual property, which was the notional justification for the UK’s recent Huawei decision. But it goes well beyond that. Most major actors have realized that an effective approach to China can only be pursued in concert with others. But what that implies is not a narrow set of foreign policy positions but a wider set of economic, trade, technological, intelligence, and military alignments and partnerships. The 5G debate helped to expose this more starkly. Unpicking the complexities of the UK’s political and bureaucratic dynamics is one way of making sense of why China policy has shifted so quickly. But it can also be explained more reductively: 2020 was the year in which it dawned on the UK that it didn’t have the luxury of refusing to pick which side it was on.The views expressed above belong to the author(s).

Observer Research Foundation

Observer Research Foundation

ORF was established on 5 September 1990 as a private, not for profit, ’think tank’ to influence public policy formulation. The Foundation brought together, for the first time, leading Indian economists and policymakers to present An Agenda for Economic Reforms in India. The idea was to help develop a consensus in favour of economic reforms.

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