Beijing to Britain

HSBC, Naval speeches, Raab call

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The United Kingdom now has the starting point of a new ‘China Strategy’ - albeit a modest couple of pages in a much longer document, the Integrated Review, setting out the country’s foreign policy. Government will use this to attempt to align political behaviour with regards to Departments, and provide clarity to businesses operating between both countries.

This starting point on a strategy for China will continue to prove highly contentious. Political views will remain polarised, and those MPs active on China will likely push for further clarification.

The Review adds credence to our view that two loose schools of thought have emerged in Westminster. One calls for a fundamental reset of British relations with China, championing human rights over trade, and pushing for all engagement to be through a values-led approach. The other school pushes for a realpolitik approach; while the so-called ‘Golden Era’ may be over, it is better to keep China at the table through diplomacy and trade, even at the expense of human rights - without these, the UK has no leverage or bargaining chips.

The majority of China-centric politicians in the UK can roughly be placed into one of these schools, although their views often change depending on the issue at play. It’s worth noting that neither school believes that an enriched Chinese middle class will steer the country towards democracy. While the Government may pretend that is has strategised around the values-led approach advocated by the first school, is the latter approach that it has chosen to embrace in a hybrid fashion, by portraying trade as a vehicle to hold China to account.

And so ‘Beijing to Britain’ was born - a weekly overview of the ebbs and flows of this discussion, and how it impacts politics, the private sector and society.

As always: tips, feedback, and your views to BeijingToBritain@protonmail.com.

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Politics

  • Foreign Ministers

  • Truss on WTO

  • Transparency

  • Naval speeches

  • Uyghur tribunal

Business

  • British Chamber of Commerce in China

  • Trade data

  • HSBC and Citi threats

Society

  • British polling on China


First, a quick look at this week for China in Parliament

  • 39 mentions of China

  • 1 mention of Xi Jinping

  • 14 mentions of Hong Kong

  • 2 mentions of Uyghurs

  • 1 mention of CCP

  • 19 mentions of Magnitsky

  • 589 out of 650 MPs (90.6%) have a Twitter account.

    • 12 MPs’ tweets containing the term ‘China

    • 5 on ‘Hong Kong

    • 2 on ‘Uyghur

    • 0 on ‘Magnitsky’



Who’s asking what?

Order! Order!

Some of the more eye-catching questions asked in Westminster this week

  • Peter Dowd (Labour) asked “the Chancellor of the Exchequer, what assessment his Department has made of how much UK property and infrastructure is owned by China State Development and Investment Corporation.”



Spotted

British Prime Minister Boris Johnson has responded to a letter from Chris Patten, Shadow Secretary Lisa Nandy, former Conservative leader Iain Duncan Smith and some other 100 Parliamentarians calling for sanctions on Hong Kong officials following the sanctioning of UK MPs. His answer? No. (Letter here)

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Politics

Phone diplomacy, Truss, transparency, speeches, Uyghur tribunal

High level chatting

It’s been so long since we’ve seen any high level communiqué between the Foreign Secretary Dominic Raab and Chinese Foreign Minister Wang Yi that your writer was beginning to think they had lost each others phone numbers. However, to the joy of all six of us that follow these things a phone call took place between the pair on Thursday morning.

The FCDO readout said:

The Foreign Secretary spoke to Chinese State Councillor and Minister for Foreign Affairs, Wang Yi, today. They discussed the importance of a constructive UK-China relationship to tackle global challenges such as climate change and global health. The Foreign Ministers also discussed a range of foreign policy issues, including the situation in Myanmar, Iran and North Korea.

The Foreign Secretary reiterated the UK’s ongoing concern at the situation in Hong Kong and human rights violations in Xinjiang, and underlined the importance of giving the UN’s human rights experts unfettered access to Xinjiang.

The Ministers ended their call agreeing that there are opportunities for the two countries to work together, from trade to tackling biodiversity loss, and said they looked forward to further discussions on these issues.

As usual, China’s Ministry of Foreign Affairs had a fuller readout. We have signalled topics that caught our eye by putting them in bold:

On May 27, 2021, State Councilor and Foreign Minister Wang Yi had a phone conversation with British First Secretary of State and Foreign Secretary Dominic Raab at the latter's request.

Wang Yi said, President Xi Jinping had phone conversation with Prime Minister Boris Johnson twice last year, charting a course for the development of the two countries' relations. China-UK relations have a deep foundation and strong driving force. China has always attached importance to the international status and role of Britain and is willing to be a partner of a "Global Britain". In spite of the COVID-19 pandemic disruptions, the trade between China and the UK still bucked the trend to grow upward last year. What's more, China became the UK's biggest single import market in the first quarter of this year, fully demonstrating the resilience and potential of China-UK relations. As permanent members of the United Nations Security Council, China and the UK should fulfill the international responsibilities, step up communication and coordination, work together to tackle global challenges such as the COVID-19 pandemic and climate change, maintain world peace and stability, and promote global economic recovery and sustainable development.

Noting that it is an objective reality that there are differences between China and the UK due to their different historical and cultural backgrounds, different stages of development and different perspectives on issues, Wang Yi pointed out, what is important is that the two sides should conduct equal dialogue in the spirit of mutual respect, so as to enhance understanding, dispel doubts, clarify facts and distinguish right from wrong. Microphone diplomacy is not advisable, and "group politics" in particular does not meet the requirements of the times.

Wang Yi also elaborated on China's principled position on issues related to Hong Kong and Xinjiang, stressing that the "one country, two systems" policy is China's basic state policy, which China will unswervingly and consistently adhere to. Everything done by China in Hong Kong is to ensure the stability and long-term outcomes of the "one country, two systems" policy. The efforts to improve the electoral system of Hong Kong SAR is gaining wide support from all walks of the Hong Kong society. Xinjiang-related issues are in essence about combating violent terrorism, separatism and radicalization. While the Chinese side welcomes foreign visitors to Xinjiang to learn about the real situation, it does not accept the so-called "investigation" based on the presumption of guilt.

Wang Yi indicated, China is ready to continue exchanges with the UK on sensitive issues with an open attitude, yet the British side should respect China's sovereignty and territorial integrity, the development path independently chosen by the Chinese people and China's right to handle its internal affairs without interference.

Raab said that UK-China relations have a deep and solid foundation. Although there are differences between the two sides, the British side is willing to strengthen exchanges and rational communication with China in the spirit of mutual respect and seeking common ground while shelving differences, so as to continuously enhance mutual understanding and let cooperation rather than differences define bilateral relations. The UK lauded the great achievement scored by China in the pandemic battle and is willing to further deepen coordination and cooperation with China across a variety of fields, including public health, the Belt and Road Initiative, economy and trade, and climate change.

The two sides also exchanged views on the Joint Comprehensive Plan of Action, the Korean Peninsula issue and the situation in Myanmar.

So, interesting to see that the FCDO readout omitted a couple of key details, such as the recently-trendy BRI.

Apropos of nothing, we enjoyed reading this Bloomberg interview with the U.K.’s first National Security Advisor, Peter Ricketts. Asked how Britain gets its China policy right, he replies:

That is the dilemma. America can be a pretty tough ally when the chips are down, and they can be very, very determined to have their way, even with the closest of allies like the U.K. So yes, we have to somehow achieve a policy on China where, on security terms, we’re very vigilant and we are lined up with America, while [at the same time we] maintain access to China’s big commercial market. We have more need of that than America does because of our size and now because we are outside the EU.

Britain has been quite bold in standing up for human rights on Hong Kong, quite rightly, and for the Uighurs. But we don’t have the protective cover of being in the EU. China can pick us off as they’ve picked Australia off with targeted sanctions and so on. So there are real limits for Britain to combine its commercial interests with its wish to stand up for human rights. These are the sort of choices that each government over the next decade or two is going to struggle with.

Asked later about the sanctions placed on CCP officials by Britain as being like a “flea bite”, Ricketts states:

You’re putting your finger on the dilemma we were talking about, that Britain both wants to promote its values and at the same time preserve its economic and commercial links with economically powerful countries. You can see it exactly in the implementation of this act.

It’s a good thing to have this [Magnitsky] act on the statute book clearly, and it’s right that egregious violations of human rights should attract sanctions. But sanctioning a few officials isn’t going to make any difference. On China, you can see that Britain imposed these sanctions on a few officials directly concerned with Uighur repression but not at all on the senior leadership of the Chinese system, which would have certainly drawn massive retaliation against British economic interests.

The most powerful sanctions come from financial centers such as London and New York, which have a lot of leverage over countries where oligarchs or leaders like to stash money away. Britain has unexplained wealth orders (UWOs) and so on. Now, there’ve been some steps taken, but I don’t think that they go far enough to really make the elites in these countries feel any pressure. 

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Truss the process

Tough words from Secretary of State for International Trade Liz Truss on the eve of the G7 UK Trade Ministerial. Speaking to Politico, she again singled out China’s practises, warned the UK must not become ‘dependant’ on Beijing, and pushed World Trade Organisation (WTO) reform to the top of her agenda. Earlier in the day, ONS figures revealed that China had replaced Germany as the UK’s biggest single import market for the first time since 1997.

Politico continues:

Truss said China had been guilty of "forced technology transfer, IP violations or unfair industrial subsidies that haven’t been transparently declared," and said World Trade Organization reform was now needed to make its "rules tougher" and restore faith in free trade.

"We believe in trade as a force for good and of course, we continue to trade with China," she said. "It’s an important market for exports. There is Chinese investment in the United Kingdom. I think the key thing is about not becoming dependent and making sure that we have a multitude of trading partners."

British MPs were recently sanctioned for their opposition to China’s treatment of Muslim Uyghurs in its Xinjiang region, conditions Truss called “horrific." She added that regarding the sanctions, she stood by "colleagues who have faced this appalling treatment by China."

“As well as those specific violations, there’s a broader issue here about economic coercion and the use of economic power to achieve things," Truss said. "And it is right that democratic countries within the WTO, and our allies who believe in following the rules, do seek to get changes to the way the organization works.”

Your writer spotted a rare tweet of support from China Research Group co-founder and sanctioned MP Neil O’Brien.

In a separate press release ahead of the G7 meet, Truss stated:

It really is now or never for the World Trade Organisation. International trade only works when it is fair and when countries submit themselves to a common set of rules, and  for that to happen we need a more modern and dynamic WTO. 

We want to use our G7 Presidency to address the fundamental issues facing global trade, and support Dr Ngozi in her work to bring the WTO into the twenty-first century. Like- minded democracies need to lead the charge on trade reform, because if we don’t then  there is a very real danger that global trade fragments and that fewer countries end up  playing by the rules.

Her rhetoric on this issue has frustrated many, both in the UK and China. The Global Times was critical, writing:

Some Western politicians have long trumpeted their support for free trade, but in reality, its becoming common to see them issue prejudicial warnings against normal trade practices that go against their political interests.

The latest example of such phenomena is the remarks made by UK Trade Secretary Liz Truss during an interview with Politico on Wednesday. The UK must not become "dependent" on trade with China, the trade secretary said, while acknowledging the necessity of maintaining economic and trade relations with China.

Her comments come just one day after the Office for National Statistics released the latest data indicating that China overtook Germany to become Britain's biggest single import market in the first quarter of this year. China is already Britain's second-largest trading partner, just after the US.

At a time when the business community of the two countries may feel a sense of relief at the trade data - a telling of the fact that the deterioration in China-UK relations doesn't seem to have affected bilateral economic and trade cooperation so far - it is clearly not a good sign to see a top trade official signal discouragement toward its trade ties with a major trading partner, which may send jitters through the markets at both sides.

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No such thing as a straight forward answer

A frequent criticism of this Government is that it is both muddled in its approach to China, and coy in sharing details of whatever strategy may or may not be in place beyond the vague notions put forward in the Integrated Review. Transparency is clearly not high on the agenda.

Your writer spends a significant amount of time trawling through Written Questions tabled by politicians from all parties, and anecdotally has noticed the standard slipping when it comes to revealing information.

Take a recent question from IPAC member Nus Ghani. Last week, she asked:

The Secretary of State for International Trade, which (a) organisations, (b) Government Departments, (c) NGOs and (d) others attended the roundtables on forced labour in Xinjiang in March 2021; what the job titles were of those representing organisations; and how many of those attendee organisations have (i) published a Modern Slavery statement and (ii) removed their supply chains from Xinjiang.

Readers may remember this roundtable was covered in the press; The Guardian got the scoop that Boris Johnson had told companies present that he was a ‘fervent Sinophile’. The same report revealed Swire Group and Tenacity were among those present.

The Government’s response to the question is poor and, as has unfortunately become the norm, evasive:

On 10th and 11th March, the Secretary of State for International Trade hosted two roundtables on the issue of forced labour in Xinjiang. 22 organisations attended, including representatives from the technology and retail sectors, non-governmental organisations (NGOs) and business organisations.

Under section 54 of the Modern Slavery Act 2015, commercial organisations with a turnover of £36m or more, that a have a footprint in the United Kingdom, are required to publish a modern slavery statement. Organisations are responsible for determining whether the legislation applies to them and those in scope of the Act are required to publish statements for each financial year online.

HM Government is keen to encourage businesses to share their perspectives on how they are responding to the situation in Xinjiang, and we continue to make clear that they should act without delay to make sure they are not complicit in any way in the violation of rights and responsibilities.

The lack of transparency around this sort of thing matters. It’s important for Parliamentarians, let alone the general public, to know which companies are present in meetings that discuss some of the finer points of the ever-changing British strategy towards China.

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Speech ahoy

Three notable speeches this week, all military-focussed. The first comes courtesy of Admiral Tony Radakin, First Sea Lord, during the Sea Power Conference.

In his speech, Radakin mentioned China once (below). It’s worth skimming the rest, as it unpacks the Integrated Review from a naval point of view and includes some classic British-isms, such as “it also reflects the British way of warfare: one that exploits the benefits of being as brave as lions and as cunning as foxes, in the use of our people, technologies and ideas”.

The China mention:

Similarly, speaking on the flight deck of HMS TAMAR in London in September our Secretary of State said “the global picture has changed … the static concept of war versus peace no longer applies as we are contested on either side of the threshold of armed conflict on a regular basis … Our Armed Forces must be more forward-deployed, deterring Russian activity in Europe, combating terror in the Middle East and the Sahel and countering Chinese activity in the Asia Pacific”.

He concludes:

Ensuring the security of the UK and its interests and deterring aggressive and adventurist states are our bread and butter. But we also have a role to play in supporting and growing prosperity after the economic challenges of the Covid pandemic. Navies follow trade. And trade follows navies. Rules matter. Alliances matter. Shared values matter. We are a Royal Navy that is flying the flag for Global Britain and carrying forward the Prime Minister’s vision of what this country can achieve on the global stage.

Separately, two more speeches emerged from the RUSI Strategic Command Conference, theme - ‘Sharpening the UK Defence’s edge in the 2020’s.’. First up, General Sir Patrick Sanders, Commander of Strategic Command. Sanders mentioned China six times throughout his speech, comparing the country to a Dragon in a reference to CIA Director James Woolsey, who characterised the threat facing America as being composed of Dragons and Snakes.

Both are still with us, only the Dragons are more powerful and malign and the Snakes are more prolific and diverse. Sometimes they act in concert. Some snakes cannot be deterred – they have to be suppressed or disrupted. This is why we will maintain cutting edge CT capabilities in our Special Operations Forces. Other snakes – like the Wagner Group for example or malicious cyber actors are used as proxies by the Dragons.

The largest Dragons in this metaphor are China and Russia. Russia is the acute and most menacing threat – the Defence Secretary described it as the number one threat to the UK just this Sunday. China is very different - a global power, a strategic rival and in some areas (we hope) a strategic partner. But our ability to manage this strategic rivalry requires the same tools of deterrence, modulated and applied to these Dragons in different ways.

Worth reading the whole thing, especially for the insights on AI. Finally, Defence Secretary Ben Wallace delivered a speech at the conference. He used his speech to chastise the media for covering defence cuts “much of the media’s focus on our paper was on the usual tired numbers game”, and set out the position that the “future of foreign policy and defence is in my opinion going to be bilateral, trilateral and small groups of countries with common cause”. Read it here.

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Uyghur tribunal

Only a week to go until Sir Geoffrey Nice QC kicks off the Uyghur Tribunal in London. For background:

In June 2020 Dolkun Isa, President of the World Uyghur Congress formally requested that Sir Geoffrey Nice QC establish and chair an independent people’s tribunal to investigate ‘ongoing atrocities and possible Genocide’ against the Uyghurs, Kazakhs and other Turkic Muslim Populations. The Uyghur Tribunal (“Tribunal”) was launched on 3 September 2020 with assistance from a non-governmental organisation, the Coalition for Genocide Response.

The Tribunal was sanctioned by the CCP earlier this year, and has come under negative media attention from many Chinese outlets. For example, CGTN published “UK 'Uygur tribunal' aims to smear China, has no legal basis: Xinjiang officials” on Tuesday morning:

China strongly condemns a UK body investigating the claims of "genocide and crimes against humanity" against Uygur people in northwest China's Xinjiang Uygur Autonomous Region, as the so-called tribunal is not a judicial body and has no legal basis for establishment, Xinjiang government officials told a press conference on Tuesday.

The so-called investigations and trials are being used to attack Xinjiang and smear China, the officials said, adding that such acts are interference in the country's internal affairs
.

The issue has also come up at various Chinese Ministry of Foreign Affairs briefings during the week, shared further by the Chinese Embassy in London. Expect this to ramp up over this coming week and peak over the weekend. Will the Embassy take the same line as China’s Foreign Minister Wang Yi, who recently saidthere’s no such thing as genocide - our European friends know what is genocide”? We would bet on it.

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Odds and ends

  • There have been 34,300 applications to the bespoke five-year visa scheme for British National Overseas (BNO) citizens since it opened on January 31. (The Times)

  • Hong Kong passed a landmark bill on Thursday to drastically reshape its electoral system and meet Beijing’s bottom line that only “patriots” should be allowed to govern the city, effectively expanding the influence of pro-establishment forces in key political bodies. (SCMP)

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Spotted

The first formal outing of the incoming PRC Ambassador to theUK. His Excellency Ambassador Zheng Zeguang will be arriving in London imminently. A leaving event for Zheng was attended by country leaders from bp, Burberry, The Economist,GSK, Jaguar Land Rover, Rolls-Royce, Shell and Standard Chartered Bank.

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Business

British Chamber of Commerce in China, trade data, HSBC threatened

New Position Paper

Your writer spent a couple of hours sifting through the newest offering from the British Chamber of Commerce in China (BCCC). It opens by noting that “UK-China relations are at a pivotal point. Amongst UK politicians, support for objective, constructive dialogue with China is waning and public opinion in the UK has hardened against China”. The paper then calls on the Chinese Government to do six things:

  1. Enact clear, consistent, safe and practical travel processes between the UK and China

  2. Encourage the development of an attractive environment for global talent

  3. Enable the uniform implementation of beneficial market reform policies

  4. Ensure that the final iteration of cybersecurity legislation provides sufficient clarity and supports international r&d

  5. Expand pilot programmes to liberalise crossborder capital flows

  6. Establish a level playing field between private and state-owned enterprises

Caixin’s coverage is worth reading, as is the South China Morning Post. The report didn’t get significant pickup in Fleet Street.

The paper does miss sensitive areas that surely impact British businesses in the country; for example, Xinjiang does not make an appearance. This is a puzzling omission given that the British Government (along with several other countries) is currently mulling over supply chain transparency measures for companies operating in the region following allegations of Uyghur forced labour.

Worth noting the Global Times view. ‘Dialogue crucial for UK, China to address differences’ states:

In an earlier interview with the Global Times, Julian MacCormac, country director for China from UK-based Rolls-Royce Plc, said that the company's global suppliers had been battered by the pandemic, and last year orders were reduced by half, including a significant reduction in volume from China, "but there has been no operation disruption caused by Chinese suppliers."

The chamber also said on Wednesday that although differences may exist, "the prospects for UK-China trade are positive," citing data that showed UK-China trade hit 79 billion pounds ($111.9 billion) in 2020. 

This was a decrease of only 8 percent - far less than the drop in overall UK foreign trade of 17 percent between 2019 and 2020, the chamber said. 

"UK-China relations have seen extraordinary shifts in the past year. Some quarters of (the UK) Parliament have expressed a desire to reduce bilateral engagement. However, dialogue is crucial if we are to address our differences and harness areas of common interest," the chamber added. 

Chinese experts said that the post-Brexit UK faces a dilemma of being marginalized in Europe, and the country worries about becoming out of touch with the European market. Trade with China is no doubt bringing practical benefits to it. 

"The economic and trade foundation of China and Britain is still solid, although there is some turbulence, reading from the trade data," Cui Hongjian, director of the Department of European Studies at the China Institute of International Studies, told the Global Times on Wednesday. 

"Political factors are like wind and rain, and both sides need to maintain stability of their trade. 

"In comparison, some small European countries such as Lithuania are sacrificing the interests of economic and trade cooperation with China. Such behavior is short-sighted, and will take away opportunities for their own development," Cui said. 

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UK-China trade

Graph time. The latest Office of National Statistics (ONS to its friends) data mentioned earlier is worth skimming. In short:

  • Imports of goods from China accounted for 16.1% of UK goods imports in Quarter 1 2021 having increased by 65.6% compared with Quarter 1 2018, exhibiting a larger increase than exports. Goods imports from China have continued to show an upward trend throughout 2020

  • Imports from China increased in February and March 2021 driven by clothing and footwear. The proportion of currently trading "Wholesale and retail trade" businesses that have imported in the last 12 months, reporting importing more than normal in the BICS increased from 2% in early March 2021 to 7% in late March 2021.

  • Additionally, real time indicators such as retail footfall, pedestrian traffic around city centers and Clearing House Automated Payment System (CHAPS) all indicate an increase in high-street traffic towards the end of March in preparation for the opening of shops on 12 April across the UK.

  • It is fascinating to see which goods are being imported from China.

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Under fire

Bloomberg has seen letters threatening media tycoon Jimmy Lai’s bankers at Citigroup and HSBC with as many as seven years in jail if they deal with any of his accounts in the city.

The report continues:

Security Secretary John Lee, who signed the letters seen by Bloomberg News, previously announced that he was freezing bank accounts linked to the publisher of the city’s pro-democracy Apple Daily newspaper under Hong Kong’s sweeping national security law. The letters were sent to HSBC Holdings Plc and Citigroup Inc. earlier this month.

Bankers ignoring the directive will be “liable on indictment to a fine and to imprisonment for seven years,” according to the letters.

“I am exercising the power because Lai has been charged with two offences of collusion with other country or external forces to endanger national security,” Lee said at a media briefing Thursday. “It is my duty to specify in my notice to the relevant parties what will be the consequences if they fail to comply with my direction.”

Noted by your writer was the lack of British political support for the London HQ-ed bank. Separately, HSBC continues to cement itself as an Asian bank after announcing this week that it would be ending retail banking in the US for most individual customers and small businesses. It will sell 90 of its 148 branches in the country, and wind down a further 35 to 40.

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Odds and ends

  • Apple Daily quotes a Hong Konger living in London on the need to watch out for increasing fees due to fire regulation in buildings. (Apple Daily)

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Spotted

Heads up Swire and Jardines. IPAC co-chair and Hong Kong Watch patron Lord Alton appears to have the two Hongs in his sites; a recent Written Question to HM’s Treasury asked if either company benefited from (a) the Coronavirus Job Retention Scheme, (b) the Recovery Loan Scheme, (c) the COVID-19 Corporate Financing Facility provided by the Bank of England, or (d) business rates relief.

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Society

British public on China

New polling reported in this week’s Spectator shows the British public is increasingly sure in their view that China is to blame for the pandemic. The magazine reports that:

More than three in four Brits believe China is to blame for the coronavirus crisis, with 42 per cent saying the country's regime is 'significantly to blame' and a further 34 per cent agreeing it is 'somewhat to blame.' This compares to just 15 per cent who 'don't know' and less than one in ten or 9 per cent who believe China is 'not at all to blame.' 

This follows a week of headlines in British media on the origins of Covid-19 being from a lab spillover, rather than from animals as previously believed. The Spectator continues:

Amid continued criticisms about the CCP's efforts to downplay the virus and mislead the world, some 69 per cent of the those polled supporting the view that the 'Chinese Government covered up the outbreak of the coronavirus outbreak' in contrast to just 16 per cent who claim 'the Chinese Government warned the world about the coronavirus outbreak.'

Unsurprisingly the events of the last year have now resulted in a hardening attitude of public attitudes towards Beijing. Just 15 per cent of those polled said they had a 'favourable' or 'very favourable' view of China with nearly a third – 31 per cent – saying they were 'neither favourable nor unfavourable.' By contrast now more than half the British public has an 'unfavourable' or 'strongly unfavourable' impression of China with a total of 51 per cent.

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Reading list

What we learned from this week