Beijing to Britain

Chinese Embassy, WTO, Steel

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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

  • Influencers

  • WTO

  • Chinese Embassy

  • BRI

  • Green

Business

  • Bitcoin

  • Steel

  • Bank of China

Society

  • What do Chinese academics think of the UK relationship?


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

  • 32 mentions of China

  • 1 mention of Xi Jinping

  • 12 mentions of Hong Kong

  • 4 mentions of Uyghurs

  • 1 mention of CCP

  • 2 mentions of Magnitsky

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



Who’s asking what?

Order! Order!

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

  • Andrew Rosindell (Conservative) askedthe Secretary of State for Business, Energy and Industrial Strategy, what assessment he has made of the implications for his policies of reports that UK solar farms have been built using panels made in Xinjiang province.”

  • Peter Dowd (Labour) askedthe Chancellor of the Exchequer, what discussions officials in his Department have had with relevant stakeholders on the allocation of funding for the UK-China Cooperation Fund.”



Spotted

An eye-catching series of questions tabled by Labour’s Peter Dowd due to be answered by the Business, Energy and Industrial Strategy Department tomorrow. Dowd is expecting responses on the following four questions:

  1. How many Chinese companies have issued shares on the London Stock Exchange as part of the London-Shanghai Stock Connect?

  2. How many Chinese companies are currently involved in the UK-China partnership on smart cities?

  3. How many UK companies currently have joint-partnerships with Chinese companies as part of their operations in China?

  4. How many UK companies are currently involved in providing financing to China’s One Belt One Road Initiative?

We note with keen interest that Dowd has previously kept a very close eye on the relationship between Philip Hammond, David Cameron, and China. He also visited the country as part of the Great Britain China Centre’s ‘10th Anniversary Leadership Forum’ in 2018.

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Politics

Who’s who, WTO, Embassy, Western BRI, UK-China relations, solar sourcing

Mapping influence

On Tuesday morning, Quartz journalist Annabelle Timsit released an interview series, ‘Meet the UK’s China Watchers’. A project that has been in the works for months, Timsit spoke to several key campaigners, politicians and journalists readers may recognise. While clearly not an exhaustive list it’s a good start and shows the breadth of opinion even within the Conservative Party on China.

Below are a couple of quotes and thoughts that drew our attention from the politicians and advisors - there’s plenty more we’re not including, so do read the series.

Tom Tugendhat, China Research Group (CRG) co-founder and Chair of the Foreign Affairs Committee (link)

On being hawkish towards China

But I would be cautious about saying we’re hawkish. I wouldn’t describe it as hawkish to seek to defend your interests. We’re not hawkish in the sense that we’re trying to invade Iraq or send gunboats up the Yangtze. We’re just very conscious that the international rules-based system, which is a rather grand way of saying the way in which the world tries to settle disputes in a predictable and ordered fashion, is being undermined by a country that has decided that it wants to use its weight and authority rather than established practice.

On alleged genocide in Xinjiang

I’ve always been, for example, more cautious about calling the serious violation of human rights in Xinjiang “genocide.” I think it probably is, but I’m not a lawyer. As Philippe Sands put it, serious human rights violations are serious enough. These are very, very, very, very serious—whether they’re genocide or not, I’m not bothered about. The important detail is there are people, particularly women, particularly Uyghurs, whose rights are being seriously violated by the Chinese state.

On Xi Jinping’s rule

But this is an administration that has clearly got an internal weakness. There’s something unusual about a state where the leader feels that they will never be able to retire, and that’s what he’s done by abolishing term limits. He’s effectively said, ‘I don’t think that I can ever make this country stable enough that I can hand [it] over to somebody else.’ It’s a bold statement.

Xi is a very, very astute man, and he has achieved power in a very complex political system. He knows that the use of force as a political weapon is an option, but not one to be used too often. And yet here he is, ramping it up in places like Xinjiang. He knows that if had waited 10 or 15 years, he would probably be able to reunite with Taiwan peacefully [and] claim great credit. But now he knows that the only way to reunify with Taiwan is going to be by force.

Luke de Pulford, IPAC co-founder and campaigner (link)

Asked if he’s a China hawk

Yes. And I don’t really have much of an objection to it. If they mean somebody who is watching out for the stuff that China’s going to do next and try to stop it from doing that stuff, then the answer is yes. There are loads of people around who are bending over backwards to try and avoid this label and it’s like, what’s the problem? Is China a threat or not? Do you want to stop it being a threat to the international order or not? If that’s what a China hawk is, then, yeah, I’m a China hawk.

On Foreign Secretary Dominic Raab announcing sanctions

I am very confident that [UK foreign secretary] Dominic Raab actually wanted to impose sanctions in January and was blocked from doing so. The language and the rhetoric that he has been using has been exceptionally strong. It just doesn’t correspond to any of the policy. And that’s because he can’t get the policy signed off. I have been a very outspoken critic of him because he is the minister responsible. But the truth is, we know that Raab agrees.

…and who allegedly blocked him

Responsibility does lie with Boris [Johnson]. We really need to act on this in a serious, meaningful way, and he’s being advised not to do that by a lot of people around him. There are a lot of voices within the Tory Party which are obsessive market worshippers and which see that the only way that the UK is going to maintain its position as a strong economy is to hitch our fortunes to China.

…and who those voices are

[Advisor to the prime minister]Edward Lister, and I would put [former UK chancellor of the Exchequer] George Osborne in that camp.

On his influence in Westminster

It would be wrong to characterize me as somebody who is powerful. It doesn’t feel like that. Influential, maybe, but only because I’ve worked to build up trust and relationships with people. Politics ultimately is the economy of relationships. But also, I know how to feed politicians, keep them in the newspaper, and keep them on the order paper.

On if he’s visited China

Not mainland China. It’s sad, actually. I love it there and I love the people and I feel at home there, weirdly enough, because I don’t know it that well. I feel accepted there, I suppose, and liked. It’s quite a nice feeling.

Lord Sassoon, formerly the executive director of Jardine Matheson and China grandee in Westminster (link)

Asked if enough was done during the Golden Era to screen investment from China on national security grounds

Let me give you a small anecdote which might or might not answer the question. I remember a visit [to London] by Lou Jiwei, who was tasked with setting up the Chinese sovereign wealth fund. He and I have a meeting with Gordon Brown in Downing Street. Lou asks through the interpreters about British limits on what a Chinese sovereign wealth fund could invest in in the UK. And Gordon Brown says we have restrictions on who could be a controlling person of the media, certain financial services, banks, and defence companies. End of story. The meeting carries on. At the end Lou says to me, ‘Is this really true, that we could invest in anything we wanted in the UK except for controlling stakes in defence, media, and banks?’ And then we have a discussion about how it’s actually a more subtle landscape than that. But my point is that the Chinese could not believe that the UK was as permissive as it was. So I don’t think they’re at all surprised to see us tightening up the scrutiny of foreign investments.

On the recognition of genocide in Xinjiang by the House of Commons

I don’t know whether to be angry, sad, or shrug my shoulders. My mother’s family, fortunately, not many of them went to camps and died in the Holocaust, but some did. I’ve been to Rakhine state [in Myanmar]. I went to Cambodia as soon as people could get back in. My mother’s uncle chaired the committee that organised the British end of the Kindertransport.

I don’t know where the evidence is, but I’m not seeing it produced by the politicians who are calling what’s going on in Xinjiang genocide. It really upsets me that people are bandying genocide about, and I give credit to the British government that they haven’t jumped onto this. And tagging genocide onto trade bills is an abuse of parliamentary process.

What is going on in Xinjiang is not pleasant. I’m sure it’s a humanitarian tragedy. I don’t know what the scale of it is because there is so little evidence. The Chinese government is not reacting helpfully in the sense of credibly rebutting what is said in the West. But again, if only some of our politicians understood better the Chinese mentality, they’d know that backing them into a corner is not going to get a positive response.

You might say, well, why don’t I stand up in the House of Lords and say this? My style is to do practical, small things behind the scenes. And maybe I’m a moral coward. But the atmosphere has been so unpleasant in and around Westminster in the last year that I prefer to write to ministers on trade topics and do what I can in a small way to influence the direction of trade policy and the engagement of China, and trying to keep lines open to China—and keep out of this debate.

Mark Logan MP, a vice-chair of the All-Party Parliamentary Group on China and former attache to the UK embassy in Beijing during the 2008 Olympic Games and at the British consulate in Shanghai

On his view on the UK-China relationship

It’s not a very popular word right now: engagement. When you use it, everyone is like ‘Ah, engagement, it doesn’t work, it’s meaningless.’ But that’s where I stand on this. From the UK’s perspective, we need to engage China on a whole broad range of issues, ones which are happy in nature and invite prosperity and building those positive links—climate change, [for example]—but also on the contentious issues. We have to seek more than ever to find solutions through diplomatic mechanisms.

But also, some of the anti-China sentiment that’s come into the debate from the UK side is in many ways a response to China’s reemergence on the world stage. I’ve had the good fortune to be engaged with China for a long time and to see it reemerge [and so] perhaps someone like myself has been able to calibrate for a much longer time. The first time I went out and worked and studied in China, those initial thoughts and impressions were like, ‘Holy shit, no one told me about this. Everyone is talking about it being communist, but it doesn’t look very communist.’ And I’m just surprised that it’s taken so long for the increasing influence that China has already been having to filter through.

There are people across the Conservative Party that have quite nuanced views on China, but definitely over the last year, the loudest voices and the most animated have come from this more stringent point of view in the Commons.

On his role helping to form the UK National Committee on China [BTB note - this was not disclosed during the foundation of the UKNCC] [link]

The criticism is often made that the UK has never, or not for a long time, had a China strategy. My idea was to bring together lots of different conversations on the one platform. It was an idea that I’d put out there, and then a lot of different people across the UK showed an interest in it. I’m not actively involved, and I don’t have an official position of any sort, nor am I remunerated. But it has organically grown.

Richard Graham, chair of the All Party Parliamentary China Group, former British trade commissioner to China, and later first secretary at the British embassy in Beijing, and consul for Macau, a former director of the Great Britain China Center and accompanied former UK prime ministers David Cameron and Theresa May to China. Speaks Tagalog, Bahasa Indonesia, Malay, Cantonese, and Mandarin. (link)

On his fellow MPs being sanctioned by the CCP

I don’t think it’s a clever move by China because it doesn’t achieve anything. None of those individuals have got properties in China, and I’m not sure any of them have been there for a long while. All of them will wear it as a badge of honor. The sanctions [China] put on the members of the European Parliament have probably blown up the possibility of the EU-China investment agreement being approved. And in our Parliament, whatever anyone’s individual thoughts on what Tom [Tugendhat], Nus [Ghani], and others have said, the perception of an authoritarian state trying to close down elected voices is not a good one.

From a Chinese perspective, you’re just encouraging a drift towards a sort of cold war. Every time either side does anything there’s an immediate response. And we need to get to a place where people don’t always need to react. I tried to explain this before to the Chinese, that in a democracy, parliamentarians are elected [and] we respect the right of people to have their views and to say them. That is a key difference between us.

On the situation in Xinjiang to be that of genocide

I don’t think we have enough evidence personally for a claim of genocide to be sustained and that’s the UK government’s view, too. But I don’t think it’s necessarily for an individual country to make that assertion without a huge amount more evidence.

When I said it was an unhappy state, I don’t mean that word lightly. There are a large number of education centers or extended prison camps. Some of them were there a long time ago. We saw one in the Taklamakan desert in 1993. But that whole program has been vastly extended. And all the tools of artificial intelligence to monitor and interfere with people’s lives have been extended since then.

On being painted as a China apologist

There are some people, both within Parliament and without, who would like to try and deploy me as the person representing the Chinese point of view against some colleagues representing the anti-China point of view. For me, this has never been about being pro- or anti-China. It’s about being pro-Britain and our national interest. But my way of explaining our national interest is much wider than just human rights. I think it is interesting that some of the loudest, most assertively anti-China voices are not those who’ve been there and understand what’s happening. That intellectual curiosity that most MPs have very strongly is intense when you go over to China. Those who’ve been over there and understand the complexities are less likely to be quite so definitive in their judgments.

Iain Duncan Smith, co-chair of the Inter-Parliamentary Alliance on China

On the origin his interest in the UK-China relationship

It goes back to when the then-government that I was a member of decided that it wanted a very open door policy to China. I think they called it the golden generation [or the] golden era—I don’t know, golden something anyway. And I was concerned that almost every cabinet meeting was filled with the chancellor [George Osborne] constantly berating others for not having done enough to make available their activities to China. And then we had the [2015 state] visit of president Xi [Jinping], which I thought was way over the top. His speech to the joint session of the House of Commons and the House of Lords was very arrogant.

…on what Xi said to upset him

Rather than in any way attempting to compliment the UK, he basically tried to tell us the story of how China’s rightful place in the world was as this dominant power and dismissed the UK or the [Western] concept of government. I thought it was very unpalatable. And given my other concerns, I was about to [walk] out, when I was told by somebody that if I did that, it would create a complete and utter chaos for the government. As I was in the government, I hesitated. I resigned later on anyway, so it didn’t matter. But at that stage, I was involved in a very big reform and I wanted to complete it.

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Hard talk

Keep an eye on the rhetoric being used by senior Government officials towards China and the World Trade Organisation (WTO). Appearing before the International Trade Committee, International Trade Secretary Liz Truss told those gathered that the UK wants “to improve our toolkit multilaterally and unilaterally” through putting in new subsidies rules for things like steel and aluminium, to help counter Beijing’s unfair trade practices.

City AM continues:

Truss told parliament’s International Trade Committee that she wanted to work with the WTO to place more stringent rules on unfair trade practices and would speak with US Trade Representative Katherine Tai about this today.

The international trade secretary said this included things like increased “transparency of declaration of industrial subsidies” and “how rules can be updated at the WTO to include more categories of subsidies”.

“We have been too soft on China’s unfair trading practices for too long,” Truss said.

“The WTO was created in 1995 when the Chinese economy was one-tenth the size of the US economy. Yet China is still treated as a developing country at the WTO.

“We can see the impact on the steel industry where the market is 40 per cent over capacity and around 85 per cent of aluminum subsidies in recent years have gone to just five Chinese firms.”

“This is about democracies working together to make sure the global trading system is supporting democratic free enterprise,” Truss said.

“Making sure to deal with unfair subsidies through state aid enterprises, making sure we’re dealing with unfair practices from non-market economies.”

Worth noting here that Truss is incredibly popular among active voting Conservatives, and among them her views hold clout. As The Economist wrote last month:

This month she topped Conservative Home’s monthly Cabinet league table for the fifth time in a row. With 89 points, she beats the highly regarded chancellor, Rishi Sunak (79 points), by a length and the prime minister (61 points) by several. The league table reflects the opinions of party activists, who matter in Tory politics not just because they make key decisions (Boris Johnson was selected as prime minister by a constituency of 160,000 party members) but also because they both create and reflect wider currents of opinion.

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Four opportunities

This week, the Chinese Embassy in London kicked off the‘London Business School China Business Forum’, with the theme of ‘“The Future is Everywhere - Adapt and Achieve”’. Chargé d'Affaires and Minister Yang Xiaoguang opened the proceedings with a short speech, his first significant outing since he was summoned in March following the PRC placing sanctions on British citizens. Yang set the scene:

On one hand, we are facing growing governance deficit, trust deficit, development deficit, and peace deficit. These pose grave challenges to the progress of the civilisation of mankind.

On the other hand, peace and development remain the theme of our times; there is no fundamental change in the trend toward a multi-polar world; economic globalisation is showing renewed resilience; the call for upholding multilateralism and enhancing communication and coordination has grown stronger; and people of the world aspire more keenly to win-win cooperation.

Present were the 48 Group and many industry bods. Minister Yang opened his speech by stating:

  • China will remain committed to implementing the strategy of openness and win-win cooperation.

  • China will strongly encourage innovation in science and technology.

  • China will vigorously advance sustainable development.

  • China will resolutely promote the building of a new type of international relations.

Minister Yang then discussed EU and UK-China relations:

Both the UK and the EU are comprehensive strategic partners of China. China values its relations with the UK and the EU, and stands ready to advance these relations on the basis of equality and mutual respect.

Recently, China-UK and China-EU relations have encountered some difficulties. It is our hope that the UK and the EU will view China’s development from an objective perspective, discard ideological bias, and refrain from interfering in China’s domestic affairs. These principles will help bring China-UK and China-EU relations back to the right track.

China never stirs up trouble, but we are not afraid of trouble. We will firmly safeguard our sovereignty, security and development interests. It is my belief that visionary people from the UK and the EU will join us in finding an appropriate approach to relations with China.

He identified four areas for collaboration.

  1. First, the opportunity for cooperation on world economic recovery.“We should encourage the development of digital economy and enhance exchanges and cooperation in areas of artificial intelligence, bio medicine and modern energy. This will enable us to shift to new economic drivers, create new growth models, restructure our economies, and promote stability and growth in the world economy.”

  2. Second, the opportunity for cooperation on open and integrated development. “Attempts to “build walls” or “decouple” run counter to economic and market rules. They are damaging to others and self-destructive. What the world needs at the moment are trade and investment liberalization and facilitation, deeper regional economic integration and openness in global economy. The Belt and Road Initiative is aimed at addressing these issues. BRI is a public road that is open to all. It is not a private path owned by one single party. Europe is an important partner for BRI cooperation. European countries are welcome to take part in promoting high-quality development of BRI and share in the benefits.”

  3. Third, the opportunity for cooperation on green development. “Later in October, China will host the 15th Conference of Parties to the Convention on Biological Diversity, known as COP15. We hope to work with all parties to take global governance on biological diversity to a new level. We also support the 26th UN Climate Change Conference of the Parties to be held in Glasgow later this year, known as COP26, in achieving positive outcomes.”

  4. Fourth, the opportunity for cooperation on reform in the global governance system. “We should uphold the principles of extensive consultation, joint contribution and shared benefits. We should safeguard true multilateralism, and build a just and reasonable global governance system. This means we should work together to safeguard the international system with the UN at its core, the international order underpinned by international law, and the multilateral trade system with the WTO as the cornerstone.”

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Western BRI

Chatter in Westminster continues to circulate around how the Western world can counter China’s Belt and Road Initiative (BRI) project. As we’ve noted in previous Briefings, beyond concern over the BRI as a form of debt-trap diplomacy, very little in terms of substantive thinking has been offered from politicians on this subject to date.

So Tom Tugendhat and Labour’s Shadow Foreign Affairs Secretary Lisa Nandy's discussion at a centre-right think tank Onward’s event ‘Delivering a Western alternative to China's Belt and Road’, is a timely one. Hosted by Rana Mitter, who reminded those gathered that the BRI extended into digital and health tech too, the discussion provided a level of insight into the Labour’s thinking on the topic.

Nandy opened by elaborating on the perception of how the UK sees the rest of the world:

For quite a long time the UK has seen large parts of the world, particularly the global south, and large parts of Africa, as only recipients of aid. But there is an opportunity to build new partnerships with countries who have complementary assets to our own; the raw materials, the production that we need for example that boost not only their own economies but ours as well. And that requires a shift in mindset from the UK perspective.

She then set out her vision for what a Western version of the BRI could look like:

If we're going to match the scale and ambition of the BRI, it requires that we provide competitive and cheaper financing and ultimately this will take large resources to be effective - which is why it demands a global response. Loans might need to be concessional to offer longer term loans at rates that avoid the debt traps inherent in the BRI. They should ensure local content; one of the common complaints is the lack of local content and labour in BRI projects that give a minimum boost to the local economy. In short, giving a better offer than the Chinese are currently offering, guaranteeing a proportion of local content of labour of technology transfer including, crucially, the role of women in the labour market which is often ignored, and projects that support societal, environmental, and economic development.

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Green ain’t clean

Quick note for those interested (and because we want to continue highlighting to readers how much of an issue this is going to become) - leader of the Green Party Caroline Lucas has tabled two questions that specifically look at solar supply chains in relation to Xinjiang.

  • Her first question to the Secretary of State for BEIS is “what steps the Government is taking to support the UK solar industry's trade associations to verify the complex supply chains for solar panel to establish whether materials come via labour from people held in the camps in Xinjiang, China; what estimate he has made of the proportion of the solar panel market in the UK that sources basic materials from Xinjiang; and if he will make a statement.”

  • Her second: “what assessment he has made of the extent to which materials being bought and sold in the UK are via labour from people held in the camps of Xinjiang, China; and if he will make a statement.”

Both are due a response from Government tomorrow; we imagine more will follow.

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Odds and ends

  • The Global Times reports that the Chinese Embassy in the UK has circulated a document reminding international students in the UK to “take precautions due to the prevalence of race crimes resulting from the pandemic, and also due to the fact that the UK continues to point fingers at China's Xinjiang affairs with smears and lies.” (Global Times)

  • "Frankly what we really want to see are the near-term policies that will then help to deliver the longer-term targets and the whole of the Chinese system needs to deliver on what President Xi Jinping has set out as his policy goals," said COP26 president Alok Sharma (Reuters)

  • One of the things we'll be doing clearly is showing to our friends in China that we believe in the international law of the sea, and in a confident but not a confrontational way, we will be vindicating that pointBoris Johnson told reporters about the Carrier Strike Group. (Reuters)

  • A  high-level probe into Chinese ‘spies’ working in British universities could lead to arrests within weeks, the Mail on Sunday has been briefed. (Mail on Sunday)

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Spotted

A small detail included in an excellent overview by the Financial Times of the UK’s current foreign policy position. The paper reports that during the final stages of the Integrated Review being put together:

The Treasury was pushing for even warmer language on the economic partnership [between China and the UK], but that it was expunged “at the last minute” after an intervention from the Foreign, Commonwealth and Development Office.

This would add credence to the rumour that there is a significant gap in thinking at the top of the FCDO and the Treasury on how to approach China. Whispers currently circulate on Twitter that Dominic Raab may find himself transferred from his position at the next reshuffle due to his views on China being too unpalatable for the Prime Minister.

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Business

Bitcoin, steel, Bank of China

To the Moon

As Wednesday afternoons go, this was a bad one for cryptocurrency. The price of various cryptos fell through the floor in part after Beijing banned banks and payment firms from providing services related to cryptocurrency transactions.

As the BBC notes:

On Tuesday, three state-backed organisations, including the National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China issued a warning on social media.

They said consumers would have no protection if they were to incur any losses from crypto-currency investment transactions.

They added that recent wild swings in crypto-currency prices "seriously violate people's asset safety" and are disrupting the "normal economic and financial order".

The story made the front page of the Financial Times, joining a separate piece on Liu Tianran, son of vice-premier Liu He.

This is interesting for a number of reasons.

  1. As we all know, China is moving to create its own digital currency, a fully digital yuan. As the Wall Street Journal observed, “that an authoritarian state and U.S. rival has taken the lead to introduce a national digital currency is propelling what was once a wonky topic for cryptocurrency theorists into a point of anxiety in Washington.”

  2. Worth pondering; how many mind-ranging CCP officials may themselves hold cryptocurrency? A report from CNBC quoted Chainalysis’s finding that in 2020 “$50 billion of cryptocurrency moved from China-based digital wallets to other parts of the world”.

  3. Finally, and semi-related, your writer wonders how many British politicians currently hold significant amounts of crypto. It’s another interesting element to the UK-China relationship; the latter can disrupt businesses and individuals in the former with heavy exposure to crypto by simply discussing tightening regulation.

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Steel yourselves

Back in the long-gone era of February this year, we mulled over a scenario in which Boris Johnson’s Government finds itself having to play an active role in Britain’s steel industry. We wrote:

Finally, a thought to ponder over the coming week. MPs, trade associations and businesses have been making noise about Britain’s struggling steel industry. They argue it needs to be part of the Government’s ‘Green Revolution’, and that it needs “a much stronger policy framework and incentives regime to drive decarbonisation and reward ambition.” The industry also needs funding. This could prove politically difficult in the coming months, as one of the companies with the largest share of the market, British Steel, is owned by Chinese multi-industrial company Jingye Group. Worth keeping an eye on.

Lo and behold, British Steel has told government officials it is willing to step in to take on parts of Gupta’s Liberty Steel, the UK’s third-largest producer, if the industrialist fails to find fresh funding, per a Financial Times report citing several people familiar with the matter.

The paper continues:

Jingye “wants to set up an empire in the UK and there have already been discussions with government”, said one person familiar with the Chinese company’s thinking, while stressing that talks remain at an exploratory stage.

One official confirmed that the government was talking to Jingye. “They have expressed an interest in Liberty assets in the future,” he said. “However, it is not the government’s job to be playing matchmaker at this stage.” British Steel said it did not “comment on commercial inquiries”. BEIS, the business department, declined to comment.

This could be yet another test of the Johnson administration’s claim that it will look to protect industries crucial to the UK’s security. Will we see the Government intervene?

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Banking it

Worth reading the foreword to the latest China Economic Watch report, courtesy of the Bank of China. This edition’s introduction was penned by Gerard Lyons, who may ring a bell with some readers either as a highly respected economist, or as a former advisor to then Mayor of London, Boris Johnson.

In his foreword, Lyons (who is an independent NED at the bank) writes:

Rising geopolitical tensions and the legacy of the pandemic points to a more difficult and uncertain international environment. Trade tensions have been evident in recent years. While in areas of mutual benefit such as addressing climate change, China will play a key role and international cooperation is inevitable, the US and UK look set to adopt a more robust relationship with China in defence, security and areas linked to human rights. Bilateral business and financial ties will have to develop within this new context.

Resilience will be a feature in a post-Covid world. China is heavily dependent upon imports in some important strategic sectors such as technology, energy and food. This sits alongside other policy aims, such as ‘Made in China 2025’, where China wants to shift from low to high end manufacturing focused on robotics, information technology and clean energy. Indeed, China’s target to achieve net zero carbon emissions by 2060 points to it working with others, like the UK on the green agenda, as we are likely to see this year.

Readers may remember Lyons’ notable piece in City AM last year, ‘It's time for a fresh UK-China relationship’. He said:

The UK needs a fresh template for its relationship with China. Central to this should be a differentiation between strategic and non-strategic areas. This would allow UK businesses to know where the government has set its red lines.

In 2015, the UK and China’s relationship was red hot—a “golden era”—with President Xi making a state visit to the UK. Now however, in 2020, it looks set to cool.

The Sino-British relationship has become more complex. Many factors account for this, including: a changing environment in the West; greater awareness of controversial issues; and China’s growing economic and political might.

China’s Belt and Road Initiative (BRI) provides an example of the challenges and opportunities stemming from China’s impressive rise. While the project has been criticised as a form of “financial colonialism” and a way for China to exert its influence over others, the importance of London as a global financial sector, plus the underpinning of English Common Law across many countries, offers the UK a strong position as the BRI expands.

Ultimately, China is the world’s second largest economy. We are the sixth. Both are members of the UN Security Council. While we should not overplay our hand, we should not underestimate ourselves either. 

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Odds and ends

  • ByteDance founder Zhang Yiming is to step down as chief executive, giving up day-to-day responsibilities by the end of 2021. In the UK, TikTok (who’s parent company is ByteDance) continues to be scrutinised for potential links between the pair in terms of sharing data. (SCMP)

  • Great spot by the China Research Group; ‘Why London must bring together the world’s best minds’ a paid promotional post by Huawei in the Evening Standard

  • Strangely flying under the wider mainstream radar is a story that emerged from a High Court hearing. One of the PPE companies awarded significant contracts by the British Government effectively knew it was relying on a corrupt official in China to help them source produce. (Evening Standard)

  • Apple has been criticised for storing some of its users’ data inside China. (BBC)

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Spotted

Bad news for business in Hong Kong, curtesy of the latest American Chamber of Commerce (AmCham) poll of its members. Some 42% of those who answered said they were considering or planning to leave the city within five years, more than one in four by the end of this year. The main reason given was concern over the national security law. The South China Morning Post issued an editorial stating “so small a sample of Hong Kong’s hundreds of thousands of foreigners is no indication of reality”.

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Society

How Chinese academics view the UK

This week, Thomas des Garets Geddes of the recently sanctioned think tank MERICS published a novel article for The Diplomat; how the UK-China relationship is viewed by Chinese think-tanks and academics. The piece, ‘Chinese Academics Are Still Bullish on China-UK Relations’, analysed various themes that have emerged in the 30 or so papers and published interviews reviewed. These include the perception of Britain as a ‘pragmatic’ country, that Washington is seeking to gain from Britain’s weakened state post-Brexit, and the belief that Boris Johnson is pro-China.

As an interesting attachment, we have shared the statements below; the piece should be read in conjunction to contextualise them.

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Reading list

What we learned from this week

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