COP26 SPECIAL: UK's answer to BRI, Foreign Sec v UK's Ambassador
Hello,
Welcome to ‘Beijing to Britain’ - a weekly overview of the ebbs and flows of the discussion in Westminster and the City around the UK’s relationship with China, and how it impacts politics, the private sector and society.
Here’s what we’re looking at this week.
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Politics
Green ticks: All the major COP26 news
CGI: The UK’s answer to the Belt and Road Initiative
Briefing room: Liz Truss v Caroline Wilson
Westminster roundup: A brief overview
Spotted: Our roundup of things dipping under the radar
Business
Polar thinking: Bringing magnets back
“Don’t Give Up On China”: One fund manager’s plea
Soft power, hard cash: Losing the cultural edge will have financial repercussions
Spotted: Our roundup of things dipping under the radar
First, a quick look at this week for China in Parliament
39 mentions of China (up 11 from last week)
1 mention of Xi Jinping (up 1 from last week)
10 mentions of Hong Kong (up 6 from last week)
No mentions of CCP
1 mention of Taiwan (down 1 from last week)
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
Lisa Nandy (Labour’s Shadow Foreign Secretarty) asked “the Secretary of State for Foreign, Commonwealth and Development Affairs, what recent assessment her Department has made of the security situation in Taiwan.”
Andrew Rosindell (Tory) asked “the Secretary of State for Foreign, Commonwealth and Development Affairs, whether her Department has made assessment of the steps that the Government would take in the event that the People’s Liberation Army launched a military assault on Taiwan.”
Politics
COP26 roundup, UK’s BRI, Truss v Wilson, Westminster round-up
COP roundup
World leaders began jetting out of Glasgow on Tuesday evening, following a busy few days of COP26 announcements
Why bother with all this if China isn’t taking part? That was the question lobby journalists repeatedly drilled at Prime Minister Boris Johnson after his speeches throughout COP26, with Sky News' Beth Rigby calling China’s absence “the elephant in the room”. There was palpable frustration seeping through the commentariat that President Xi Jinping was only sending a note with no major pledges, and it emerged that China is now responsible for a third of the world’s carbon emissions.
Separately, there’s an emerging view among some SW1 figures that Xi is staying in China to avoid a coup - watch how this begins to influence the foreign policy conversation in London.
For his part, Johnson replied with a mix of phrases and points, at one time saying “there’s a world of difference between peaking in 2030 your emissions from China and peaking in 2025. So that’s where the conversation is, that’s where we’re keeping the pressure up,” and later saying “We are continuing to engage with China and we are seeing some signs of progress. But do we want more? Yes… but we want more from everybody.” This effort to keep China at the table made him few friends in Fleet Street - the Express ran it under the headline “'Doesn't mean they're not engaging!' Boris appears to let China off hook for COP absence”. The Telegraph’s cartoonist agreed.
Meanwhile, Xi’s team said he only sent a note because he was not offered a video link. This is true - President of COP26 Alok Sharma confirmed no leaders were sent video links.
It’s also worth skimming through the statement and consequent questions the Prime Minister gave to Parliament on Wednesday - China was mentioned over 25 times. Johnson noted “what is interesting is that when China made the commitment to stop overseas financing for coal, that had an instant impact on many of China’s friends and partners around the Asia-Pacific region, which took the signal and have also stopped overseas financing for coal.”
Stepping away from the rhetoric, let’s have a look at proper policy announcements:
Over 100 leaders, accounting for more than 86% of the world’s forests, committed to work together to halt and reverse forest loss and land degradation by 2030 in the Glasgow Leaders’ Declaration on Forests and Land Use (China being one of them). (Link)
Johnson met with India’s Prime Minister Modi to launch the Infrastructure for Resilient Island States (IRIS) facility, a joint initiative with the Coalition for Disaster Resilient Infrastructure (CDRI) and Small Island Developing States (SIDS). The IRIS will “support small island states to develop resilient, sustainable infrastructure that can withstand climate shocks, protecting lives and livelihoods.” (Link)
40 world leaders backed and signed up to the new Breakthrough Agenda, including the US, India, EU, China. This will “see countries and businesses coordinate and strengthen their climate action each year to dramatically scale and speed up the development and deployment of clean technologies and drive down costs this decade.” (Link)
Johnson met with President Joe Biden, European Commission President von der Leyen and a handful of other world leaders to discuss their respective BRI alternatives, endorsing five key principles for infrastructure development. (Link)
The PM and India’s Modi formally launched a new flagship international initiative - called “Green Grids Initiative – One Sun One World One Grid” (GGI-OSOWOG) (catchy stuff). This “will accelerate the development and deployment of interconnected electricity grids across continents, countries and communities, and improve energy access of the poorest through mini-grids and off-grid solutions.” We’ve actually mentioned it previously a month or two ago, so not that new. (Link)
The UK announced new support for the Africa Adaptation Acceleration Program (AAAP) – an initiative endorsed by African Union leaders and led by the African Development Bank, Global Centre on Adaptation and the Africa Adaptation Initiative. It will “back African-led plans to accelerate resilience-building across Africa.” (Link)
The UK announced £50m in funding for the High Impact Partnership on Climate Action (HIPCA), launched by the European Bank for Reconstruction and Development (EBRD). This will “be used to mobilise private sector funds to support work across North Africa and the Middle East, including in Morocco, Algeria, Egypt, Tunisia, Jordan and Lebanon. This funding will be used to support energy transition and green infrastructure and growth in the region.” (Link)
18 new countries, including Poland, Vietnam, and Chile, committed for the first time to phase out and not build or invest in new coal power. They join a 190-strong coalition. (Link)
It’s worth reading these two interesting reflections on China and the UK through the prism of green technologies and diplomacy. (Council on Geostrategy, China Research Group)
CG-my oh my
Global Britain’s answer to the BRI begins to move forward
A spectre has been haunting liberal democracies — the spectre of the Belt and Road Initiative (BRI). China’s landmark initiative has many detractors and a handful of supporters among Western policymakers and commentators (as recently as 2019 a British Chancellor sung its praises in a speech), but it had no significant Western rival for years.
Despite accusations of debt-trap diplomacy or Chinese firms behaving poorly, the simple matter was that Beijing was offering capital - with few of those frustrating ethical or human rights strings attached - in countries that the West had ignored for decades. But things are changing.
Readers will remember the launch of the Build Back Better World (B3W) initiative during the G7 meeting this summer. Now, Prime Minister Boris Johnson has set out the UK’s offering to the B3W - the equally catchy Clean Green Initiative (CGI). Speaking of its launch, he said the aim is to “help to build back better and greener from the pandemic and put the world on the path to a more sustainable future.” As a reminder, the EU also has its own similar thing, the “Global Gateway”, and Japan has had the “Partnership for Quality Infrastructure” for a couple of years.
Foreign Secretary Liz Truss added “this new initiative will enable us to seize [opportunities], working closely with our allies to deliver honest and responsible investment and cleaner and more reliable infrastructure in the developing world.” Note the use of ‘honest’ again - this is part of the USP of the CGI from the UK’s perspective, presenting London as an honest broker (some would argue increasingly undermined by the governing party breaking and rewriting rules on a whim). Her predecessor was floating this language in speeches dating back to the beginning of the year too. Another USP is the pitch for the CGI (as part of the B3W) to be a far more environmentally friendly deal than the BRI.
How will the CGI work? It seems to have a heavy reliance on multilateral development banks. In effect, the UK will give guarantees to these institutions in return ‘unlocking’ investment in climate-related projects in India and across Africa. It will see a doubling of UK aid-funded green investments to more than £3bn over five years and new guarantees to support clean infrastructure projects.
Take particular note of this - the UK will provide an ‘India Green Guarantee’ to the World Bank to unlock an additional £750 million ($1 billion) for green projects across India. Johnson’s administration continues to grow closer to Modi.
Separately, the Government also announced £110 million of financial support for the Association of South East Asian Nations (ASEAN) Catalytic Green Finance Facility, managed by the Asian Development Bank. This “will increase access to finance for critical infrastructure for ASEAN countries” per the press release. Truss added that “Britain is working closely with allies, through COP26 and beyond, to deliver the clean, honest and reliable infrastructure investment that the world so urgently needs.” Again, note the use of that language.
Briefing wars
Another week of eye rolling
On Monday, the Times reported the following tale: in a meeting with Liz Truss, then International Trade Secretary, the UK’s Ambassador to China, Caroline Wilson, asked Truss why the UK couldn’t treat China “like we treat the French”. According to the Times’ source, Truss replied: “Because the French aren’t committing genocide.” The meeting then ended abruptly. The reporter used two sources for this story; the first, an “ally of Truss”, and the second, someone “close to the foreign secretary.”
This snippet was shared widely on social media and within SW1, featuring in Politico’s hugely influential morning briefing (written by Alex Wickham, apparently the godfather of the Prime Minister’s most recent child).
As we noted in last week’s Briefing, Truss has been on a PR mission to boost her China hawk credentials since arriving in post. Indeed, a ‘Government source’ tells the Times that “Truss is a UK-Atlanticist. In another life she’d have been a Republican senator. She is dead-eyed about who our enemies are: China, Russia and Iran. She’s a China hawk. She will want to reduce our dependence on China and build up alliances in the Indo-Pacific region. The prime minister is a lot more liberal on China than she is.” For what it’s worth, imagine the reaction for a second if Truss’s PRC opposite was described as being “dead-eyed about who our enemies are”, and then named the UK.
Truss later issued a non-denial, telling a reporter that she "does not recognise the words." There has been discussion about who the sources involved were, and what motives they had, but nothing is clear at this stage. As readers know, this Government has been plagued by leaks and briefings in a similar way to its predecessor. It’s likely little to no action will be taken to properly investigate.
A closing thought. It is very easy to brief against the Foreign Office, Ambassadors and Embassies. They don’t respond. But doing so comes with consequences. First, it undermines those institutions in front of an international audience. Second, it shows those watching that the leakers can only approach these issues through the SW1 favourite technique of airing dirty laundry via a friendly journalist, safe in the knowledge that there will be no formal repercussions. Third, and perhaps most critically, these type of leaks rarely move the dial. Should Wilson have held this view, leaking a transcript that would make a Hollywood writer blush to the Times will likely not change her mind on the issue.
Westminster roundup
What’s going on in the hallowed halls
Labour used the Second Reading of the new Nuclear Energy (Financing) Bill to slam the Government’s Golden Era embrace of CGN.
MPs debated Afghanistan, mentioning China’s role in the country and potential role in restructuring its future.
A clause to the Nationality and Borders Bill which would allow former UK-Hong Kong servicemen and their families to come to the UK was discussed.
There’s been an increase in social media chatter from MPs around China’s climate goals. John Redwood MP continues to dominate this game, racking up thousands of retweets on his posts.
Lib Dem leader Ed Davey appeared on Times Radio saying the UK "has got to be tough with China." He also tweeted that “we still need much more action from China”, and was interviewed by the i, where he urged the Prime Minister to deploy UK diplomats to try to persuade China to adopt bolder carbon cutting targets. “I’d rather do it mutual interest… moral persuasion, but we have to have all the tools,” the former Secretary of State for Energy and Climate Change said. “We can’t wait for another decade. This is an absolute crisis.” It’s important for readers to note that both the official opposition and the third largest English party now both align roughly with Conservative backbenchers in their view as to how the UK should compete and collaborate with China.
His party’s former leader Vince Cable wrote the opposite in the Independent on the same day; Cable has recently emerged as the pre-eminent China advocate on the SW1 circuit.
Spotted
A short section of things we jotted down this week.
Here’s a fairly remarkable statistic. Per a YouGov poll, 44% of the British public think COP26 will be limited in its ability to achieve progress on climate change without Chinese President Xi Jinping in attendance.
The Sun has published a lengthy article on China ‘inflaming Britain’s pig cull crisis’. It quotes a Government insider, who summarises the extremely complex situation the following way “This really boils down to geopolitics, particularly Hong Kong. China is upset that we’ve dared to welcome the Hong Kong people to our country and they’re cross with us.”
Frigates and helicopters operating with HMS Queen Elizabeth were able to locate Chinese submarines during their trip through the South China Sea, helping the UK's biggest warship to steer clear.
Business
Magnets, funds, the value of soft power
Polarised thinking
An industry revival may be on the cards
"We're looking to turn the tide of shipping all this kind of manufacturing to the Far East and resurrect UK manufacturing excellence," an anonymous source told Reuters this week. The comment related to a Government-funded study looking at the UK’s ability to rebirth its magnet industry, in part to move away from over-dependence on China.
In his Ten Point Plan “for a green industrial revolution”, Boris Johnson pledged to “back our world-leading car manufacturing bases including in the West Midlands, North East and North Wales to accelerate the transition to electric vehicles, and transforming our national infrastructure to better support electric vehicles,” and also to “Produc[e] enough offshore wind to power every home, quadrupling how much we produce to 40GW by 2030, supporting up to 60,000 jobs.” Hence this interest in magnets, which play an integral part in both of those technologies, but for which the UK is heavily dependent on China.
Here’s the report which was published on Friday. Researched and compiled by Less Common Metals Ltd, it was funded through the Advanced Propulsion Centre (APC) as part of the Government’s Automotive Transformation Fund. The report is explicit in putting forward options for a ‘robust non-Chinese supply chain’.
Some of the answers may worry British policymakers. For example, LCM Ltd note “given the complexity of magnet production technology and the need for detailed know-how, enticing an existing global magnet producer to set up a facility in the UK may be an effective way to establish domestic production.” How the British Government plans to entice such a producer to set up shop is anyone’s guess, but could lead to some fascinating politics.
More generally, the UK is looking to become as independent on energy as possible. Writing for the Telegraph, Business Secretary Kwasi Kwarteng said this week “We want to ensure our own energy independence by generating nuclear, wind, hydrogen and solar in this country….If we don’t lead this global race, Britain would become even more exposed to forces we cannot control. We would import even more energy and technology from other countries and be vulnerable to their excessive price fluctuations…Let’s ensure the United Kingdom becomes a producer and exporter, rather than a customer and importer.”
As a fun aside, British firm Alexander Dennis Limited (ADL) and Chinese firm BYD UK provided a fleet of 22 Enviro200EV zero emission buses for COP26, shepherding world leaders around Scotland’s best city. Since the firms began working together in 2015, they have delivered over 70% of the UK's electric buses.
All work no fun(ds)
Checking in on China through trusts
Sang Peter Gabriel, “Don't give up 'cause you have friends. Don't give up. You're not beaten yet. Don't give up. I know you can make it good.” He was joined by Baillie Gifford’s James Anderson in sentiment this week. Anderson co-manages £21.2bn Scottish Mortgage Investment Trust, which counts three Chinese companies among its top 10 holdings: Tencent at 4.1 per cent of its total assets, Meituan at 2.9 per cent and electric carmaker Nio at 2.8 per cent.
“I don’t think it’s right to give up on China,” Anderson told the Financial Times. “I don’t think the golden goose has been killed off at all . . . from the point of view of building companies.” His comments came as policymakers begin to sharpen their views on investment firms they perceive as overlooking the human rights elements of their ESG pledges with relation to China. Some also raise concerns around the volatility of investing in China, and if these companies have considered this properly.
In a fairly flattering piece with the paper, Anderson tried to play down concerns around Xi’s China. For example, as an investor he is “more confident” from a corporate, rather than a political perspective, that the regulatory framework means “we’re already basically able to envisage the shape of these companies . . . and the continuing economics of these businesses is quite attractive.” He did admit that Baillie Gifford ought to have anticipated the clampdown on education because Xi himself had written “about the difficulties of the educational system” and the financial and competitive burden it creates for Chinese families had been well-flagged. “We ought to have seen that one coming,” he said.
Which begs the question - why didn’t they? When you’re paid to get these calls right, what went wrong?
Separately, Baillie Gifford China made the headlines a couple of weeks ago after it was revealed to be holding a stake in BGI Genomics, which has been blacklisted in the US over its alleged role in “conducting genetic analyses used to further the repression of Uighurs and other Muslim minorities” in the province of Xinjiang. See previous Briefings for our own coverage of BGI and its links to British institutions.
Speaking to the papers, Dame Helena Morrissey, incoming chair of stockbroker AJ Bell, said “Baillie Gifford rightly states in their governance and sustainability guidelines that they expect all the firms they invest in to comply with the United Nationals Guiding Principles for Business and Human Rights. Yet a quick look at their China investments find them invested in a company which recently had two subsidiaries placed on a US trade blacklist. This seems hard to reconcile with the firm’s own guidelines – and, of course, Baillie Gifford is far from alone.”
We don’t need no education
A new British Council report examines the impact of British culture on Chinese students
Soft power can translate to hard cash. When we asked our readers a couple of weeks ago the UK’s best soft power assets were, the replies were varied; Downtown Abbey, Peppa Pig, the Premier League, Harry Potter, and of course Sherlock, to name a few.
These all share a common theme - they are cultural assets. The UK’s cultural soft power is vast, and as a new British Council report illustrates, can be the driving reason Chinese students choose to study here.
For example, it notes that 78% of students who were interested in overseas culture and saw the UK as the most attractive overseas country in this area said that the UK was their first-choice study destination, compared to only 26% of all students.
Per research from former Universities Minister Jo Johnson, the rough net value of UK HE exports from the hosting of full-time Chinese students was approximately £3.7 billion in 2019.
With this in mind, one of the key findings in this report should cause concern. First, the report notes that the UK, having overtaken the USA as the answer when Chinese people are asked about their preferred overseas countries in terms of culture, is losing ground to Europe and Asia. In part this stems from the UK’s Covid response. Should it translate into a longer-term trend, British universities may find themselves unable to attract the number of Chinese students they need to balance their books, and it is unlikely that this Government would be able to produce a scheme to help them plug the gaps.
The British Council note this, adding “improvements in US-China relations or a decline in the UK-China relationship could cause a similarly rapid shift in the opposite direction, showing that UK universities should avoid relying too heavily on students from China.”
This is to say nothing of the cultural, research and local economic benefits Chinese students bring to the UK, nor the exposure these Chinese students get to British culture, democracy and ideas they may not be able to access freely at home.
Spotted
A short section of things we jotted down this week.
In its October 2021 record, the Financial Policy Committee of the Bank of England noted that “the interim results of the 2021 Solvency Stress Test indicate that the UK banking system is resilient to the direct effects of a severe downturn in China and Hong Kong, and sharp adjustments in global asset prices”.
Newport Wafer Fab continues to pop up in the papers - this week, the Telegraph reported the firm, at the centre of a national security row, was turned down by the Welsh administration and UK government.
In a piece in Caixin this week, Ambassador Caroline Wilson noted “China’s expertise on this will be crucial — and its commercial relationship with the U.K. is key. China is already the world’s largest electric vehicle market — the cost of electric vehicles is falling rapidly, in large part thanks to China’s innovation in the sector. On offshore wind, the U.K. is home to the largest global market and has welcomed Chinese investment into this sector. The U.K. continues to partner with China to encourage growth of the domestic wind industry.”
The Times has run a piece on “How British brands can benefit from Singles’ Day in China”.
Reading list
Who is the real Wang Huning? Kaiser Kuo, SupChina
China turns inward: Xi Jinping, COP26 and the pandemic. Financial Times
Britain and the Geopolitics of Space Technology. John B Sheldon, Policy Exchange
Rising to the challenge: Navigating competition, avoiding crisis, and advancing US interests in relations with China. John R. Allen, Ryan Hass, and Bruce Jones, Brookings Institute
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