Britain hitching its wagon to China's star

With growing debt, creaking infrastructure and joblessness, UK's historical ties take a back seat

The Financial Times quoted an unnamed US official in March, highlighting exactly what the Obama administration thought of the United Kingdom becoming the first developed economy to seek founding member status in the China-led Asian Infrastructure Investment Bank.

"We are wary about a trend toward constant accommodation of China," it read, "which is not the best way to engage a rising power."

But if London's eagerness for membership of the $50 billion (44 billion euros) new bank had left its historic US "special relationship" fragile, UK finance minister George Osborne's recent trip to China will have had the White House calling for diplomatic and economic divorce lawyers.

The UK Chancellor of the Exchequer - just three weeks before Xi Jinping was due in London for the first state visit there by a Chinese president in a decade - undertook what can best be described as an unparalleled China charm offensive.

And it left the world in no doubt, whatsoever, his country is now looking firmly east for economic assurance, rather than west to its former trans-Atlantic colony.

Top of Osborne's agenda was to urge Chinese firms to invest in future British nuclear power plants, and that they might eventually be allowed to take majority stakes.

In addition, he invited Chinese to pitch for $18 billion in contracts, alongside its own firms, as he launched the bidding process for the UK's proposed High Speed Two rail line. And he revealed a stock connect plan, between the Shanghai and London stock exchanges.

While China has successfully promoted its economic goals with snappy catch-phrases like Belt and Road Initiative and Going Global, Osborne continually repeated his own: We had entered a "golden era" for UK-China relations.

He urged the two countries to "stick together", hailing their cultures as having "done more to shape the world than almost anyone else".

"I see it at home every night as my 12-year-old daughter does her Mandarin homework," he said. "The UK can be China's best partner in the West."

Robert Peston, the BBC's economics editor, said Osborne told him his hope is that as China re-tilts its economy more toward consumer spending, and away from excessive debt-financed investment, he expected it would make Chinese people and businesses feel more inclined to "buy British".

Peston also summarized the chancellor's logic for such an argument, as being "that the Chinese will remember who stuck by them when the going got tough".

That said, while I squirmed at some of the chancellor's "cap-in-hand" language, I am equally confident the UK's policy shift toward China is an economic step in the right direction.

Though the UK is growing faster than any other Western economy (2.5 percent GDP growth in last quarter), it's still saddled with growing debt, a creaking transport and energy infrastructure network badly needing investment, and 16 percent of its households being unemployed.

But, what the UK still does best - financial services, enterprise creation, environmental protection, education, ground-breaking science and technology, and creative industries - are just the areas that China is keen to develop.

Latest figures from Britain's Office for National Statistics show the growing importance of China to the UK. Following a growth in imports of Chinese goods into the UK from $17.45 billion to $57.56 billion last year, China is now the UK's largest partner behind the US, accounting for 7 percent of UK imports compared to 3.3 percent last year.

During Xi's visit, expect an avalanche of hefty government-level deals, including one linking flagship UK and Chinese universities in promoting and training business startups. Huawei Technologies Co Ltd opened its global R&D center in the UK last year, and other major tech-linked announcements are said to be in the pipeline.

Leading UK industry figures suggest joint initiatives are likely, too, on improvements to Chinese financial market transparency, and corporate governance. They also hope for moves to make the renminbi more convertible, or at least a commitment to not overtly influence the capital markets. Commentators are looking for assurances on how China's financial markets might be better integrated into a world system.

Osborne has banked firmly on London as the oldest major financial market of them all, playing center stage in his country's new "golden" relationship: clearly a case of commercial interests now taking precedent over historical political considerations.

The author is a writer with China Daily. Contact him at nicholas@chinadaily.com.cn

( China Daily European Weekly 10/16/2015 page9)