China Gets a British Bedfellow
Left vulnerable by Brexit, the U.K. looks eager to sign onto Beijing’s giant Belt and Road program.
The United Kingdom is starting to get on board China’s signature, trillion-dollar Belt and Road Initiative, a departure from the more confrontational line toward Beijing that’s taken hold in Washington and Brussels.
One reason for London’s outreach may be Britain’s sense of vulnerability in the wake of the stalled plans for Brexit, which have left the British reassessing their trade relations globally.
Philip Hammond, the British chancellor of the exchequer, said on Friday at the Belt and Road forum in Beijing that the U.K. is committed to helping China realize its ambitious but controversial infrastructure investment project.
Hammond’s visit to the high-profile forum underscores what he calls the continued “golden era of relations between China and the U.K.,” a bid for closer economic ties between the two countries that kicked off during the previous government of Prime Minister David Cameron.
Though Britain, unlike Italy, hasn’t yet signed a formal memorandum of understanding to take part in the Belt and Road program, Hammond said he will lobby for British firms to take part in Belt and Road projects, especially in finance and engineering. Some firms are moving ahead on their own: Standard Chartered, a London-based bank, just signed an agreement with the Export-Import Bank of China to promote Belt and Road projects.
The British flirtation is welcome news for China, which is trying to restore the lost luster to a foreign-policy initiative that is a major priority for President Xi Jinping. Since the Belt and Road was announced in late 2013, China has come under increasing criticism for what many critics call “debt-trap diplomacy,” using financial muscle to expand China’s influence throughout Asia, Africa, and parts of Europe.
Countries on the receiving end of Chinese loans, such as Sri Lanka, Malaysia, and Myanmar, have begun bristling at the onerous terms that come with Chinese investment. U.S. officials have repeatedly decried Beijing’s use of “chains of debt” to strong-arm smaller countries and expand its reach. On Friday, Xi pledged to make Belt and Road projects more transparent and to control reckless lending.
But the British outreach also comes at a time of growing suspicion between China and the West over everything including cyberespionage, economic rivalry, and the simmering dispute over who controls the South China Sea. The United States now calls China a “strategic competitor,” while the European Union earlier this year branded China a “systemic rival.”
As part of its campaign to roll back China’s influence, the United States has pressured allies, including the U.K., to exclude equipment made by the Chinese firm Huawei from their advanced mobile phone networks. But this week, just days before Hammond left for Beijing, Britain agreed to allow Huawei to participate in “non-core” parts of its new network.
And despite China’s charm offensive at the Belt and Road forum, tensions with the West are still evident. China on Friday lashed out at France for sailing a warship through the Taiwan Strait. China’s sensitivity about nearby waters has also ruffled relations with Britain: Hammond’s planned visit to Beijing earlier this year was scuppered after British officials talked of sending an aircraft carrier to the region, highlighting the different views toward China that prevail across the British government.
Treasury and trade officials, in particular, are eager to deepen economic ties with China, especially as soon-to-be post-Brexit Britain seeks new trade partners. Rona Fairhead, the U.K. minister for trade and export promotion, as well as Douglas Flint, Britain’s Belt and Road envoy, also attended the forum in Beijing.
On Thursday, Hammond announced that the U.K. and China will hold an economic and financial dialogue in June to cement closer ties. “By deepening our cooperation on financial services, trade, and investment with international partners, we can ensure Britain’s global future,” he said in a statement.
But many in Britain are leery of the return to the Cameron-era red carpet for China.
“The UK’s approach risks prioritising economic considerations over other interests, values and national security,” concluded a report issued this month by Parliament’s Foreign Affairs Committee. “If the Government had not already committed in rhetorical terms to a ‘Golden Era’ in UK-Chinese relations, we question whether it would be appropriate to do so now.”
Most expect Britain’s participation in the Belt and Road to be limited—but that may be all China is looking for. Beijing, stung by criticism about its predatory lending and low standards of governance in deals worth hundreds of billions of dollars, is hoping the British help can burnish the Belt and Road’s standards.
Andrew Cainey, a Belt and Road expert at the Royal Institute of International Affairs, commonly known as Chatham House, said the route for the British is to take China at its word. He said that while there’s no British interest in supporting debt dependency in poor countries, the U.K. is “happy to help with standards and good governance, and can help with financing.”
“That’s a positive engagement,” Cainey said.
Beijing could be looking for a much the same payoff as when London broke ranks with Washington and joined the Chinese-led Asian Infrastructure Investment Bank, helping nudge the nascent development bank toward better and more transparent lending standards.
China’s ambassador to the U.K. openly pleaded this week for Britain to help ensure higher-quality investments across the Belt and Road.
“From a Chinese perspective, [British participation] would lend a lot of credibility—there’s a lot of symbolic value,” said Jonathan Hillman, the director of the Reconnecting Asia Project at the Center for Strategic and International Studies.
But China’s apparent desire to reboot the much-maligned Belt and Road might be tricky to pull off entirely. Using fewer Chinese companies or workers on projects in other countries, for example, would have costs at home. And more rigorous lending standards for new projects would require Beijing to scale back its ambitions.
“The big question: Is this just a superficial rebranding, or will the Chinese government take steps to recalibrate?” Hillman said.
Another big question is how Britain balances its desire for closer economic ties with China with the tougher stance being taken by the United States and other allies. Britain’s decision to allow Huawei on its networks has revived fears the move could hamper intelligence-sharing between Britain, the United States, and other close allies.
And even as the U.K. hopes to forge a trade deal with the United States once it leaves the European Union, Washington is putting poison pills into its new trade pacts to prevent countries from signing similar deals with China—which could complicate London’s outreach to Beijing.
“There’s a feeling post-Brexit that maybe it’s time to engage more with China on the economy and trade,” said Cainey. But the British government is also well aware of the concerns about Huawei and Chinese cyberespionage and worries about the future of the Five Eyes intelligence-sharing relationship, he said.
“Britain’s now trying to find a way through that,” Cainey said.