China and the UK's Strategic Future

How Beijing might impact London's new Integrated Review

Dear all

The very public spat between the West and China over the last few weeks has left a depressing scar on the international landscape. It comes, ironically, less than a few weeks from the publication of the United Kingdom’s integrated international review, which explicitly called for productive relations with China. In today’s newsletter I’ll discuss how London is planning to deal with Beijing over the coming years, and whether it is likely to be a success or not.

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In a rare moment of strategic self-appraisal, the UK’s new Integrated Review (IR) was recently published. As expected, the headline conclusion was for the country to shift its focus towards the Indo-Pacific, which the government described as "increasingly the geopolitical centre of the world". Not only that, but it is now a lynchpin of the global economy. China and Japan are the second and third largest economies, and South East Asia has more than 600 million consumers and a significant combined GDP.

There are however dangers for the UK in shifting its focus to the Indo-Pacific. Geographically, it is far; culturally, it is heterogenous and very different; and politically, as the current fighting in Myanmar/Burma shows, it is not wholly stable. Then there is China.

The review’s conclusions were seen by some as London wanting to have its cake and eat it – wanting to increase trade, but at the same time painting China as the “biggest state-based threat to the UK’s economic security”. Whilst some might consider Russia to be the UK’s leading strategic rival these days, in particular since the 2018 nerve agent attack in Salisbury, the reality is that Russia is too small to have a long term impact on the UK. China is a different matter, especially its stated desire to rebuild the world in its own image. As was recently described to me, “Russia is like having your eyebrows on fire; China, on the other hand, is like having your house burnt down, rebuilt, and then taken away from you”.

But does the relationship between China and the UK have to be confrontational? The British Government has been keen to stress areas of potential collaboration between the two nations. Foreign Secretary Dominic Raab has said, for instance, that the UK would work with China on issues such as climate change, an imperative given that China is responsible for 28% of global carbon emissions

Unfortunately, climate change aside, it isn’t clear where cooperation can occur. Raab may have warned against adopting a "Cold-War mentality" with Beijing, but his words mean little compared to the actions taken by both countries in recent months. The tit-for-tat sanctions imposed by both China and the UK in recent weeks have seen relations plummet, but this was just the latest in a long line of feisty disagreements over Hong Kong, Xinjiang and the Uighurs, and Huawei.

The bad news is that there are plenty more areas for disagreement to come. 

The Times ran an article yesterday revealing that the UK is in a global race to secure the rare-earth elements that are crucial for swathes of the modern economy amid fears that China could use its near monopoly of them as a weapon. Rare earths – vital for everything from mobile phones to fighter planes - have long been seen as an Achilles’ heel to Western manufacturing given that China is responsible for nearly half of global rare earth exports. Beijing has form in using these metals as an economic weapon: in 2010 it banned their export to Japan in response to a maritime dispute.

The UK has also announced that it will invest more heavily in Africa. This will see it go toe-to-toe with China which has put significant sums into the continent in the last few decades. An indicator of London’s determination was the announcement of a £100 million investment in a new road in the West African state of Benin, a country that China has long courted through grants.

The real challenge however is going to be in the Indo-Pacific. The UK has made its intentions there clear, stating that it wants more influence and trade with the region. To do so it has become a dialogue partner of ASEAN (the Association of Southeast Asian Nations) and aspires to join the CPTPP, the huge Pacific trade area. 

This will invariably bring it into competition with the People’s Republic, which increasingly views the region as its own backyard. Beijing’s claims to the South China Sea are representative of its expansionist diplomatic position there, a stance backed up by increasing economic influence. In 2020, for example ASEAN became China’s leading trading bloc partner.

The upcoming visit to the Indo-Pacific of the Royal Navy aircraft carrier HMS Queen Elizabeth will be a test of Chinese-UK relations. Beijing has already warned London against sending the ship to the region, with a defence spokesman saying that “The Chinese military will take necessary measures to safeguard its sovereignty, security and development interest as well as peace and stability in the South China Sea.” There is every possibility that the ship’s deployment will lead to a further rise in tensions between the countries. With maritime rules around escalation between China and other nations not yet set in stone, there is even the chance that there could be a physical incident between ships if Beijing is keen to defend what it views as its sovereign waters.

There is some good news, in that there seems to be a pattern in recent years of trade with China not being so impacted by diplomatic strains. Sweden has been in China’s icehouse after a very public diplomatic spat in 2016, but trade has not suffered. A report in 2019showed that despite tense relations, Chinese investment in the country saw a threefold increase in 2018, and bilateral trade grew 15 per cent. 

The UK seems to be in the same boat. Even though we are far from anything like the Golden Age that David Cameron promised in 2015, British exports to China surged by 10.7% in 2020, even with Covid and the arguments around Hong Kong and Huawei. 

The aims of the IR might yet come to be. Britain and its allies may continue to push back on China whilst increasing trade and economic cooperation. 

If, however, the strategic picture becomes too confrontational then it is highly likely that economic ties will suffer. Given that any financial and commercial split between China on one side and the West and its developed world partners on the other will likely lead to a massive economic shock, massive geopolitical disruptions could well result. In that case, the UK may well need to do another integrated review.