Published daily by the Lowy Institute

Xi Jinping in London: Cameron and Osborne take a big risk on China

Xi Jinping in London: Cameron and Osborne take a big risk on China

In the last few decades, the relationship between China and the UK has often seemed like that between a married couple who have been having the same argument for so long that they have forgotten the issue they started arguing about, yet seem happiest when they are at loggerheads.

Perhaps this set in during the years from 1984 to 1997 when Britain was negotiating the reversion of sovereignty of Hong Kong to China. The default setting then was mutual antagonism, with stretches of brittle over-politeness and rigid courtesy punctuated by fierce disagreements.

The memory of this era fades by the day, but the structure it implanted in Sino-British relations of a persistent veering between concord and discord has never quite vanished. In 2009, the British Government revised its unique policy of only recognising Chinese 'suzerainty' in Tibet and fell into line with every other country in acknowledging Chinese sovereignty. That won plaudits in Beijing for a while, before the tragic execution of British National Akmal Shaikh late in 2009 for drugs trafficking, the first citizen of a European state to suffer this fate in China since the early 1950s. Bilateral relations reached rock bottom in 2012 with the meeting between Prime Minister David Cameron and the Dalai Lama in London, which resulted in a freeze on all top-level contact for over 15 months.

The question with the current Xi Jinping visit to London is whether we are just seeing a high point in the usual cyclical pattern, and that we should expect the usual dip fairly soon. There are, after all, plenty of issues the UK and China can have arguments over: security, cyber espionage, the Middle East. Then there are the usual issues that have scuppered good feeling in the past: Tibet, human rights, the treatment of British business in China, or issues with Chinese investment in the UK.

The only remedy for these dips and troughs is sustained, top-level commitment, through thick and thin, on both sides, and to keep this going not for a few months or even years but for at least the next half a decade and beyond. [fold]

It also means that not just one or two figures in each government have to buy into the new narrative of steady, positive relations, but substantial numbers. There has to be a change in the culture of relations and attitudes on both sides, and on their recognition of the benefits they get from each other. There also have to be a steady stream of tangible gains for both sides, despite the fundamental differences that exist politically, diplomatically, and even in terms of their economic values.

British Chancellor George Osborne, the architect of this new push to regularise and create sustainable positive relations with the People's Republic, is taking a risk with this visit, because so far everything is promise, very little is concrete. In terms of tourist numbers, investment inwards and outwards, and trade figures, the two countries are of only moderate importance to each other. The main issue is the expectation that this will change, and that soon they will enjoy a substantially upgraded and busier relationship.

Even as Xi signs big new deals while in the UK, this risk is not dispelled. Chinese and British leaders have traipsed back and forth between their respective countries for almost two decades now, but the bottom line is that after all the excitement, little has happened. Relations have continued to be  sporadic, sometimes nervous and jittery. Once Xi departs, there will need to be concerted effort by both sides to ensure that all the diplomatic and political effort was really worth it.

The epicentre for all of this will almost inevitably be the City of London, the great financial district. For the internationalisation of China's currency, for the assistance to Chinese companies going global, and for the creation of a truly international interface outside of China between capital markets and their domestic financial services, London is a core partner. The City is hugely global, but it is not in the US. It also sits in Europe, China's largest market. Its location, its size, and the effort it has already put in to working with China, means the City has great tactical importance for both sides. The only problem is that the fruits of this collaboration are not easy to quantify, which is why, in order to look real, they have to be dressed up in impressive investments and solid projects generating quality jobs for the British and viable international companies for the Chinese.

The UK has pushed the boat out for this visit. It has a lot to lose, with its allies in particular, if this does not work. If a steady, strong flow of good economic collaboration starts, and Europeans, Americans and Australians see knock-on benefits, then this story has a good ending. But if another dip happens in the next few months or year, it will be proof that the UK and China have profound problems that they have still not managed to overcome.

In that event, the UK will have to concede that someone else must make the running with China.

Photo courtesy of 10 Downing St.

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