May’s China trip aims to renew ‘golden era’ in relations

UK Prime Minister Theresa May makes her first official visit to China from Wednesday to help deepen the bilateral strategic partnership between the countries. The visit, which comes hot on the heels of last month’s UK-China Economic and Financial Dialogue summit, will seek to build on the momentum of President Xi Jinping’s London visit in 2015, which saw relations enter a “golden era.”

Since that landmark trip, the 2016 Brexit vote has only increased the emphasis London is putting on consolidating ties with key non-EU nations. And, through this Brexit lens, the most important element of the bilateral relationship with Beijing is economics. 

The United Kingdom already receives the largest amount of Chinese foreign direct investment of any EU country, and is Beijing’s second largest trade partner in Europe, after Germany. Meanwhile, China is the UK’s second-largest non-EU trade partner. 

The pre-eminence of economics in bilateral ties will be heavily underscored by the trip to Beijing, Shanghai and Wuhan. This will build on Finance Minister Philip Hammond’s visit to the country last month and will aim to work out final preparations for a “stock connect” linking the London and Shanghai exchanges. Hammond had also agreed to examine the possibility of connecting their bond markets.

More than 40 companies, universities and trade associations will travel with May as she seeks to demonstrate that the United Kingdom will be able to boost post-Brexit trade ties with Beijing, particularly in infrastructure, green finance and technological innovation. Take the example of UK energy and technology businesses, which are eager to gain opportunities in the massive Chinese market, and where the United Kingdom is well positioned as a leader in key sub-sectors, including energy management systems, offshore wind, and tackling air pollution.

The potential opening here is huge given that China faces serious air and water pollution, and is more reliant on imports of oil than the United States. Moreover, Beijing is committed to moving its economy away from energy-intensive, inefficient industries towards cleaner energy and greater energy independence.

The proposed Chinese domestic investments in these areas are huge and include potentially tens of trillions of yuan between now and 2020 for enabling urbanization, with a focus on efficient, clean and low-carbon infrastructure. There are also expected investments of several trillion yuan in renewable energy over the next 10 years; several hundred billion yuan in ultra-high voltage transmission; and several trillion yuan on "smart grids."

Outside of the economic realm, after last year’s 45th anniversary of the China-UK diplomatic relationship, there will also be discussions on security issues. Here, China last year tried to expand military cooperation with the United Kingdom, including for the first time sending warships to London for a goodwill tour. 

For many, it might appear that the bilateral relationship is overwhelmingly one-way, especially given that the Chinese economy is now a multiple of that of Britain’s. However, for all that Beijing may be the more powerful partner, it is grateful to the UK government for ratcheting down, in public at least, human rights concerns about China, especially after bilateral relations temporarily went into a deep freeze in 2012, when then-Prime Minister David Cameron met with the Dalai Lama.

While this stance is certainly not without controversy, including with Labour’s leader Jeremy Corbyn, who raised human rights issue with Xi in 2015 in London, Brexit means that the May team increasingly sees enhancing ties with Beijing — albeit not in an unqualified way — as being in the UK national interest. Xi could be in power until the early 2020s and, especially with Brexit, it is widely viewed in London that there is an opportunity to develop a relationship that could make a significant contribution to UK prosperity for a generation to come.

In this context, Washington has previously raised concerns about the degree to which London is perceived to be cozying up to Beijing, especially under the previous government of Cameron, when then-Chancellor George Osborne pledged to make the United Kingdom “China’s best partner in the West.” This ruffled the feathers of the Obama administration following the UK’s decision to become a founder member of the Asian Infrastructure Investment Bank, which is being championed by Beijing as a potential alternative to the World Bank.

An unnamed senior Obama administration official was widely quoted in March 2015 as being “wary about a trend toward constant (UK) accommodation of Beijing, which is not the best way to engage a rising power.” Meanwhile, an official White House statement urged London to “use its voice (in the AIIB) to push for adoption of high standards.”

Taken overall, the UK government’s desire to further warm ties with China is not without controversy, both domestically and internationally. However, May’s visit is likely to prove a success and will reinforce the dominance of economics in bilateral relations, with a series of trade and financial deals set to be announced.

• Andrew Hammond is an Associate at LSE IDEAS at the London School of Economics