Most reporting on Jeremy Hunt’s visit to China this week went little further than his slip of the tongue in describing his wife as Japanese rather than Chinese. Preoccupied by that trivial matter and any offence it might have given the new foreign secretary’s hosts (which seemed to be none), commentators missed the somewhat more substantial issue of why China is so keen to oblige Britain’s requests for a trade deal.
A ground-breaking free-trade agreement between Britain and the world’s ascendant superpower would be the great boon the UK government so desperately needs, especially after Brussels’ rebuffing of May’s Chequers plan for Britain’s future relationship with the EU and the kerfuffle over Donald Trump’s vanishing offer of a ‘beautiful, beautiful’ UK-US deal. It would give Britain a trading relationship with a country which the EU’s trade negotiators have so far failed to master, and give credence to the Brexiteers’ argument that an independent Britain can be far more fleet of foot in its trade negotiations than a plodding EU can.
The new foreign secretary certainly seemed to make progress. China’s openness to Hunt’s advances suggests that ‘Global Britain’ can indeed forge ahead into the new Asian century, never mind the old world order. China, moreover, is eager to expand its influence over America’s key global ally. Foreign Minister Wang Yi flattered Hunt by proclaiming that Britain and China would uphold global free trade.
But Yi then turned the knife, stating that ‘whoever takes the unilateral approach will be isolated’. It was a warning to Washington, but one that could equally apply to London. What Yi was really saying was that he expected Britain to play along to China’s tune.
No matter how appealing a trade deal between Britain and China, it comes with costs. For a start, greater trade with China invariably means larger trade deficits. At present, UK-China trade is relatively small at £67 billion, but it is very much in China’s favour — Britain has a £23 billion trade deficit with the country. This would only balloon if Hunt got the free trade deal he wants. China’s low labour costs already give it a big advantage in manufacturing, something which is bound to grow as Xi Jinping pushes through his ambitious ‘Made in China’ programme to make the country dominant in advanced technology, aviation, energy and IT by 2025.
It is no use arguing that Britain can supply high-value research and development while China provides the raw people–power. China has a record of building its industries on the theft of intellectual property.
When economies become dependent on trade with China, the costs grow and grow. The danger for Britain is of becoming a pawn, albeit an unwilling one, in China’s global chess game with the United States. Beijing’s goal increasingly appears to be to create a ‘Greater China’ in its near abroad, making large swaths of Eurasia and the western Pacific Ocean pliant as a necessary step to solidifying its global position, and then extending its influence even further afield.
Beijing specialises in what is called ‘debt-trap diplomacy’, combining economic entanglement with demands for strategic accommodation of China’s overseas interests. It starts by making a country dependent on trade with China. Sri Lanka learned this the hard way last year when it was forced to hand over control of its largest port, Hambantota, to China after it could not pay off bills to Chinese firms. This gave Beijing a strategic outpost in the Indian Ocean, where its naval ships now routinely sail.
China also took a 70 per cent stake in a similarly useful port in Burma last year. A similar dynamic is underway in Vanuatu in the South Pacific Ocean. By these means the Chinese navy has gained access to vitally important waterways and potential military openings to land routes across Asia.
Australia is another country which has fallen into the trap. Because of its dependence on Chinese investment, Canberra has been hesitant to oppose Beijing’s aggressive behaviour in the South China Sea. Beijing has further been accused of intimidating Australian media to drop critical coverage of China and of pressuring or bribing Australian politicians to support Chinese policies.
For many Brexiteers, the chief motive of leaving the EU is to regain sovereignty from Brussels. Yet increasingly, doing business with China itself involves a certain loss of sovereign power.
For nearly two decades, China has been the world’s second-largest military power, with spending on weapons now estimated at £132 billion (US$175 billion). China-watchers presumed that Beijing would use this massive build-up, which includes stealth fighters, missiles, aircraft carriers, sub-marines and cyberweapons to drive the United States out of Asia and intimidate American allies. We’ve all heard dire warnings that China wants to be ‘number one’ and is heading towards an unavoidable martial confrontation with America.
Yet such prognostication may have missed the larger aim of China’s global strategy and how it intends to use its military. Far from catastrophically rushing into war, China’s military strength is being used to further its goals of economic dominance and political influence around the globe, starting close to home.
It is like imperialism in reverse. The old empires would start by invading lands before building trade networks with them and creating biddable governmental systems; China, by contrast, starts by creating new trade links, then gains political support to achieve economic dominance, which is then translated into greater military might. As this process deepens, Beijing increasingly seeks to integrate its trade and military relations, using its power to protect trade routes, whether on land or sea.
Greater China begins in Asia, where Beijing’s primary trade and military presence is felt. Despite official statements assuring the world that China seeks only mutually beneficial trading arrangements, Chinese writers and analysts openly talk about the country regaining its traditional position as Asia’s hegemon. Other nations, in order to establish trading links, must acknowledge Chinese national interests, and either willingly accept them or at least choose not to challenge them. Countries such as Pakistan, Laos, Cambodia and North Korea have long allied themselves in varying degrees to China. All have grown deepening trade and aid ties with China, which have turned into closer military ties and even, in the case of Pakistan, increasing Chinese military access to their territories.
The benign face of Chinese expansion is symbolised by the Belt and Road Initiative (IBR) — aka the Silk Road strategy. President Xi Jinping has pledged $1 trillion to IBR, his flagship international policy, which involves building infrastructure across Eurasia. The scale of it is hard to exaggerate. The project’s purpose is to link land and sea-based trade routes, running from east to west and north to south, with all belts and roads leading back to China.
In January, during her first bilateral trip to China, Theresa May sidestepped a Chinese push for a formal British endorsement of their Silk Road strategy. Britain was a ‘natural partner’ for the project, she said, but she would not give it her full backing. Such reticence may not be possible if Britain wants to agree a free-trade agreement with China.
Beijing’s priority is not Britain, of course. It first wants to neutralise the opposition of those near neighbours with whom it has territorial or political disputes. Beijing has made clear that it will respond with military action if Taiwan, with whom it has around £100 billion in trade, should so much as hold a referendum on independence, and it has steadily eroded Hong Kong’s freedoms despite promises not to do so.
China is also increasingly willing to take on Asia’s largest nations, attempting to wear down their opposition to its territorial claims. Despite more than £230 billion of bilateral trade with Japan, Beijing regularly challenges Tokyo’s control over the contested Senkaku/-Diaoyu Islands in the East China Sea with maritime patrol boats. On land, Chinese forces spent much of 2017 in a face-off with Indian army troops high up in the Himalayas, over a disputed border with Bhutan.
Perhaps most brazenly, China has systematically militarised its possessions in the South China Sea over the past five years. Beijing contests the sovereignty of the Spratly and Paracel Island groups with a half-dozen other South-east Asian nations, in waters through which nearly 70 per cent of global trade passes. The Chinese military has turned once-submerged reefs into island bases through a massive reclamation project, emplacing airstrips, radar installations, weapons bunkers, and anti-air missiles.
This militarisation, undertaken despite Chinese promises not to do so, has shifted the balance of power in one of the world’s most vital bodies of water, which links the western Pacific to the Indian Ocean and routes to Europe. Chinese media channels have darkly warned of war if Washington should try to force China to stop its island-building campaign. Will London risk trade ties with China by insisting on sailing the Queen Elizabeth through these waters to uphold freedom of navigation?
Beijing’s goal is to ‘win’ Asia and create a wider sphere of influence all without firing a shot. It sees Trump’s withdrawal from the Trans-Pacific Partnership and lingering doubts about his willingness to defend allies as an opportunity to supplant America’s role as global hegemon.
In some ways, Beijing is merely doing what all rising powers do. But that is no consolation to western powers, which have not been challenged so strongly for centuries. The military and trade ambitions of Greater China are almost certain to prove the most important strategic challenge for the next generation. The closer Britain gets to China, the more it will face pressure to conform to Chinese interests. Any accommodation will simply embolden Beijing, while also driving a wider wedge between Britain and America. Sometimes, a sweet deal conceals a bitter pill.
Spectator.co.uk/podcast Michael Auslin and Kerry Brown on China.