Linda Li, Professor of Chinese Language & Culture, examines the changing political and economic relationships between the UK and China, and predicts what it could look like post-pandemic.
This article is part of our new series, Regent's Review: thoughts, research and academic discussion on the rapidly unfolding pandemic.
Summary
- The pandemic is seriously affecting global supply and demand, economic collaboration and sustainable development, posing severe challenges to the existing economic globalisation
- Once a largely economic-focused engagement strategy towards China has now become more political and diverse.
- In the UK, businesses’ attitudes to China are mixed, but still more positive than negative.
UK-China relations: business collaboration and development post COVID-19
As the COVID-19 pandemic spreads rapidly around the world, it is not just threatening people’s lives and health, but also seriously affecting global supply and demand, economic collaboration and sustainable development, posing severe challenges to the existing economic globalisation. While the pandemic is a major test for all countries, it is also a test for UK-China relationship regarding business collaboration and development post COVID-19.
In 2015, then UK Prime Minister David Cameron announced that UK-China relations had entered a ‘golden age’. The government held a grand ceremony to welcome Chinese president Xi Jinping's visit to the UK, and the two countries signed trade agreements worth over £40 billion. In 2017, the Chinese funds flowing to the UK amounted to US$20 billion, 10 times its investment in Germany. In 2016, the Asian Infrastructure Investment Bank was established, and the UK was the first Western country to become a founding member. In 2018, Prime Minister Theresa May visited China and signed a batch of business agreements with a value of over £9 billion.
In his message congratulating the 70th anniversary of the founding of the People ’s Republic of China in 2019, Boris Johnson, a couple of months after he became the prime minister said: ‘As the UK is about to leave the EU, British-Chinese relations are very important. I have high expectations for strengthening economic and trade cooperation and deepening cultural exchanges between Britain and China.’ Despite repeated warnings from the United States, the UK government decided to include Huawei in the construction of 5G networks in the UK. Huawei, a non-state-owned Chinese telecommunications company, has been operating in the UK for two decades and is a major supplier of BT.
The outbreak of COVID-19 has somewhat changed the direction and the dynamics of the relations. Once a largely economic-focused engagement strategy towards China has now become more political and diverse. China has become part of public and policy debates around COVID-19, and its image in the UK appears to be more negative than before.
After being discharged from the hospital, Johnson and his government faced tremendous pressure, saying that they would reassess their relationship with China. Foreign secretary Dominic Raab has also warned that Britain cannot go back to ’business as usual’ with China after the end of the crisis. Between January and April 2020, UK-China trade fell by 19.3%, with UK exports to China falling by 13.1% and China's exports to Britain falling by 21.8%. As a result of closure of real economy and travel restrictions, foreign direct investment is expected to drop sharply in both ways in the first half of the year.
The situation now does not look positive. What would happen after the epidemic?
In the UK, businesses’ attitudes to China are mixed, but still more positive than negative. According to a recent survey by China-Britain Business Council in March, most of the businesses that import from China are more likely to review their business models: nearly a third of importers would look for sources outside of China, less than a quarter (23%) of respondents hold negative views about long-term prospects for China’s economy, and close to a third (32%) remain optimistic over their annual forecast. Only a small number of companies (3%) plans to shift their long-term focus away from China.
In China, COVID-19 is under control and the country’s economy is showing a steady recovery. By the end of April, 99.1% of the large-scale enterprises had reopened, and 95.1% of staff and workers were back at work. Manufacturing PMI was above the threshold in both March and April, reaching 50.8% in April. A survey conducted by China's Ministry of Commerce, which covered more than 8,200 key foreign companies, indicated that 76.6% had powered on over 70% of their production capacity, and China would continue to be the ’factory’ and ’market’ of the world. Also in March when the epidemic was at its peak, China's Hebei Jingye Group acquired British Steel. Not only did the acquisition retain 3,200 local jobs, the Chinese group also promised to invest £1.2 billion in the next 10 years to upgrade the British company.
While the reality remains to be seen, all mentioned above shows that there is still a great deal of confidence in British and Chinese companies in the future of economic collaboration between the two countries. Although the epidemic has caused a short-term decline in trade volume, the fact that China and Britain have complementary economic advantages has not changed. China and the UK have broad common interests in free trade and economic globalisation, and a close partnership is indispensable for their economic success in the second half of the golden age.
