It’s money that matters in China-UK’s new found love

By Rahul Sharma

Kate Middleton’s snazzy red dress, a hop into a neighbourhood pub for a pint of beer with Prime Minister David Cameron and a jolly ride with Queen Elizabeth in a royal, six-horse carriage would have definitely pleased Chinese President Xi Jinping during his maiden state visit to the United Kingdom.

That the latest round of pomp and show came soon after Xi was feted – U.S. President Barack Obama merely gives additional credence to the fact that the world cannot afford to overlook its second-biggest economy and a fast-growing military power that astutely holds one end of the global power balance.

The Chinese media dubbed Xi’s foray into a country with which the Chinese have had  an oddball relationship for several centuries, a “super state visit”, signifying its importance to Beijing that has been trying hard to redefine its ties with other major powers.

The reality is different. The United Kingdom is no more a major power; it handed over that trophy to a surging United States at the end of World War II. In the past seven decades, since then, the UK has only continued to lose its grip over the world it once ruled.

So while for China its burgeoning ties with the United Kingdom might be the start of a “golden era”, for the latter it is more about a source of cheap funds for infrastructure that it needs to push its economy – some of it like steel manufacturing already battered by cheap Chinese imports. It is almost like a poor man asking a wealthy man for his daily bread.

Beijing, keen to spend its hoard of cash, is not complaining. Not when its president gets to ride with the Queen and sign deals worth a whopping $61.5 billion – most of them in the energy sector.

Cameron has reasons to cheer. He is getting cheap dollars to push nuclear power that will provide electricity to millions of British homes, which he himself can’t raise given Europe’s current economic disability. For China, it is a win-win situation too. With a slowing domestic economy, it is looking for its companies to go out to seek contracts that would buoy their bottom line.

The energy deals are indeed big. Not only will a new nuclear power project built with Chinese help provide electricity to millions of British homes, it will also create thousands of new jobs. More projects using Chinese-built nuclear reactors are in order. For China the projects become a testing site for its technology that it can then take to other developed nations.

But trade and investment is only one part of the story that could go horribly wrong on other sticky grounds. Given the Western world’s penchant for slamming China on human rights and its authoritarian government, and mutual suspicion, Cameron’s overtures to Beijing to invest in Britain’s energy and infrastructure sector will raise red flags in Washington that considers China’s rise a threat to its current influence in East Asia.

While economics works well between China and the United Kingdom, it is a tricky diplomatic route for Cameron and he will have to ensure that his newfound bonhomie with Xi doesn’t make the old ally in Washington too nervous. He will have to carefully walk the fine line between keeping old, historic ties in place and nurturing his new relationship with an ambitious China that would only want more in the long run.

At some point in the near future he may be pressed by the United States to take a stand on ticklish diplomatic issues involving China, such as Beijing’s aggressive postures in the South China Sea where it is building islands to effectively counter the U.S. navy that recently sent one of its ships to take a closer look at what was brewing there. Cameron will then have to take a quick call on what’s best for him. Xi will, of course, be watching.

Rahul Sharma, President, Rediffusion Communications, is a former newspaper editor and a public affairs expert.