By Dean Xu
On October 21, 2015, Chinese President Xi Jinping agreed to a multi-billion dollar deal with Great Britain on his four-day visit to the country. Despite the magnitude of Chinese investment to finance projects of mutual interests, American and European criticism gave business a grain of salt.
The meeting between Chinese President Xi Jinping and British Prime Minister David Cameron illustrated the two nations’ increasing trade relationship. The deals, which culminated in economic agreements worth $62 billion, included sectors such as energy, tourism, and healthcare. As a result, British and Chinese corporate hegemons almost immediately began punching out deals. British engine-manufacturing company Rolls Royce signed a $3.7 billion accord for its cooperation with China’s HNA Group. Carnival Corporation and BP agreed on $18.5 billion worth of collaborations for cruise ships, oil, and gas. The list of deals was crowned by the first major Chinese investment in a Western nuclear facility, in which China’s General Nuclear Corporation plans to purchase shares worth a third of the $28 billion Hinkley Point nuclear plant project. Controlled by the French electric utility company Électricité de France (EDF), Hinkley Point will be the first newly built nuclear plant in Britain after more than two decades. Since the Fukushima nuclear disaster in 2011, nuclear power had been a highly controversial topic within the European Union.
The U.S. condemned the cooperation between China and Great Britain through these agreements as a dangerous strategic play. While the U.S. sees China as its global competitor, and thus wants to limit its economic and military power, critics argue that the bilateral trade between China and Great Britain would suppress the British foreign-policy agenda such as human rights in China. Furthermore, the U.S. warned its historical ally about threats to national security and international standing that might be endangered due to the Chinese investments. The British Foreign and Commonwealth Office denied those accusations and emphasized its ongoing commitment to sociopolitical concerns such as human rights, important subjects that close trade relations with China will not take off the table. The American excitement might be provoked by fear of losing influence and competitiveness to China. After all, China initiated the Asian Infrastructure Investment Bank (AIIB) in 2014 that challenges the U.S. led World Bank and has attracted popular states including Germany, France, and Great Britain. The possible dilution of the World Bank and IMF created by the potential of the AIIB questions the global leadership position of the U.S. in favor of China’s rising economy.
Great Britain has struggled partnering with China in ultimately beneficial trade agreements. On one hand, China has flooded British markets with subsidized steel, pushing out domestic steel production. Chinese producers, backed by the government, have been able to sell below cost price, allowing steel exports to more than double last year, while the U.K. has been restricted by E.U. rules that prevent state intervention. Consequently, the British steel company Tata Steel Europe has confirmed it will cut jobs by 1,200 this year with no optimistic outlook. On the other hand, Great Britain is eager to secure trade with China as it seeks more independence from the European Union. As a Brexit becomes less improbable, it seems self-evident to look for partnerships beyond Europe, which makes up roughly half of Britain’s imports and exports.
By emphasizing the global importance of China’s economy, Cameron wants to ensure Britain’s important position in Chinese trade relationships. The massive flow of investment has been declared the beginning of a golden era in economic and political relations. Despite American and European criticism, the partnership between China and Great Britain will be essential for diversifying trade relations and securing economic and political interests in the world’s prospective biggest economy. In weighing costs and benefits of bilateral agreements between those nations, short term concerns such as the weakening steel industry and suspension of sociopolitical issues might be offset in the long-term with investment opportunities and trade margins outside the European Union. As China’s economic force is on its way to surpass the rest of the world, Britain recognizes the significance by amplifying its partnership. However, beside the challenge not to let trade suppress political disaccords between the two countries, Britain must be prepared for less beneficial reactions from its Western allies in response to the increase in China’s impact on Britain’s economy.