China will eat UK for Brexit

Things have been travelling along just peachy-keen between the United Kingdom and China for the past two and a half years, but last week’s Brexit vote has upset that particular apple cart.

In December 2013, British Prime Minister David Cameron and his Chancellor George Osborne took a caravan of politicians, diplomats and business people to China for a visit that signaled the resumption of relations between the two countries, which had been frozen since former chair of the Standing Committee of the National People’s Congress Wu Bangguo cancelled a visit to the UK in 2012 after Cameron met with the Dalai Lama.

The caravan’s kowtowing obsequiousness was something to behold, although what anyone ever expected from Cameron — whose only job before entering politics has been in the dark arts of public relations — is beyond this essayist. By September last year, the Dalai Lama was criticising Cameron for refusing to meet with him, accusing him of preferring money over morality.

[Brexit — the shockwaves spread out from a departing Britain]

But it paid off, at least financially, in spades. Since the Cameron visits, Chinese investment in the UK has surged. Suddenly, Great Britain was China’s BFF in Europe, having fallen hook, line and sinker for Chinese blandishments, and the country’s hardly subtle strategy of divide and conquer.

In many ways, the UK was playing catch up with European frenemies such as Germany, France and Italy, who had all been earlier movers in building stronger economic ties with China.

The ardour was not just one way; the kiss-and-make-up strategy with the UK had China’s self interest at its heart, with London the world’s key financial centre and Beijing pushing hard for the internationalisation of the country’s currency, the renminbi. Chinese leader Xi Jinping returned the favour, visiting England in October, and being feted like a rock star as 40 billion pounds worth of deals were announced (with the usual warnings that such numbers are usually pumped right up by government PR). The British press christened his relationship with Cameron a bromance, although the Queen, reportedly, was not so amused, caught on camera saying that Chinese officials were “very rude”.

China was responsible for 2.4 billion pounds worth of foreign direct investment in Britain, according to law firm Baker & McKenzie.

But last week, things took a turn for the worse when the oldies and welfare recipients teamed up to get the Brexit bite over the line, despite lacking any clear plan for what would happen next — a gaping hole that appears to be growing rather than shrinking with each day after the fateful vote.

[Brexit a lesson in appeasing the right: Oakeshott]

With the British economy seemingly heading for recession as its sharemarkets and currency are pummeled and clouds gather over the future of the City of London, some banks are already announcing they will shift staff to Frankfurt and other European centres, such as Dublin. Inside China, there are mixed views on decision.

“China will be both harmed and helped by Brexit,” according to the Kissinger Institute, citing the Consensus Network, a liberal-leaning, independent Chinese-language website.

“On the plus side, if the U.K. leaves the EU, the geo-economic landscape will face restructuring and an independent England will have even greater need for foreign investment, which may provide enhanced opportunity for Chinese investment. The downside is that, because London is the largest offshore renminbi trading center, Brexit will affect the stability and internationalization of the renminbi.”

Virgin founder Richard Branson is one businessman who believes it is very much a negative for Chinese investment in the UK.

“I met with a group of Chinese businessmen yesterday morning who have invested heavily in England and who are now going to stop investing and withdraw investments they’ve already made,” Branson told The Guardian.

Branson’s company has lost about one-third of its value as part of the London sharemarket rout since the Brexit and said his opinion that leaving the EU would damage investment in Britain was shared by “every single person I’ve met from overseas”.

Others believe that if the UK economy does nose dive, China will pile in with offers of financial support and pick off cheap assets.

China’s propaganda tsars have seized in the decision as the latest example of how flawed democracy is.

“In terms of Chinese society, we have arrived at a critical period where we need to understand the big questions for globalization and democracy,” Communist Party-run tabloid the Global Times said. “England is representative of Western democracy, what will be the result of its embrace of the referendum — the ‘highest form’ of democracy — to decide this question? That is angle from with Chinese observers will continue to observe developments.”

[Yes, you should panic about Brexit]

Yet the Brexit has also triggered China’s existential fears of being unable to quell its own proponents of secession. The people voting for the Brexit were venting their anger at globalisation. In China, where wage costs are rising and manufacturing is moving to lower-wage countries, like Vietnam and Bangladesh, similar problems are emerging.

Yet China has none of the built-in advantages of the rule of law, strong institutions and freedom of the press, which are all meant to provide buffers against instability and public anger. The peaceful option of the ballot box is not available in China. Conversely, the Chinese economy has benefited from globalisation, and many see Brexit as a blow against that.

And as more than one commentator has noted, the Brexit has a horrid whiff, to Chinese noses, of Taiwan or Tibet.

Others have seized the moment to call for Britain to step up its efforts to call out China for its serial human rights abuses. A report entitled The Darkest Moment, and prepared by a Conservative Party group, outlined the state’s ongoing crackdown on human rights lawyers and advocates, and advocated for a new policy on China.

“China is not what it was five years ago,” expert China-watcher Christopher Hancock said in a statement from the report’s authors. “It has undergone a 180-degree turn in its political ethos.”

“Outsiders should not attempt — and will always fail — to change China’s political and social behaviour,” Hancock added. “However, British citizens can, and must, attempt to change their government’s hitherto misguided response to it.”

That, of course, will go down like the veritable cup of cold sick in Beijing. Nations who get too lippy about Chinese human rights — such as Norway, which handed the Nobel Peace Prize to rights advocate Liu Xiaobo, now in the midst of an 11-year prison sentence for his non-violent pursuit of more freedom for Chinese people — have found themselves on the economic outer with China.

Economic self-interest has always tended to win out with governments over taking ethical or moral stands, and nowhere is this better demonstrated than with the relationship between democratic countries and modern China.

If the UK sees Chinese investment seeping away, as Branson suggests, the likelihood of the Conservative human rights group being heard are close to zero.