Author: Sara Hsu
Posted on: Forbes | 20th December, 2017
A UK fund supporting China’s One Belt One Road (OBOR) project was announced on Friday, with former Prime Minister David Cameron taking on a role as Vice Chairman. It is a private equity fund supporting UK-China relations, and looks set to boost ties between the two nations, as the U.S. takes a back seat.
The fund will increase collaboration between the UK and China in the areas of technology, high-end manufacturing, healthcare, and other sectors. It seeks to assist British businesses in particular sectors to penetrate foreign markets, especially in China, reinforcing British support for the flagship Chinese endeavor.
Better UK-China relations
The fund is set to improve British relations with China, which have not reached the high marks under Prime Minister Theresa May that David Cameron strived for when he was in office. Under May, for example, several high-profile projects between the two nations lost steam at the beginning of the year, including an RMB bond issuance and a London-Shanghai stock link. This represented a diminution of British-Chinese cooperation since the period under David Cameron, who warmly welcomed Chinese investment in the UK when he was in office. Now, Cameron is once again trying to lead the UK into stronger ties to China.
As a result, UK-China relations are improving. The 9th UK-China Economic and Financial Dialogue was held in Beijing this past weekend. In addition to the announcement of the private fund, preparations for a London-Shanghai Stock Connect Initiative were restarted, and additional plans for a UK-China bond connect were made. To quell anxiety over Brexit, a Trade Working Group was held to discuss British-Chinese trade relations after the UK exits the EU. New partnerships were also set up, including a collaboration on Ultra Low Emission Vehicles and on the UK’s new Industrial Strategy.
The UK has also looked upon the One Belt One Road project as being mutually beneficial. Chancellor Philip Hammond has represented British financial and trade interest in the project, stating in May that “Britain can be a natural partner in delivering infrastructure in Belt and Road countries by supporting the finance and planning needed.” The UK also gladly joined the Asian Infrastructure Investment Bank, which was established in part to support projects along OBOR.
U.S.-China relations remain mediocre
The UK is embracing trade and financial relations with China, just as the U.S. is laying low. While the U.S. is a far larger trading partner for China than is the UK, the British have shown that, despite their inward turn through Brexit, they are working toward expanding economic ties to the Asian nation.
By contrast, the U.S. policy toward China is unclear. Candidate Trump assailed China as “raping” the U.S. Gains made to improve the American trading position vis-à-vis China were, however, minute. Negotiations carried out at the beginning of the Trump presidency were inconsequential, with deals already underway served up as major accomplishments. Little has changed since then. In President Trump’s recent trip to China, memoranda of understanding were signed between American and Chinese entities and again touted as huge successes, without many concrete business deals or discussions over real international business concerns.
In addition, the U.S. government has chosen not to officially participate in One Belt One Road. Although the U.S. sent a representative to the One Belt One Road forum in May, little to no commitment has been made to invest in or otherwise support this project, despite the eagerness of some American firms to make deals along OBOR.
Increasingly, American threats to retaliate against North Korea for launching missiles have raised concerns in China that the U.S. will soon start a war, dragging China into the imbroglio by forcing it to take sides. This would overshadow any economic negotiations under consideration between the Trump and Xi administrations.
UK raising its profile in China while the U.S. lowers its own
The UK will therefore raise its profile in China in a way that is mutually beneficial, as long as risks along OBOR are properly controlled for. It seems likely that projects receiving financing from the British fund will be well vetted, given the experience of the UK and London as a major global financial center. Meanwhile, the U.S. is lowering its own status as a partner to China. The Trump administration recently went so far as to name China a “revisionist power” along with Russia, Iran, and North Korea, with “values and interests” that are “antithetical” to those of the U.S.
The UK has dubbed this period of strengthening relations with China a “golden era” for the bilateral alliance. Divergence from American policy on China couldn’t be starker at this time, as the U.S. enters a “leaden age” in American-Chinese relations under President Trump.