RUTH SUNDERLAND: When the Berlin Wall fell, many assumed western liberal democracy had beaten communism – they reckoned without the rise of China
The Chinese economy is suffering badly from coronavirus and a draconian lockdown, but this is unlikely to curb its onward march for very long – and that should concern us all.
The 6.8 per cent fall in the latest quarter compared with the same period a year ago is the first shrinkage since national income statistics began to be compiled in 1992. It is unlikely to bounce back instantly after being hit so hard, not least because many export markets are still shut down.
Yet just as China went into the crisis ahead of the rest of the world, so it is likely to emerge earlier, too. Lockdown is being lifted tentatively, and that is leading to worries that the Chinese may seek to take advantage of our economic weakness.
Boxing clever: China went into the coronavirus crisis ahead of the rest of the world, so it is likely to emerge earlier, too
This taps into an increasingly tense climate of difficult trade relations with US President Donald Trump and the debate over whether China should face a ‘reckoning’ over coronavirus. There is an ugly, jingoistic tone about some of the anti-China rhetoric.
Yet here in the UK we do need to take far more seriously its rise as an economic superpower and the relationship we wish to have with it. For years, the UK has been seen by Beijing as an attractive home for investment, with £48 billion flowing in during over a decade. Partly this is because we are, like the US, a global financial centre.
But we are also more open to Chinese involvement. Indeed, under David Cameron and George Osborne, it was encouraged. Osborne launched an effort to boost trading of the Chinese currency, the renminbi, in London, and the City is now the leading hub outside China itself. Beijing saw Brexit as another opportunity to make inroads here, believing doors would open as the UK sought to forge stronger trading links with non-EU nations.
The weak pound after the referendum also made British assets cheaper for overseas buyers. On the UK side, there has been a patronising tendency to treat China as an investor of last resort, in our nuclear power industry, for instance, when other sources of capital proved unforthcoming.
The Government was reluctant to invest in new nuclear itself, but was happy to open the door to the Chinese (and the French). Similarly with the steel industry. There was not much dissent in Tory party ranks about the sale of British Steel to the Chinese group Jingye, saving thousands of jobs but giving a foothold into a strategic industry, along with our trade secrets.
A cynic might think that was because other buyers, including a Turkish military pension fund, had left the scene and having plants in so-called Red Wall constituencies in Scunthorpe and Teesside was not a good look in the middle of the election.
A row has erupted about Huawei’s involvement in 5G. The inconvenient truth, however, is that the company has already embedded itself in our networks – without debate and with scant scrutiny.
China is unlikely to be deflected by coronavirus for long from its economic ambitions, including its multi-trillion-pound Belt and Road trade routes girdling the globe. It is a huge investor in Africa and has come in for flak for lending large sums to poor countries that will struggle to repay.
Yet when I had a meeting with a bank chief executive from Kenya, he lamented the fact Britain showed little interest in investing in his country, despite historic links.
The idea that we can insulate our economy from China with protectionist barriers is an illusion founded on arrogance.
When the Berlin Wall fell and the Soviet Union crumbled, many leading thinkers assumed western liberal democracy had won a definitive victory over communism and our system would prevail. They reckoned without the rise of China.