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The Royal Navy’s new aircraft carrier, HMS Queen Elizabeth. File photo: AP

Warship row: why Britain can’t afford to be on China’s bad side

  • When the UK voted to leave the EU in a 2016 referendum, it became apparent Britain needed China more than China needed it

UK Defence Secretary Gavin Williamson’s announcement he would send a warship to the Pacific could cost the British government more than just its reputation as a serious player on the international stage.

As the country prepares to leave the European Union next month, currently with no deal on trading arrangements, it will need all the friends it can get.

Prime Minister Theresa May, the Foreign Secretary Jeremy Hunt and the finance minister Philip Hammond have been bending over backwards to court Beijing in the hope of a preferable post-Brexit trading deal.

Number 10 Downing Street was still decorated with red lanterns and cherry trees for the Spring Festival when Williamson dropped his firecracker last week.

In a widely circulated speech, he said that as part of the UK’s post-Brexit global ambitions he would deploy the UK’s new aircraft carrier HMS Queen Elizabeth to the Indo-Pacific.

Chinese President Xi Jinping meets Britain's Prime Minister Theresa May in Beijing in 2018. File photo: AFP

The ship will have US F-35 fighter jets embedded “enhancing the reach and lethality of our forces reinforcing the fact the United States remains our very closest of partners”.

General Sir Lord Dannatt, a former UK army chief said Williamson had “oversold” his idea as the aircraft carrier was not yet ready for deployment and that the defence secretary had made “a bad diplomatic move” by announcing Britain was going to send a warship “to the Spratly Islands”.

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“The aircraft carrier Queen Elizabeth is a very fine looking ship but it hasn’t got its full complement of aeroplanes yet, so let’s get the thing properly equipped, properly sorted out and use it responsibly,” he told Sky News this weekend.

China responded by accusing Britain of a “cold war mentality” and a trip by Hammond to Beijing, probably this week was postponed.

Hammond’s trip was expected to discuss billions of pounds of poultry and cosmetics deals with China, as well as strengthening links between the London and Shanghai Stock Exchange.

It would have been Hammond’s sixth trip to China since taking office two years ago with no reciprocal visit of the same level.

With the date of the UK’s departure from the European Union just over a month away with no future trading arrangements in place, the May government was hoping to secure a trade deal with China.

At the moment, the UK lags far behind Germany in its trade with China.

The UK’s new aircraft carrier comes armed with new F-35 fighter jets. File photo: AFP

Only three EU countries had a trade in goods surplus, with Germany a clear winner at 15 billion (US$16.9 billion).

The UK was second to bottom of the list of 28 countries with a deficit of 33 billion. It fares slightly better in trade in services, but the amount is a drop in the ocean compared to its other partners.

China was the UK’s sixth largest export market in 2017, accounting for just 4 per cent of exports and 7 per cent of imports.

Following the declaration in 2015 by then-Prime Minister David Cameron of a “golden era” in Sino-British relations, the UK has tried hard to convince China to make its EU base in the UK.

China partially responded, including buying the UK’s former Royal Mint building to house its largest diplomatic mission in the West.

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When the UK voted to leave the EU in a 2016 referendum, it became apparent the UK needed China more than China needed it.

“Brexit makes it tougher given the UK’s well known ambition for non-EU deals,” said Andrew Cainey, Associate Fellow, Asia-Pacific Programme with the London think-tank Chatham House.

Chinese businessman he said, while bemused at the UK political crisis, were still ready to make deals.

Only last Thursday China’s Ant Financial agreed to buy British payments group WorldFirst in a transaction worth around US$700 million, its biggest step yet into the UK’s financial markets.

The US blocked a similar deal by Ant Financial on security grounds.

But the UK needs China’s know-how as well as investment to maintain London’s role as a financial centre after Brexit.

Britain is due to leave the EU in six weeks and still no deal in sight on the terms of its departure. File photo: AFP

Hammond’s plans to greatly increase UK Chinese cooperation in other areas of banking and finance to boost the role of the city will likely now slow following Williamson’s comments.

The UK-Chinese relationship was already getting complicated. As well as the pressures of Brexit, the UK is also under pressure to comply with the demands of the so-called “Five Eyes” security alliance that includes the US.

On Sunday, the Financial Times reported that the UK government was likely to conclude that the risk from the Chinese phone giant Huawei’s involvement in 5G networks can be managed.

How Huawei went from small-time trader in Shenzhen to world’s biggest telecoms equipment supplier

Britain’s BT Group, which began working with Huawei in the UK back in 2005, recently won a deal to provide internet services in China, contracting directly with customers in the country and bill them in local currency.

This pointed to the possibility of a new UK-China understanding over telecoms.

Approval of Huawei’s suitability for 5G mobile networks that will drive many new technologies, although a technical and not a political decision, has been made in the face of US pressure.

Even Alex Younger, the head UK’s foreign-intelligence agency MI6, conceded the Huawei issue was too “complicated” to simply ban the company.

Again, casting aside US warnings, the UK has no choice but to take up China’s offer to fill the gap in its nuclear energy technology following the stalling of Japan’s investment in the UK’s nuclear plans.

One of May’s first acts was to delay Chinese involvement in the Hinkley Point nuclear power plant, only to then let it go ahead. But government policies require nuclear projects to be “developer-led”, and promises given to Chinese investors by Cameron’s government in 2014, make it awkward for the government to reverse course.

Chinese companies are supplying the trains for the delayed Crossrail London line and the even more delayed HS2 high-speed rail link.

China is also heavily involved in the UK’s Northern Powerhouse project to redevelop the UK’s post-industrial north.

Can Chinese expertise help Britain’s future high-speed railway rival Japan’s bullet trains?

In Scotland, in the North Sea, China oil giant CNOOC is now the largest player in the UK’s oil extraction, and petroleum exports are expected to overtake motor vehicles as the UK’s top export to China.

The company recently announced new oil discoveries.

The UK hoped its support of China by joining the Asian Infrastructure Investment Bank in 2015, upsetting the US, would pay dividends later.

Hunt had been hoping for Chinese support at the World Trade Organisation once the UK has left the EU. Having relied on the EU to make its trade deals for the past 40 years, the UK is desperately lacking in skilled trade negotiators.

More crucially, Chinese expertise and understanding is needed in government ranks.

“Success would require some area of greater China experience within government and the ability to keep discipline around an agreed integrated policy rather than what can seem like separate economic and defence policies,” Cainey said.

George Osborne, the former Chancellor of the Exchequer, accused the government of “gunboat diplomacy”.

“It is very difficult to work out what the British government’s China policy is at the moment,” he told the BBC on Saturday.

“China needs to understand that of course we are a western liberal democracy who are always going to be close allies of the US and should be close allies of our European partners and they are not going to separate us off from the pack.”

Whether or not the Huawei development will smooth British-Sino relations remains to be seen. Meanwhile, the UK’s chicken farmers and lipstick makers hoping to sell on the Chinese market will have to wait.

And if Williamson really wants to improve Britain’s “lethality”, he would be best reminded that a Chinese company Creat, has bought the UK’s blood plasma supplies.

This article appeared in the South China Morning Post print edition as: why u.k. cann ot aff ord to be on China’s bad side
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