Friday, October 23, 2015

Britain goes out on a limb to pivot with China

Britain really rolled out the red carpet this week for China’s President Xi Jinping.  In addition to the usual pomp, pageantry and banquets in white tie at Buckingham Palace and the Guildhall in the City of London, there were an almost bewildering variety of official visits to squeeze into the president’s four-day trip, from universities to football clubs, from London to Manchester. Mr. Xi even addressed both houses of Parliament, a privilege reserved for very few dignitaries.

The United Kingdom has a lot on the line here as it tries to embrace the world’s second-largest economy. While the small UK market isn’t of much interest to China, the Bank of England was the first G7 central bank to sign a swap agreement with China’s central bank; Chinese commercial banks recently sold offshore yuan-denominated bonds in the City; and on October 20th, the first full day of Mr. Xi’s visit, China sold its first sovereign bond in London, worth over $4 billion, reported the Economist.

China was very happy that Britain became the first western nation to join the China-led Asian Infrastructure Investment Bank in March.

And the UK seeks to get some of the investment money China is throwing around, on Oct. 21st the government sanctioned a £6 billion ($9.3 billion) investment by a Chinese state power company in a nuclear plant being built at Hinkley Point in Somerset by the French company EDF with the promise of more nuclear deals to come. There are also expectations that the Chinese will invest in several projects to help develop a “Northern Powerhouse” of English cities.

Not everyone in Britain is happy at the move to a closer relationship with China and Britain risks alienating the US which criticized the recent moves as separating Britain from America and undermining western resolve to stand up to China in regions like the South China Sea, and on questions of human rights, said the Economist. But in the end, human rights usually take a back seat to economic interests. So whether the displeasure of the US has any effect remains to be seen. By Asia Unhedged

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