China’s Belt & Road Initiative & The United Kingdom

Belt & Road Projects Could Be Via The Commonwealth of Nations Where UK-China Interests Overlap

The Formation Of A Commonwealth-China Development Bank One Way To Assist China & Access Projects

 Op/Ed by Chris Devonshire-Ellis 

The UK has not signed up to China’s Belt & Road Initiative, although the current British Chancellor, Phillip Hammond, did visit the Belt & Road Forum in Beijing earlier in the year and offered British expertise in the financing of China’s Belt and Road project.  Hammond said that the UK would bring its expertise to the BRI (Belt and Road Initiative) and described it as a “vision”, reiterating that “Our offer is to bring together the best of Chinese manufacturing, engineering and construction, with the best of British project design and legal, technical and financial services expertise, as we promise the golden era of U.K.-China relations to deliver world class sustainable infrastructure for the 21st century. 

He went on to suggest that “The Belt and Road Initiative has tremendous potential to spread prosperity and sustainable development, touching as it does, potentially 70 percent of the world’s population, a project of truly epic ambition. The U.K. is committed to helping to realize the potential of the BRI and to doing so in way that works for all whose lives are touched by the project.”

So far so good, at least in terms of the rhetoric, although it does rather leave the question open as to why the UK hasn’t signed off on Beijing’s Belt & Road MoU. The British interests in the Belt & Road have gone a step further however with the organization of a British Commons Select Committee debate about the trade implications for the UK and the Belt & Road. That took place at the Palace of Westminster on Wednesday 5th June, was recorded and can be viewed here.

The Commons Select Committee briefing states that “The Belt & Road Initiative is a multi-layered foreign and economic policy programme that was first unveiled by President Xi Jinping in 2013, through which China is building and developing land and sea trade routes to and throughout Europe and Asia. The programme will see the world’s second biggest economy expand its global geographic and economic reach, but questions remain as to its objectives, as well as whether the UK is making the most of the trading opportunities it presents. In 2017, China was the destination for 3.6% of UK exports and supplied 7% of UK imports. Its overall share of UK trade has grown considerably in recent decades: in 1999, the same figures were 0.7% and 1.5% respectively. Key British exports include road vehicles, petroleum-related products, and travel services; notable imports include telecoms equipment, plastic articles, toys, games and sporting goods.

The Committee is expected to focus on opportunities and challenges for UK businesses, as well as the underlying strategic implications of possible participation in Belt and Road projects. It will take evidence from Chatham House, Baker McKenzie, and Grisons Peak, a London-based, Asia-focused merchant bank.”

Giving that “evidence” to the Committee are Dr. Cherry Yu Jie, Research Fellow of the Asia-Pacific Programme at Chatham House, Peter Lu, a Partner and M&A specialist of the law firm Baker & McKenzie, and Henry Tillman, the Chairman and CEO of Grisons Peak, a merchant bank and of the China Investment Research platform which analyses Chinese Outbound Investment.

The situation appears rather odd in that neither the China-Britain Business Council nor trade representatives from the British Embassy or Consulates in China appear to be participating, while the evidence being provided is from London-based executives. The grouping also appears rather narrow – the Belt & Road Initiative by definition being rather more than a China focused deal. The executives providing evidence would appear to be more focused on the ability for Britain to partner with Chinese companies in China, in order to gain a foothold on Belt & Road projects. In that case, more focus should be coming from China on whom those companies might be. It also assumes that partnering with Chinese companies will introduce them to development contracts external from China. As I have been pointing out in a continuing series here on Silk Road Briefing, BRI contracts are taking place on a global basis. I have covered Africa, South America, Central America and the Caribbean and Pacific countries to date. Other regions are to follow.

What is apparent is that China is working directly with its SOE’s on a Government to Government basis on Belt & Road Projects. There are two China strings to that; firstly, the need to have excellent British Government relations with the Chinese Ministry of Foreign Affairs and with the various officials at the Ministry. Crucially however, those relations should not be solely concentrated on officials dealing only with UK affairs, but with Chinese officials responsible for other regions as well. That requires diplomatic initiative and it is unclear how or even if the UK missions in China reach out to such people. Getting involved in a Chinese Belt & Road project in South America for example requires dialogue with the Chinese officials responsible for that region, or specific country. One wonders if the UK has that reach or has even considered this as a strategy.

Secondly, there are the Chinese SOE’s themselves. Like all large corporations, they have their hierarchy and divisions concentrating on specific regions of the world. Have business attempts to coordinate those contacts been made? That appears to be a brief the CBBC should have been given. The question here is whether that has been done?

Thirdly, the UK has a tremendous asset that I suspect is totally underutilized – the Commonwealth of Nations. That shadow of the British Empire still represents, or should, a major intelligence gathering and investment asset – if used properly.

The British Governments initiative to engage with China and the Belt & Road Initiative should be to promote British interests into it via the businesses the UK either owns, co-owns or can otherwise service in the countries above, and also through assistance with Government to Government support when negotiating or arranging finance with China over Belt & Road projects.

Indeed, the Chinese Belt & Road Initiative and the British Commonwealth of Nations share so much common interests that a Commonwealth-China Development Bank should be on the agenda, sharing British financial expertise and access to capital and credibility not just with China but where China’s Belt & Road Initiative already dictates it is most needed.

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There is another incentive to approach China’s Belt & Road Initiative in a rather more subtle manner than purely looking at the UK-China trade opportunities. A looming spanner in the works as concerns British trade with China is Brexit, with a hard landing looking increasingly likely. With the US President Donald Trump in Britain this week, talk has been of UK-US trade deals and the “special relationship”. But the Americans will drive a hard bargain and seek to supplant Brussels as the protocol that oversees how trade will be determined. In terms of the UK, that will mean a lessening of trade with China and a pull back from involvement in the Belt & Road. The United States will almost certainly insist that a US-UK trade deal will include restrictions on what and how the United Kingdom can deal with China. That has already occurred with the USMCA trade deal that President Trump agreed with Mexico and Canada and is currently in the process of being ratified. That might just render the entire Select Commons Committee debate over Britain’s potential Belt & Road Trade with China null and void.

If so, the only solution is to go the long way around and access China’s Belt & Road needs where it overlaps with those of the UK. In which case, the model for re-energizing the Commonwealth of Nations to provide assistance to China and British participation in the Belt & Road should not go unrecognized.

Related Reading:

Could a Post-Brexit Britain Emerge as a Silk Road Player and Counterweight to China?

China’s FDI into the UK After the Brexit Vote

Brexit Shows UK Has Turned its Trade Face Towards China, India & the East