Anatole Pang: At long last, there are signs Britain is developing a China policy

Anatole Pang is a former Conservative council candidate for Twickenham, and is resident in Beijing where he has worked for four years. He is currently an active member of Conservatives Abroad there.

In May of this year, Oliver Letwin came to Beijing on a crypto-ministerial visit during a period of frosty relations following the most recent Dalai Lama incident.

Amongst the items Mr Letwin had in his bag marked “leverage” was a reform of the visa system which has subsequently not been given as much attention as it might perhaps warrant, allowing in particular business visitors easier access to Britain going forward – a key element in encouraging Chinese investment. This gesture was noteworthy because it could be interpreted as the beginnings of something I have been calling for on this blog for some time – a China policy.

Let us not beat about the bush: whether we like it or not, China is not just an emerging power but rather one which in many ways has already arrived. It is, in this day in age, as relevant for us to have a China policy as it is a Middle East or Russia policy.

Generating the necessary discussion amongst the British political classes requires digesting the facts. There are of course plenty of headline numbers bandied about – that China is now the second largest economy in GDP terms (at PPP); that it is scheduled to overtake the US by the 2030s; that nearly half the population is urbanized, with many yet to follow. Less known is that Beijing, Shanghai and Guangzhou are all amongst the world’s top 15 conurbations by GDP, and that the middle class exists and will continue to grow.

Much of that, though, rests on predictions of a future which lies in the hands of statesmen, reformers, and fate. So instead let us consider this: eight cities in China of over 5 million people (including all three of the megalopolises above) currently generate a GDP per capita of US$20,000 – US$27,000, on a PPP basis. At a median of around US$22,500, this exceeds parts of Great Britain and indicates substantial real disposal incomes.

As an example, US$20,000 is greater than the figures for Blackpool or the Isle of Wight. The range is comparable to solidly middle class economies such as Poland or the Czech Republic.

For all the corruption which undoubtedly exists, China is not a stratified society comprising only super-elite “haves” versus multitudinous “have-nots” – unlike, for example, Indonesia. Instead, as anyone who has lived there can tell you, it is home to a material, robust and vibrant middle class – a middle class who consume. The proof of this is another interesting fact: China is already, today, the largest single market for most of the UK’s luxury car makers, including Rolls Royce, Bentley and Jaguar Land Rover, just as it is for Mercedes and BMW. This is a real market, and it exists right now.

At the same time, China’s rise has begun to re-shape some of the terms of international relations. The G20 has already officially replaced the G8 as the main forum for most macro-level discussions, whilst groupings such as BRICS and the Shanghai Cooperation Organization have been institutionalized. Obama may or may not have been premature in referring to the “G2” in 2010, but as discussions around the Copenhagen climate change conference demonstrated, the cosy world of the Quadrilateral is being undermined by the fact that the US can and will reach out directly to those who matter – and this does not include much of the Old World, much to their horror.

The reality, though, is that China is very receptive to Britain – more so than we might realize. Since the conclusion of the tensions over the Hong Kong handover in 1997, Britain has had the benefit of a clean slate and no little warmth in terms of sentiment on the ground. Everything from preferences for UK education to the use of the Union flag as a fashion symbol show this, and anecdotally it can be felt that we are preferred in many ways to the US just because, well, we are not them.

Indeed, the challenge has rather been about forging a distinct identity for ourselves, both in the international arena and in terms of trade. The EU subsumes much of Britain’s trade relations, despite the best efforts of British businessmen and the UKTI; whilst in geo-politics China, as with many other emerging powers, have difficulty seeing Britain as anything other than an adjunct of the US. Both of these situations are sub-optimal.

Fortunately, it is also clear to all that the British are as pragmatic as ever. Investment into this country is welcomingly straightforward compared to similar moves into our European peers or the US, and even Australia and Canada are becoming trickier. Letwin’s visa reform fits very much into this tradition of Briti EMBED Word.Document.12 \s sh openness and is much appreciated.

Attracting this inward foreign direct investment (FDI) is, of course, critical to Britain since we are still above all a trading nation – an enormous investment trust, really, requiring inflows as well as outflows. FDI is particularly important to us since our domestic spending neglects investment and is so dominated instead by consumption, as recent figures continue to show. The emerging markets, including China, will be a critical source of this going forward and we need our share, just as we need a trade policy to help companies go into China, which will be an overwhelmingly domestic market just like the US is today.

When all is said and done, therefore, forging a meaningful China policy is yet a thoroughly Conservative thing to do. For it is the Conservative Party alone which embodies those principles needed to reestablish our identity, our independence, and self-reliance. This is not just independence from the EU, important though it is, but also a perception of detachment from the US. We must be fundamentally ourselves, and working on a raft of new bilateral relationships across the globe is a platform for this independence.

Getting people to talk about this – at Westminster, in the press, in schools and universities – is the necessary starting point and Letwin and the policy unit are doing their bit. It must be only the start.