global economy

China wields economic weapons over tensions with UK

Agence France-Presse, Agence France-Presse
China wields economic weapons over tensions with UK

Newly built office buildings and commercial properties are pictured at the redeveloped Royal Albert Dock, constructed jointly by China's ABP (Advanced Business Park) and CITIC Construction, in North Woolwich, east London on June 22, 2020. (Photo by DANIEL LEAL-OLIVAS / AFP)

Beijing is threatening 'consequences' after London withdrew its extradition treaty with Hong Kong, a former British colony. Here are some possible targets in China's sights.

Just 5 years ago, Britain was predicting a “golden era” in trade with China. Today, the shine has faded as the two countries square off over Hong Kong, Huawei, and human rights.

Beijing is now threatening “consequences” after London withdrew its extradition treaty with Hong Kong, a former British colony. That followed Britain’s decision to blacklist the telecoms giant Huawei.

China is also angry at British criticism of its treatment of ethnic minority groups in the northwestern region of Xinjiang.

Here are some possible targets in China’s sights:

Commercial exchanges

China could close its borders to British products as it did with Norwegian salmon to punish Oslo after the Nobel committee awarded its Peace Prize to Chinese dissident Liu Xiaobo in 2010.

Last year, Britain exported 30.7 billion pounds (34 billion euros) worth of goods and services to China – a record that has been growing steadily for 4 years, according to the Office for National Statistics.

Beijing is London’s 3rd largest customer after the European Union and the United States. The Asian giant is also the UK’s 4th largest supplier of goods.

China has ploughed nearly $60 billion of investment into Britain over the past decade, according to data from Dealogic. That includes marquee companies such as Heathrow Airport, British Steel, and the manufacturer of London’s iconic black cabs.

Gold against telecoms

British exports to China last year were topped by gold – used especially in nanotechnology – plus petroleum products, vehicles, and pharmaceuticals.

These 4 sectors accounted for two-thirds of British exports, according to UK data.

In the services sector, accounting, legal and consulting activities – as well as tourism and transport – were the most in-demand by China in 2018, the year of the latest available data. 

These activities in China earned Britain some 2.8 billion pounds. 

Companies in the crosshairs

The Global Times, a nationalist tabloid, said on Tuesday, July 21, that Beijing may “have no other choice” but to strike at British-linked companies such as HSBC and Jaguar Land Rover.

Some British firms are very dependent on the Chinese market. 

Pharmacy behemoth AstraZeneca generates 20% of turnover in China, its second market after the United States.

China accounts for around 20% of sales for Jaguar and Land Rover, now owned by the Indian group Tata. 

Standard Chartered Bank, which plans to invest $40 million over 3 years in China, last year achieved 40% of its revenue in north Asia, which includes China.

Its competitor HSBC, historically linked to China and which employs 30,000 people in Hong Kong, has already publicly supported a controversial national security law imposed by Beijing on the former colony.

Education and tourism

Before the COVID-19 pandemic, some 120,000 Chinese nationals were studying in Britain, paying large tuition fees – a key source of income for UK universities. 

Chinese tourists are also big spenders, bringing in over 1.71 billion pounds in expenditure last year.

More than 883,000 Chinese visited Britain last year, according to the VisitBritain tourism agency.

The agency even launched a campaign 5 years ago inviting Chinese tourists to pick names in Mandarin for more than 100 of the top British icons, from Buckingham Palace to Mr Bean.

This spending power could be a potential pressure lever for Beijing. 

Amid growing tensions with Sydney, China last month urged its tourists and students to avoid Australia altogether, highlighting an upsurge in “racist” incidents.

It limited tourism to South Korea in recent years in a spat over a US anti-missile system.

Nuclear friction

Britain, however, also has potential economic leverage, with China General Nuclear  Power (CGN) working with French energy giant EDF on the construction of a mammoth nuclear power plant at Hinkley Point, in southwest England.

CGN’s involvement in such critical infrastructure is already drawing the ire of some British politicians.

“The nuclear sector seems destined to become the next point of friction between the United Kingdom and China,” the Financial Times said.

Carolyn Fairbairn, director-general of the Confederation of British Industry, said now was not the time “for the UK to self-isolate from China.”

“What is needed instead is a set of guiding principles for trade with China, to help businesses and policymakers weigh the interests of UK citizens in the round,” she wrote in an op-ed in the FT. – Rappler.com