By Austyn Close, Senior Executive
Free global markets have come under pressure in the past few years, with President Trump in the White House and increasing concern about China’s position and practices. A phantom trade war between the two economic powerhouses has characterised a landscape which can be described as a Cold War 2.0. The global grip of Coronavirus on the world, which originated from China, is now causing governments around the world – including in the UK – to reassess economic reliance on the Chinese dragon.
Last week, it was revealed that the UK was the most open and receptive European nation to Chinese Foreign Direct Investment (FDI) – welcoming just shy of £45 billion worth from China last year. The UK chose to become more open to overseas investment than its European counterparts.
A spike in takeovers of overseas companies is another aspect of China’s behaviour towards the UK and the rest of the world. More and more companies in the fields of real estate, investment, technology and other sectors are seeing Chinese investors take large or controlling stakes. The debate around Huawei’s involvement in the UK’s 5G network was an early sign of the growing international concerns about the reach of the Chinese invisible hand.
Media reports of Boris Johnson’s ‘Project Defend’ – a plan to roll back the UK’s reliance on Chinese medical equipment – spells a new age of caution. Both the trade war and Coronavirus have brought the risks of our reliance on China into sharp focus for the UK Government. Outside of the EU bloc, the UK will have more freedom to make its own decisions on these perceived risks but it will have to react strategically and in a manner which doesn’t undermine its ‘open for business’ logic.
In the midst of the world dealing with Coronavirus and the fallout towards China, we now see the superpower tightening its grip on Hong Kong. Protests in the city have grumbled for over a year and disrupted business ever since. China’s latest moves on bypassing the Hong Kong legislature and pushing through a new national security law has amplified democratic cries of Hong Kongers.
The Chinese state is slowly encroaching on the city’s liberal way of life with this new law effectively policing the territory and eradicating the ‘one China, two systems’ status quo agreed with the UK back in the 1980s. Interestingly, China’s ministry for foreign relations has represented this new law as something which will renew ‘peace’ in the city in an attempt to reassure international investors and businesses nervous at this news. Global businesses are watching and considering how long they will be able to continue playing in China’s backyard and whether they have to look to alternative Asian wealth centres such as Singapore, Taiwan or South Korea.
Government and business in the UK have their eyes opened to these seismic changes. In a world where China is firmly at the centre of the global economy, the new considerations will change the trajectory of thinking behind trade agreements, treaties and how we conduct business with the country.