LONDON – The late Labour Party leader Harold Wilson, who served as the United Kingdom’s prime minister during much of the 1960s and 1970s, famously remarked that “a week is a long time in politics.” Nowadays, as current Prime Minister Keir Starmer can attest, political time moves even faster.
Just six months ago, Starmer’s Labour won the UK general election in a landslide, ending 14 years of lackluster Conservative Party rule. With a commanding 163-seat majority in Parliament, Starmer appeared set for a stable and successful term. But with the British economy teetering on the edge of stagnation, a series of blunders has dented Labour’s hard-won reputation for competence and integrity.
To be fair, the press – particularly the right-wing media – has given Starmer little chance to find his footing, attacking his government almost immediately. Even so, with the UK’s public finances in disarray, Labour cannot avoid its share of the blame.
During the election campaign, the independent Institute for Fiscal Studies accused both major political parties of perpetuating a “conspiracy of silence” regarding the economy’s dire state. Given their dismal track record, it is no surprise that the Conservatives sidestepped the issue. But Labour, perhaps wary of admitting that painful measures such as tax increases and spending cuts might be unavoidable, also chose to stay quiet. Consequently, British voters were once again shielded from the harsh truth: the UK cannot sustain European-level public services while maintaining US-style taxes.
Now in office, Labour faces the unenviable task of reducing public debt. Recognizing they cannot simultaneously keep taxes low and increase public spending, the party’s leaders are pinning their hopes – especially in the medium to long term – on economic growth and increased productivity. But with the economy stuck in a rut, a sudden growth surge seems highly unlikely.
In its first six months, the Labour government has focused on directing more resources toward upgrading the UK’s aging infrastructure. But its efforts to stimulate corporate investment have been undercut by an increase in businesses’ national insurance contributions, introduced by Labour as part of its plan to stem rising government debt.
Amid these growth challenges, some observers look to China. Strengthening bilateral ties, they argue, could boost demand for British exports and attract much-needed investment. And China, according to this view, will deepen economic ties only with countries that unconditionally accept its political narrative and are willing to play by its rules.
But this approach is deeply misguided. While China tends to bristle at any criticism, its approach to trade is remarkably pragmatic: it buys what it needs at the best price available, regardless of political disagreements. The COVID-19 pandemic offers a striking example. In 2020, amid widespread – and likely justified – suspicions that the virus was leaked from the Wuhan Institute of Virology, Australia called for a World Health Organization investigation into the pandemic’s origins. China, in clear violation of the WHO’s International Health Regulations, responded by threatening to suspend Australian imports.
These threats understandably caused alarm in Australia and across the Western world, but China’s reliance on Australian barley, lithium, and iron ore abbreviated its political posturing. By the first half of 2023, Australian exports to China had reached record levels. Pragmatism, not politics, guides Chinese leaders’ trade decisions.
Similarly, Chinese overseas investments are far from altruistic. They are designed to return a profit or establish a strategic foothold abroad. In the UK, however, China accounts for only 0.2% of total foreign direct investment and just 0.4% of the profits generated in the City, suggesting that China has little interest in the British market.
This brings us to the broader political debate over UK-China relations. Should Britain maintain close ties with China to encourage it to join critical international agreements, especially those addressing climate change and pandemic preparedness?
Here, advocates of keeping China close must somehow rationalize the Communist regime’s well-documented history of breaching agreements that it signs. A notable example is the 1984 Sino-British Joint Declaration on Hong Kong, in which China pledged to preserve the city’s autonomy for 50 years after the UK relinquished sovereignty in 1997.
Starmer, for his part, has outlined a three-part credo for managing relations with China: compete when appropriate, cooperate when possible, and challenge when necessary. But what would happen if the UK challenged China? Most likely, the Chinese regime would respond as it always does – with a brusque dismissal. Tellingly, just hours after Starmer’s recent meeting with Chinese President Xi Jinping, intended to strengthen bilateral relations, dozens of pro-democracy activists in Hong Kong were arrested.
Engaging with China becomes even harder to justify when the UK’s defense establishment identifies it as a threat to national security and economic interests. In 2023, MI5 head Ken McCallum warned that Chinese authorities were spying on British citizens on an “epic scale.” More recently, it was revealed that agents of the Communist Party of China’s United Front Work Department have been actively seeking to influence prominent public figures, even going so far as to target Prince Andrew.
Given this reality, the notion that China might bail out the British economy is but utterly fanciful. Even if such an intervention were consistent with how the Chinese regime operates – which it is not – China’s own economy is faltering, burdened by structural issues that Xi’s regime seems incapable of resolving.
The UK cannot continue to ignore the evidence in the vain hope that appeasing China will somehow revitalize its economy. Instead of pandering to Xi, Starmer’s government should recognize that China represents a threat to British values and interests, and focus on identifying and crafting policies that really can promote sustained economic recovery.
Copyright: Project Syndicate, 2024.
