Britain: Chinese investment: Not so gung-ho
Relations may cool, but the flow of yuan into Britain is unlikely to dry up.
After spending a century trying to prise open the Chinese market in Victorian times, European countries are now seeing the flow reversed, as a tide of Chinese money (if not yet gunboats) goes west.
Some are cautious about allowing Chinese investment in sensitive areas of the economy.
But last year, to the surprise of many, Britain’s government launched a new initiative of economic co-operation with China that the two sides said would bring forth a “golden era” in bilateral relations.
Britain became one of the first Western countries to sign up for the new, China-led Asian Infrastructure Investment Bank, to America’s annoyance.
George Osborne, then chancellor of the exchequer, visited Beijing, to make clear that cash-strapped Britain was open for infrastructure investment.
He launched the ￡12 billion ($16 billion) procurement process for HS2, a railway between London and the north of England, in the Chinese city of Chengdu.
Then came a double shock.
First the vote on June 23rd to leave the European Union.
Then on July 28th the surprise decision by the new prime minister, Theresa May, to delay approval of a nuclear power plant at Hinkley Point in Somerset, due to be part-funded by Chinese investment.
If the review cancels the project, the golden era could be over before it has begun, says Kerry Brown of King’s College London.
Since 2000 China has poured more direct investment into Britain than it has into any other EU country.
The Chinese are keen to prove themselves as solid partners in Western infrastructure projects, and hope, after Hinkley, to design and build an entire nuclear plant in Essex.
But critics felt the sudden British embrace of China was too gung-ho.
The same sceptics had, for security reasons, already warned about a decision to allow Huawei, a Chinese firm, to supply equipment for Britain’s telecoms infrastructure.
Many feared getting too close to China tied Britain’s hands diplomatically.
Mrs May’s delay on Hinkley has clearly annoyed China’s leaders.
In an editorial Xinhua, the official news agency, denied that China would put any “back doors” into the project, saying that ditching it would “stain” Britain’s credibility as an open economy and “might deter possible investors from China” in the future.
Xinhua also pointed indirectly to a sensitive issue about the British delay: Brexiteers had promoted a vision of Britain outside the EU with closer ties to emerging markets like China.