The 4th MIMA South China Sea Conference, co-sponsored by the Cambridge Centre for Rising Powers (CRP), took place at the InterContinental Hotel in Kuala Lumpur from 8-9 September 2015. The conference featured presentations on emerging issues on the South China Sea by leading experts from around the world.
CRP was represented by Senior Research Associate Dr Markus Gehring and Post-Doctoral Research Associate Dr Andrés Villar. Dr Gehring was interviewed on the topic by Malaysian Television.
Professor Amitav Acharya, Member of CRP’s International Advisory Board, has recently published his new book on The End of American World Order.
While the US will remain a major force in world affairs, he argues that it has lost the ability to shape world order after its own interests and image. As a result, the US will be one of a number of anchors including emerging powers, regional forces, and a concert of the old and new powers shaping a new world order. Rejecting labels such as multipolar, apolar, or G-Zero, Acharya likens the emerging system to a multiplex theatre, offering a choice of plots (ideas), directors (power), and action (leadership) under one roof. Finally, he reflects on the policies that the US, emerging powers and regional actors must pursue to promote stability in this decentred but interdependent, multiplex world.
Please find a video introduction to the book by Professor Acharya below:
Dr Amrita Narlikar, Director of the Centre for Rising Powers, and Dr Aruna Narlikar have published a new book, 'Bargaining with a Rising India. Lessons from the Mahabharata', now available at Oxford University Press.
The need to negotiate effectively with India is only growing as its power rises. Understanding the negotiating culture wherein India's bargaining behaviour is embedded forms a crucial step to facilitate this process. In the literature on international negotiation, experimental studies point to specific behavioural characteristics of Indian negotiators. Empirical analyses confirm these findings, and many suggest that the sources of India's negotiation behaviour are deep-rooted and culture-specific, going beyond what standard explanations of interest group politics, partisan politics, or institutional politics would suggest. But there are very few works that trace these sources. Extensive sociological and anthropological, and comparative political studies remain confined to their own fields, and do not develop their implications for Indian foreign policy or negotiation. There is a conspicuous lack of works that attempt to unpack the "negotiating culture" variable using literary sources. This book aims to fill both these gaps. It focuses on India's negotiating traditions through the lens of the classical Sanskrit text, the Mahabharata, and investigates the continuities and changes in India's negotiation behaviour as a rising power.
"All of us outside India need better understandings of its policies and their drivers. This rare, creative book helps by viewing the classical Sanskrit epic partly through lenses from recent negotiation analysis. A corrective to western-centric scholarship, the book makes a remarkably original contribution to the tradition that traces negotiation behavior to national cultures. The authors lessons are relevant for todays international negotiations." - John Odell, Professor Emeritus of International Relations, University of Southern California
"National cultures and international bargaining behavior are too often linked using stereotypes and anecdotes. Narlikar and Narlikar offer for the first time a comprehensive and convincing view of the traditional negotiating culture of one rising power, India, and the effects of that culture on contemporary international negotiations" - Miles Kahler, University of California, San Diego
"This study fills a major gap both for scholars and for policymakers by placing Indian diplomacy in a cultural context and provides a new understanding of how Indias classical traditions continue to influence Indias bargaining positions and negotiating strategies." - Gareth Price, Senior Research Fellow, Chatham House
Amrita Narlikar speaks at the British Academy on the aims of rising powers. This session at the British Academy's Emerging Powers Going Global conference on 8-9 October 2013 was chaired by Dr Christopher Alden, Reader in International Relations at the London School of Economics & Political Science.
Please find a video of the session below:
The former Brazilian Minister of Foreign Relations and Defence, Celso Amorim, visited the Centre for Rising Powers on Thursday 5 November to give a public lecture on Brazilian Foreign Policy in the 21st Century
Having led some of Brazil’s most defining moments on the international stage in the last two decades, Minister Amorim shared his reflections on the most important highlights of Brazilian foreign policy during his period in office. He particularly drew attention to the role played by Brazil in the creation of the G20, its bridging role between key actors in the Arab world, and gave an outlook on the implications that stem from Brazil's rise in the international system.
Photography by Peter Nixon.
Dr Kun-Chin Lin, Director of the Centre for Rising Powers, took part in a panel discussion on geopolitical faultlines, organized by CQS Capital on the 11th of November 2015. Other speakers at the event included Tina Fordham (Managing Director and Chief Global Political Analyst, Citi Research), Konstantin von Eggert (Leading Journalist and Political Commentator on Russian Domestic Politics as well as Foreign and Security Policies), General The Lord Richards of Herstmonceux GCB CBE DSO DL (Former Head of the British Army and Chief of the Defence Staff from 2010-2013) and Sir Michael Hintze (Founder, Chief Executive and Senior Investment Officer of CQS).
Dr Kun-Chin Lin, Director of the Centre for Rising Powers, presented a talk on 'The Highway Boom: Politics, Energy demand and Emissions in China' at the Cambridge Centre for Research in the Arts, Social Sciences and Humanities (CRASSH) on 18 October 2016
This paper sets out the core issues for the Xi leadership, and focuses on what these might mean for the UK, particularly in the post-Brexit world and with the election of Donald Trump as US president (Chatham House Asia Programme Publication). Chapter 12 "China and the Intergovernmental Organizations" contributed by Kun-Chin Lin
Asia Programme is focused on the key political, economic and social developments affecting Asia.
Dr Kun-Chin Lin, Director of the Centre for Rising Powers (CRP), and Dr Andrés Villar Gertner, Research Associate at CRP, have published a new report on Maritime Security in the Asia-Pacific with a focus on China and the Emerging Order in the East and South China Seas. It argues that while Asian regionalism has traditionally been weak in incorporating non-state interests, a breakthrough in maritime governance will depend on securing the representation of, and contributions from, non-state actors.
In order for powers such as the US, Australia and Europe to play a constructive role, this paper suggests the following starting points for better understanding the challenges of maritime governance in Asia:
- Asian states need to recognize the limits of Westphalian preconceptions of maritime sovereignty. Countries in the region are close geographically, and linked by critical maritime spaces. But they are far apart in terms of national identity, and divided by traumatic historical antagonisms.
- Contending states need to show greater respect for the claims of disputants, without necessarily accepting the legitimacy of these claims. For example, beyond pointing out China’s underdefined territorial claims, we suggest that the origin of these claims should be explored in detail and their effects on domestic political discourse in China and other states observed.
- Stronger incentives are needed to promote the use of the UN Convention on the Law of the Sea (UNCLOS)/the International Tribunal for the Law of the Sea (ITLOS)/the International Court of Justice (ICJ), as means of dispute management. This would involve recognizing the maritime law regime’s problems rather than touting its universality, and encouraging Asian nations (in particular, China) to accept and apply UNCLOS principles and rules.
- Greater coordination of policy should be sought. There is no global best practice in maritime governance, only a diverse set of references drawing on common challenges and tried options. In particular, the European experience with the Arctic Council and other cooperative mechanisms provides a rich set of practices for consideration. When exploring options, policy-makers should keep in mind from the outset the importance of harmonization to avoid ‘nesting’ problems (such as in free-trade agreements), and to minimize burdens on commercial agents who would be subject to these regulatory and institutional requirements.
- The success of maritime governance depends a great deal on securing the representation of, and contributions from, non-state actors such as industries, fisheries groups, scientific communities, NGOs, think-tanks and local communities. While Asian regionalism has traditionally been weak in incorporating non-state interests, the nature of issues involved in the maritime domain necessitates this approach.
The Centre for Rising Powers is collaborating with the Cambridge Institute for Sustainability Leadership (CISL) to provide a 23-day study tour senior officials from the Guangdong Provincial Government. It is designed to equip these leaders with insight into the concept and operationalisation of sustainable development in critical areas, with a particular focus on the role of industrialisation and technological innovation in promoting sustainable economic activity.
The key questions addressed in the program include:
- How are global trends shaping the future environmental, economic and social context?
- How has the UK has developed industrially and is now supporting industrial sustainability?
- What are the challenges in achieving sustainable economic growth, including risk mitigation and the role of environmental protection
- What is the role of technology and innovation in delivering sustainable solutions (particular focus on information technology - data management and utilisation)
- How can long-term exchange and cooperation between Chinese and UK organisations be established?
The delegation will visit Cambridge and London from 19 June to 11 July 2015. The program will entail the following:
Please contact Lucy Bruzzone at CISL for further information: Lucy.Bruzzone@cisl.cam.ac.uk
"Don't Blame the Brands", an article by Professor Jagdish Bhagwati and Dr Amrita Narlikar, was published in Prospect Magazine. Click here for more details.
Dr Amrita Narlikar, Reader in International Political Economy and Director of the Centre for Rising Powers, has been awarded a Leverhulme Research Fellowship for 2013-2014, to work on a new research project "The Power of the Poor: International Economic Negotiations in a Globalising World". The Leverhulme Research Fellowships are awarded on the basis of a competition that is open to experienced researchers across the full range of academic disciplines. The scheme is a highly competitive one: 588 applications were reviewed this year with a success rate of 16%. The grant will allow POLIS to appoint a replacement lecturer to cover Dr Narlikar's teaching while she is working on the project.
Dr Kun-Chin Lin, Director of the Centre for Rising Powers, attended the conference on “Maritime Security in the Asia-Pacific” at Chatham House on the 12th of February. Dr Lin chaired the morning session on “Traditional and Non-traditional Maritime Security Challenges in the Asia-Pacific Traditional Challenges”. Participants of this session included James Przystup, Senior Research Fellow, Institute for National Strategic Studies, National Defense University (United States), Ryo Sahashi, Associate Professor of International Politics, Kanagawa University and Sam Bateman, Professorial Fellow, Australian National Centre for Ocean Resources and Security, University of Wollongong. The theme of the session was Traditional Challenges, Non-traditional Challenges and Capacity-building and Cooperation.
For more information, please visit http://www.chathamhouse.org/event/maritime-security-asia-pacific
Please find a video from the conference below:
The Resilience and Sustainable Development Programme (RSDP) is a new research initiative of the Centre for Rising Powers at the University of Cambridge.
The overarching mission of RSDP is to offer valuable and actionable insights that will help ethical leaders to cope and to thrive; and to drive policy innovations and institutional development in a changing World. Resiliency and sustainability depend on good leadership, empowered people, the wise use of natural resources and the profitable activities of ethical companies to bridge the gaps between rich and poor, so as to enhance prosperity for all.
The three pillars of the Resilience and Sustainable Development Programme are:
1. Improving resilient leadership and adaptive governance
2. Sustainable policy making and applied institutional innovations
3. Building a resilient society and a responsible economy for the poor
As such, RSPD helps to create a shared, multidisciplinary research and practice vision and to embed the Sustainable Development Goals and Global Environmental Accords within the work of the Centre for Rising Powers.
To build resilient communities, we need the implementation of adaptive leadership models, the governance of sustainable policies and the process of institutional innovation to pursue resilience and sustainability in the global value chain of power, politics and commodity. Ultimately, this will help secure peace between people. The RSDP identifies, invests in and supports the rising generations from the emerging countries through robust fellowships and cutting-edge leadership development programs.
Roundtable discussions during the launch event will focus on the importance and role of resilience and sustainable development for rising powers. Experts from academia, government and industry will lead the discussion of how adaptive leadership and institutional innovation foster resilience and sustainable development.
3:00 – 3:30
3:30 – 3:40
Dr Kun-Chin Lin - Executive Director, Centre for Rising Powers, University of Cambridge
3:40 – 4:00
Key Note Speaker
Prof Rajah Rasiah - University of Malaya, Malaysia
4:00 - 4:30
Tea/Coffee Break and Networking
Clare College Garden Room
4:30 – 4:40
Launch the Resilience and Sustainable Development Programme (RSDP)
Prof David Runciman - Head of the Department of Politics and International Studies (POLIS)
4:30 – 5:20
Roundtable on Resilience and Sustainable Development
Dr Kun-Chin Lin
Prof Rajah Rasiah
Dr Francois Kayitakire
Dr Nazia Mintz-Habib
5:20 – 5:40
5:40 – 6:30
Roundtable on Adaptive Leadership with the audience
Sir Richard Shirreff
6:30 – 7:30
Drinks and networking
7:30 - 9:00
Dinner at Garden Room
Mr Matthew Bullock
Master of St Edmund's College
The confirmed panelists to date include:
- Professor Rajah Rasiah -- distinguished Professor of International Development at the University of Malaya, 2015 recipient of the Celso Furtado prize from the World Academy of Sciences for his seminal contributions in the field of social sciences
- Professor David Runciman -- Head of the Department of Politics and International Studies at the University of Cambridge
- Sir Richard Shirreff -- former Deputy Supreme Allied Commander Europe of NATO
- Dr Francois Kayitakire -- Joint Research Center in the Institute of Environment and Sustainability European Commission
- Dr Kun-Chin Lin -- Director of the Centre for Rising Powers at the University of Cambridge
- Dr Nazia Mintz-Habib -- - Lecturer in Public Policy, Department of Politics and International Studies at the University of Cambridge
- Michael Brooke -- Head of Innovation at BNP Paribas
- Steve McCauley -- executive leadership coach and mentor to senior leaders in government, business, finance and professional services
- Ana Hajduka -- CEO Africa GreenCo
- Joe Studwell -- Journalist and author of The China Dream, Asian Godfathers, and How Asia Works
- Catherine Tilley --Director of Executive and Graduate Education at the Cambridge Institute for Sustainability Leadership
Coffee, snacks, and drinks will be provided, as well as networking opportunities with panelists and other participants. You may refer to this website for detailed directions.
Dr Kun-Chin Lin, Director of the Centre for Rising Powers (CRP), will present on 'State Formation and Territorial Claims: Evolving Frames on Chinese Maritime Disputes' at the interdisciplinary workshop 'Caius at Sea' at Gonville and Caius College, Cambridge.
The event is open to all members of the University of Cambridge. It intends to deepen a collegiate conversation about the study of the sea in the humanities, at a time when scholarly attention to the oceans is very much on an upward trend. Due to the election of some new Fellows to the college, Caius now has an impressive concentration of expertise devoted to the study of the oceans. This workshop brings together scholars who work in Anthropology, International Relations and Politics, Archaeology, Medieval and Modern History, Mediterranean Studies and Asian Studies to present work on their current research in the humanities and social sciences.
The workshop will take place at Gonville and Caius College SCR (Panelled Room) on 24 September, 2015. Please register if you wish to attend (email@example.com).
Professor Jong Kun Choi of Yonsei University (South Korea) has published a new article in the Review of International Studies on the prospects of a liberal transition in Northeast Asia.
Is the relatively long peace of Northeast Asia a result of crisis stability or general stability? The article introduces two stability concepts – crisis and general stability. Crisis stability occurs when both sides in military crisis are so secure due to its military capability and are able to wait out a surprise attack fully confident that it would be able to respond with a punishing counter attack. On the other hand, general stability prevails when two powers greatly prefer peace even to a victorious war whether crisis stability exists or not, simply because war has become inconceivable as a means of solving any political disagreements and conflicts. While crisis stability entails delicate balance of military power from the deterrence literature of security studies, general stability bases its logic of inquiry on constructivism where the idea of war aversion – categorically rejecting war as a means to end conflicts – becomes the prevailing norm. Therefore, this article empirically examines how Northeast Asia has sustained its peace through crisis stability and presents a new trend toward general stability.
Dr Kun-Chin Lin, Director of the Centre for Rising Powers, and Dr Andrés Villar Gertner, post-doctoral research associate, have published an article in The Diplomat on Gunboat Diplomacy in the South China Sea.
Please find the full text below:
Two events in recent days have turned the tables on Chinese initiatives since 2009 in taking control of the vast waters of the South China Sea. On October 27, a U.S. guided missile destroyer passed within 12 miles of the Subi Reef in the Spratly Islands of the South China Sea (SCS) on a Freedom of Navigation Operation (FNO) which China condemned as a threat to its national sovereignty. Two days later the Permanent Court of Arbitration in The Hague rejected China’s argument that the Court had no jurisdiction over the Philippines’ challenge to Chinese territorial claims in SCS.
Since 2009, China has effectively been one step ahead of other claimants and the U.S. in getting what it wants through a deliberately confounding mix of rhetoric and actions. While reiterating its commitments to peaceful resolution and joint development, Beijing has demurred at signing on to a Declaration of Conduct and Code of Conduct with ASEAN nations, provoked skirmishes with Philippines and Vietnamese vessels, set up oil rigs in disputed waters, reclaimed land on shallow reefs on an astounding scale, and continually projected an expansive historical claim while abstaining from defining it to meet the legal requirements of international maritime law. The success of these encroachments – often termed the salami-slicing approach – hinges on no one calling the Chinese military presence bluff and taking a counter-stance in disputed waters. In 2012, the Philippines Navy pulled back from a military standoff against Chinese maritime surveillance ships in the Scarborough Shoal, only to have China renege on reciprocal withdrawal and thus gain exclusive control of the shoal. This failed deal was brokered by the U.S.
The FNO of the USS Lassen was a change in momentum, but not primarily in the sense of American brinkmanship thwarting Chinese advances. There is no indication that coercion will be applied to roll back de facto Chinese control over features and maritime areas, or to compel Beijing to make concessions on historical claims, or to bring in a U.S. military show of force of the scale seen during the Taiwan Strait Crises of 1955, 1958, and 1996. In fact, in the short-run, the inevitable diplomatic vitriol and militarization by China may seem counterproductive to the aim of peacefully resolving disputes. China would surely augment its infrastructure and military capability over specific islands and ocean zones.
However, we believe the U.S. warship in disputed water makes a strong political statement on the future Sino-American relations and sends a clear operational signal to U.S. allies in the region. The gunboat diplomacy tests Beijing’s resolve in keeping its word following an affront to its national face. Would China adhere to its professed principle of peaceful resolution of conflicts? Would it revoke its reassurance at the last ASEAN Summit that land reclamation projects were completed and in any case do not affect freedom of navigation by air and sea?
The U.S. underscores freedom of navigation as the actionable principle guiding U.S. military responses to Chinese maritime expansionism in SCS. The freedom of navigation is not an ideal state, but a status quo that is readily reinforced by the presence of U.S. warships with acceptable risks, and repeated as necessary. While demonstrating American naval hegemony in the region, this mission strictly speaking neither forces the U.S. to take sides in sovereignty and territorial disputes in the SCS, nor poses concrete security threats to the Chinese. It does create room for maneuver for U.S. security allies and Vietnam to expand naval or coast guard activities over the disputed water on the proven basis of American clarity of intention and level of control in the use of force. It also strips China of any pretense that it is a defender of UNCLOS, limiting it to criticize the regime’s definition of “innocent passage” at the same time as denying its authority over Chinese maritime claims under the Nine-Dashed Lines.
Nonetheless, U.S. President Barack Obama is incurring a very real risk of armed escalation, which suggests that in Washington’s interpretation of Chinese elite politics there is no domestic division in China to exploit over this issue. There is no pacifist camp in China whose bargaining position might be harmed. Having centralized decision-making and information flows on this issue, President Xi Jinping is effectively making the call. Moreover, political statements on both sides are predicated on an implicit understanding that an escalation from the use of or threat of limited naval deployment into an act of war is strictly against the national interests of both parties. In fact, there might be opportunities to enhance military ties. The USNS Impeccable incident in 2009 and the near collision between U.S. Navy P-8 surveillance plane and a Chinese fighter in August 2014 have prompted improved military-to-military cooperation between the two powers, leading to the Chinese Navy participating in U.S.-led naval drills off Hawaii in July 2014 and Xi announcing bilateral “confidence-building” measures last November.
Policymakers in Washington may have learned a lesson from the Russia annexation of Crimea, which exposed Europeans in badly miscalculating Putin’s willingness to defend Russia’s sphere of influence. The U.S. is not willing to give away its leadership in the Asia-Pacific and Xi hasn’t much space to maneuver, in either international law or regional security alliances. However, “American adventurism” – to borrow Mao Zedong’s propaganda terminology – is being conducted today within a very different geopolitical context. The last time Americans militarily defended another country’s territorial integrity against its neighbor was on behalf of Kuwait against Saddam Hussain in 1991. The last time the U.S. Navy engaged in a major naval battle was seventy years ago in the Pacific Theater against the Japanese Imperial Navy. The USS Lassen is not an agent of change in the direction of armed conflict. Both sides would do well to proceed to address the practical consequences of this political message. It is a new reality, but it need not be a harbinger of the worst-case scenario.
Kun-Chin Lin and Jean-Marc F. Blanchard publish new book on 'Governance, Domestic Change, and Social Policy in China.'
Dr Kun-Chin Lin, Director of the Centre for Rising Powers, and Dr Jean-Marc F. Blanchard, Executive Director of the Mr. & Mrs. S.H. Wong Center for the Study of Multinational Corporations, have published a new edited volume on 'Governance, Domestic Change, and Social Policy in China. 100 Years after the Xinhai Revolution', which is now available at Palgrave Macmillan.
This book constitutes the first comprehensive retrospective on one hundred years of post-dynastic China and compares enduring challenges of governance in the period around the collapse of the Qing dynasty in 1911 to those of contemporary China. The authors examine three key areas of domestic change and policy adaptation: social welfare provision, local political institutional reform, and social and environmental consequences of major infrastructure projects. Demonstrating remarkable parallels between the immediate post-Qing era and the recent phase of Chinese reform since the late-1990s, the book highlights common challenges to the political leadership by tracing dynamics of state activism in crafting new social space and terms of engagement for problem-solving and exploring social forces that continue to undermine the centralizing impetus of the state.
“Lin and Blanchard offer an edited volume on state and society in China that goes well beyond the norms of the genre. Data rich and analytically interesting, these essays offer a historically grounded set of perspectives on how state and society in China continue to interpenetrate and inform each other in unexpected ways.” - Julia C. Strauss, Professor of Chinese and Comparative Politics, School of Oriental and African Studies, University of London, UK
“A thought-provoking volume that usefully deploys an historical lens to examine some of contemporary China’s most important social, environmental and political issues.” - Jane Duckett, Edward Caird Chair of Politics, University of Glasgow, UK
“This is a highly stimulating and thoughtful set of essays that crosses chronology and disciplines. Using the century-long arc since the 1911 Chinese revolution, the authors explore a variety of key issues—from governance to social welfare to civil society—in a comparative framework that makes exciting use of historical comparison while providing highly significant insights for the present day.” - Rana Mitter, Professor of the History and Politics of Modern China, University of Oxford, UK
Dr Kun-Chin Lin, Director of the Centre for Rising Powers, participated in a panel discussion on One Belt, One Road and China’s Trading Past as part of the Legatum Institute's 'Culture of Prosperity' programme.
Dr Kun-Chin Lin, Director of the Centre for Rising Powers, presented on 'The Changing Coastal Economy in China’s Maritime Strategy' at the Management of Indo-Asia-Pacific’s Maritime Future Conference, co-organized by the Daniel K. Inouye Asia-Pacific Center for Security Studies and King’s College London on 22 September 2016.
Chatham House is currently featuring the International Affairs special issue on Rising Powers (May 2013), guest-edited by Dr Amrita Narlikar. Click here for for further details and a transcript of the launch event for the Special Issue held at Chatham house on 22 May 2013.
Please find a video of the event below:
New blog post by Kun-Chin Lin on the Foreign Policy Implications in the UK’s Economic Pivot to China
Dr Kun-Chin Lin, Director of the Centre for Rising Powers, has published a blog post at the University of Nottingham's China Policy Institute on the Foreign Policy Implications in the UK’s Economic Pivot to China.
Below is the text in full:
President Xi Jinping’s state visit to the UK, much feted for ushering a “golden era” of Sino-UK relations underpinned by a promised £30 billion in Chinese investments, critically reflects on the UK’s foreign policy adjustments in response to the 2008 global economic downturn and the related Eurozone crises.
There is a no question that by most realist and liberal-institutionalist measures China has arrived as a global superpower, and the UK is adjusting to the reality of a dramatic relative power shift since the late-1990s. In my undergraduate class on “China in the International Order” at Cambridge, I already take China’s rise as a given rather than a prospect.
There will always be normative debates centred on our principled reservations in acknowledging China’s soft and hard power. A recent Cambridge Union Society debate passed the motion that “This House Welcomes China as a Global Superpower.” Three senior stalwarts of Tory politics argued that China fully deserves our respect for making great strides in overcoming its political and economic backwardness, and that UK should show humility in refraining from judging Chinese leaders by our liberal values and political preferences. In this respect, the Americans are ahead of us, having delinked trade with human rights since their last congressional debate on “most favoured nation” status in 2000 before China’s WTO accession. The reality is that in the current menu of great power bargaining, the realpolitik of American decline and protectionist responses to Chinese mercantilism are served separately from debates over our obligations in a common and sustainable humanity.
This is music in the ears of our influential financiers and their political patrons. The City has never been bound by political ideology in upgrading its niche in the global financial market, having facilitated Soviet dollar deposits in the 1950s, bundling petrodollar into jumbo loans for sovereign borrowers in the 1970s, developed extensive tax havens in British outposts of the Caribbean in the 1980s. The city also engaged in protecting assets of failing foreign regimes in the 1990s, driving financial market liberalisation and internationalisation in the 1990s leading to the collapse of Baring, and freely dealing the complex financial instruments that led to the financial crisis of 2008. Reminbi internationalisation is its latest and most logical extension of the City’s core competence.
However, lost in this justifiable shift to economic diplomacy are fundamental questions of UK’s strategic positioning in the global power shift, and the implied costs of the UK’s pivot to Asia. Is commercial diplomacy risk-free on political alliances? Might these effects undermine UK’s assets and aspirations in international affairs, which had historically supported an exceptional regional and global standing? It is often said that the UK “punches above its weight” in global affairs. How would the “golden era” affect this achievement?
Basically, Cameron’s economic diplomacy represents a hedging strategy. Secondary powers, not wishing to antagonise a great power to being dominated by it, seek to diversify their security strategies to prepare for future uncertainties. Hedging buys time in avoiding balancing and bandwagoning behaviours in response to a rising power. The UK is hedging by de-linking more controversial issues from trade and investment agreements, thus allowing it to tap Chinese economic resources without getting involved in US-China debates over these issues. Three crucial decisions are implied in the UK’s hedging:
1) A narrowing of the permissible agenda in the UK-PRC diplomacy:
Undoubted, the signal is the primacy of commercial interests. It has been observed that in Asia, there are two spheres of influence – China dominates the regional economy while the US maintains a firm grip on the regional alliance structure. Unsurprisingly Xi’s visit to UK was much more focused and less contentious than visit of US a month earlier – where there was a full spectrum of issues discussed including several “negatives” of cyber-espionage, human rights and China’s claims to sovereignty over most of the South China Sea, as well as issue areas of prospective agreement include climate change, anti-terrorism efforts, North Korea, the U.S.-led Iranian nuclear deal and progress toward a two-way investment treaty. While the Obama-Xi summit was less positive than two years ago when they first met in Sunnylands CA, this fuller agenda showed the depth of engagement between the superpowers despite rising uncertainties on the Chinese economy.
It is not that these issues are not important to our national interest. Even far away from home in South China Sea, the Royal Navy – which is undergoing the most dramatic re-equipment since the Korean War – has a presence in support of the Japanese and American principled stance on the freedom of navigation. There are looming questions about NATO, UK-France naval bilateral treaty, and the militarisation of the EU under the Common Security and Defence Policy, which cannot fail to be of strategic interest to China. The question is, by sweeping these issues under the welcoming mat, does the UK undermine its bargaining position in the future when we need to raise them before Beijing?
2) Coping with economic resilience and power asymmetries:
As Professor Kerry Brown pointed out, one must credit George Osborne for possessing “that rarest of attitudes from Britain’s political elite towards China – a consistent vision.” If the vision is one of economic diplomacy with China for mutual benefits, then one must consider the visit to fall short of substantial discussions to guarantee the UK’s economic interests. While it is unrealistic to expect Chinese money to be a critical factor in sustained growth and overcoming of UK economy’s structural issues, it is not too much to ask if this relationship will enhance our resilience or expose us to new risks.
There is hope that the “Northern powerhouse” policy – led by Lord Jim O’Neill who coined the acronym BRICs in his former role as the chairman of Goldman Sachs Asset Management, now the commercial secretary for city devolution and infrastructure at the Treasury – will draw some Chinese investment away from past focus on London. This would be helpful in addressing the chronic investment imbalances in the UK.
Fundamentally, the bilateral trade and investment relations are highly asymmetric – numbers tell us that UK is far less important to China than China is to the UK. That translates into weak leverage for Britain. Chinese investment in UK has been less than 1% of UK GDP; similarly, UK investment in China is less than 1% of total FDI in China compared 3-6% by US, German, and Asian countries. While Chinese investment into the UK has increased by some 14 fold during the past decade, UK FDI is not about to make the similar rise in importance to the Chinese. During Xi’s visit it is often cited that bilateral trade had reached USD$70 billion last year. This volume is dwarfed by the US-PRC trade of $521 billion or Sino-German trade of $162 billion, casting serious doubts on George Osborne’s hope that UK will become China’s number two trading partner in ten years. UK is not about to become a manufacturing power on the rank of US, Japan, Korea, and Germany. Moreover, import outstrips import by roughly 3 to 1 in Sino-British trade, following a trend of worsening trade deficit which current stands at six times larger than in 2000.
So it is simply not realistic to imagine this new relationship to position UK as the gateway for Chinese economic transactions with the EU. At best we are looking to siphon off the even more important trade and investment relations China has with the EU. In that case, we should be thinking about the prior relationship between the UK and the European common market, which will define the externalities of UK-China relations.
It is relevant to recognise that China has been conducting the same economic diplomacy elsewhere – in Asia after the Asian Financial Crisis of 1997, in Central Asia under the aegis of the Shanghai Cooperative Organisation in early 2000s, and over the past decade in Latin America. Premier Li Keqiang’s trip to Brazil, Colombia, Peru and Chile last May brought offers of infrastructure finance to help China tap natural resources and benefit from lower costs of intraregional trade. In these regions, strictly commercial deals from Beijing are hard to turn down for countries traditionally dependent on Western markets, who are seeking an alternative source of cash flows given member economies’ poor growth and spiralling inflation, and weaknesses in regionalism.
However, the outcome is intensified economic vulnerability, if not dependent development on China. Latin America enjoyed a so-called “golden decade” of economic growth in the 2000s, fuelled largely by Chinese demand for raw materials, but has been hit hard by the Asian giant’s slowdown and the corresponding chill in commodities prices. Brazil saw a FDI contraction of 36 percent from January to August 2015, with Colombia, Guatemala, the Dominican Republic and Uruguay all experiencing contractions of more than 20 percent. Similar shocks have hit Africa and Australia, with the South African rand hitting a 14-year low in a 12% slide this year. While contagion came from the East, solution also seems to depend on Chinese largesse as many of these countries rush to sign more concessions.
While the UK is not going to be affected in the same way by commodity prices and RMB devaluation, it is sensitive to other price-instability issues. For example, the UK government has been under criticism for continuing fossil fuel subsidies, while cutting back support for renewables. The Global Subsidies Initiative, Oxford Energy Associates, and the OECD have separately published reports revealing alarming complex schemes for subsidies. How much would Chinese investment further distort energy and industrial policy? Osborne has committed 2 billion pounds in underwriting Chinese investment in the Hinkley nuclear power plant, plus a price guarantee of £92 per megawatt hour (MWh) for 35 years, which is likely several times above the market rate for energy production.
Will UK’s rapid reaction to globalisation become hampered by its China ties? China basically runs a neo-mercantilist trade strategy. Its motivations in the defunct Doha Round and the new mega-regional trade bloc Free Trade Area of the Asia-Pacific (FTAAP) cast doubt on its readiness to support the next steps in global liberalisation. The Americans are writing the new regulations on product standards, IPR, regulatory harmonisation via the approved TPP (Trans-Pacific Partnership) and proposed TTIP (Transatlantic Trade and Investment Partnership (TTIP). Does the UK want to be caught in the Chinese lower standard alternatives, which have little to offer for our competitive service sectors? This is not to tout the merits of TTIP – there are several aspects of market liberalisation and inter-state dispute settlement mechanisms that are potentially worrisome. Harmonising down to the level of US GMO and pesticide standards is not appealing. But this is where precisely the UK needs to focus its diplomatic attention on, for the economic effects will be far more wide-ranging than a few Chinese-invested nuclear and transport projects.
In this context, asking China to scale back its steel export to UK as a favor to the new partnership is hardly liberal solution to enduring problems of free trade. Not surprisingly, the Chinese said in effect, we will think about it.
3) Leadership in international organisations:
The UK’s enduring foreign policy strategy is one of maximising its international flexibility. Moreover, flexibility has been predicted on substantial leverages on enduring partnerships. Winston Churchill talked about the three interlocking circles of the empire, trans-Atlantic relationship, and Europe. Other bilateral and multilateral relations emanate from these circles of influence.
Will the envisioned Sino-British relationship help the UK get more traction on important issues and forum in international affairs, or would it introduce uncertainties into UK’s core strategic partnerships?
Here again the UK is not the price-setter. It is more appropriate to ask where the UK might fit with President Xi’s ambition for a “new type of major power relations.” From what most China watchers have inferred of Xi’s foreign policy orientation, there has been a clear trend toward a worldview of G2 – that the Sino-American relations is the first-order for most issues of global significance, placing the demand for adjustments on the secondary powers. This mindset represents a significant departure from China’s initial commitment to a multipolar world in the post-Cold War era. Consequently, compared to his predecessor Hu Jintao, Xi is less interested in reassurances and more consistent in taking actions assertive of national status.
What is the “China Dream” for the UK? Is realistic to imagine the UK at the heart a new global network of exchange and influences, via commercial diplomacy with China? Is hedging understood here simply as a means of reducing UK’s deference to American priorities and its historical Eurocentrism? Have departures from these core relationships been reinforced by UK’s relatively cool relations with Russia, the Gulf states, and India in recent years?
How could the UK re-orient without risking downgrading its relations with the EU and US? Can the UK maintain its moral and policy autonomy from Chinese political demands, apart from the collective “soft-power” projection of the US and EU? Allowing China to isolate UK, and possibly prompt a sort of competitive dynamic for Chinese economic favours, would do damage to the collective bargaining position of the European region as well as UK’s national position.
Dr Robin Niblett, Director of the Chatham House, has argued in a recent report that UK can only manage its relationship with China via EU partnership, not going at it alone. In particular, as international organisations – in which UK has historically demonstrated a great deal of network power – are losing legitimacy and facing challenges to their mandates and institutional capacities, UK’s turn to China not only undermines its leadership but generates negative externalities.
In this global power transition, the US is struggling to reconfigure regional and global economic and security architecture in the waning moments of its unipolar moment. The UK has fundamental interest in supporting the US through this process.
What would UK say when India, backed by the US, bids for an UN Security Council seat – and China objects? India has become the premier strategic partner of US in South Asia. This relationship provides insurance against the China threat in South China Sea and Indian Ocean, and addresses common objectives of anti-terrorism and control of nuclear proliferation, among other priorities. India is considering membership of the US-led TPP, and political economic logic dictates that it should be admitted before China and the rest of Asian powers do. One could argue that India’s strong relationship with the US puts it in a better position to bargain with the China. China’s cooperation with India in G20 coalition of the Doha Round provides strong evidence of this leverage.
What would the UK say when future complaints of procedural transparency in project bidding, favouritism of Chinese firms, and corporate social responsibility are raised in the Asian Infrastructure Investment Bank? Would it hold back criticisms given its privileged position in receiving Chinese funds?
Advanced industrial and developing countries are facing common risks to economic resilience from climate change, energy efficiency, ageing populations, digital markets, industrial espionage, citizen privacy, etc. The UK has some of the most innovative solutions to these problems, and should prioritise foreign policies aimed to enhance the impact of its leadership.
In short, there is a complex set of strategic considerations in the next steps in reshaping the UK foreign policy priorities, consequent to the economic pivot to China, which has more to do with UK’s traditional partnerships and its self-directed expectations as a global power.
Steve McCauley, Senior Research Fellow in the Resilience and Sustainable Development Programme at the Centre for Rising Power, recently spoke to Trevor Dann at Cambridge 105 Radio on the challenges of Adaptive Leadership in the 21st Century.