Special

Article 4

A British Perspective on China
in the New World Order

By Nigel Inkster CMG

In common with most liberal democracies, the United Kingdom
finds itself torn between the desire of economic ministries to develop
the best possible trading relationship with China and the argumentsof security ministries in favour of a more cautious approach focusing
on potential Chinese threats. In the case of the UK the situation isfurther complicated by its complex history with China: the UK’s
traditionally close relationship with the United States whose
approach to China has become characterised by increasing levels of
distrust and antagonism; the aftermath of Brexit; and a large andvociferous human rights lobby that seeks to make human rights thecentrepiece of the UK-China relationship. The UK’s relationship with
China arguably represents an extreme example of the challenges
faced by liberal democracies in steering a course in a world where
established power structures are undergoing a dramatic shift,characterised by the Chinese Communist Party as “a period ofchange unprecedented in the past century”.

UK’s Unique History with China
British imperial history is in large measure a case of the flag
following trade. After British merchants had secured footholds inforeign markets the British state would find itself being drawn into
establishing colonial administrations to ensure continued privileged
access to those markets. By the early 19th century an increasingly
wealthy and prosperous Britain, already on the way to becoming a
global superpower, experienced a growing demand for luxury
Chinese products, notably tea and what was termed chinoiserie:silks, porcelain and objets d’art. Trade with China was strictly
controlled with British merchants confined to a small enclave on
China’s southern coast and required to operate through Chineseintermediaries.
The China trade had to be paid for in silver at an increasing cost to
the British exchequer, so British merchants began instead to pay forgoods with opium brought in from the British India Company’s
opium monopoly in Bengal. Opium was one of the few medications
available in the 19th century that actually worked to alleviate thesymptoms of many common ailments, and Britain, with a population
many times smaller than that of China, imported more opium from
India than China did (it was consumed in liquid form as laudanum
rather than, as in China, smoked). But the large-scale importation ofopium proved socially and economically disruptive and China sought
to stem the trade. The result was a series of Opium Wars in thehttps://www.jef.or.jp/journal/

AuthorNigel Inkster CMG

course of which China was forced to open up to foreign trade, withthe establishment of some 42 foreign concessions in which Chinese
law did not apply and Chinese people were in effect second-classcitizens. Eleven of these were British, though by 1945 all bar thecolony of Hong Kong had reverted to Chinese control. China hasneither forgotten nor forgiven the UK’s role in forcing China to open
to the West and subjecting it to humiliation.
Despite its imperial past, the UK was one of the first Westerngovernments to recognise the People’s Republic of China in 1950.
This was in marked contrast to the US which continued to recognise
Chiang Kai-shek’s Taiwan-based Nationalist government and tosupport its aspirations to retake the Chinese mainland. In 1972
relations were upgraded to ambassadorial level. The fact that Hong
Kong remained a British colony was less of an irritant in therelationship than might have been supposed, as it suited China toallow the territory to remain as a trading entrepot and window on theworld. It was in fact the British who first raised the question of Hong
Kong’s future, due to concerns about the validity of leases that would
lapse after 1997, the date on which, in the absence of any
negotiation, Hong Kong would by default revert to Chinese
sovereignty. Diplomatic negotiations led to the 1984 Sino-British
Joint Declaration which laid the way for China to recover sovereignty
over Hong Kong on the basis of Deng Xiaoping’s “One Country, Two
Systems” formula.

A Relationship Focused on Trade
The signing of the Declaration removed a major source of tension
from UK-China relations and an improving relationship went hand-inhand with a period of relative openness in China as economic reform
gathered pace. Even the violent suppression of the Democracy
Movement in June 1989 had only a limited impact on relations. The
UK joined the US and European countries in imposing an embargoon military sales to China but also took its lead from theadministration of President George H. W. Bush which emphasised
the importance of maintaining contact. The focus thereafter was verymuch about improving economic relations. There were periodic
bumps in the road but bilateral trade grew steadily and the UK
increasingly became a destination for Chinese students and Chinese
tourists. Following the September 2001 attack by Al Qaeda on theTwin Towers, the UK, in common with the US, focused its foreign
policy and intelligence capabilities on a counter-terrorism agenda
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that was bound up with two major conflicts in Afghanistan and Iraq.
This led to a diminution of focus on China as an intelligence priority(at that point the UK was the only European country that was able tocollect intelligence on China on a serious and systematic basis) on
the grounds that broadly speaking China was behaving as a statusquo power and appeared to present no threat.
In 2015 Chancellor of the Exchequer George Osborne took thedecision to “make a bet on China” thereby supposedly ushering in a“Golden Era of Cooperation”: in effect prioritising the interests of theeconomic ministries while largely ignoring the concerns of the
security ministries. The City of London became the premier offshore
centre for trading in the renminbi, by 2019 accounting for 37% of all
such offshore trade with daily average trading volumes of £76 billion.
China, meanwhile, was allowed to invest in UK infrastructure projects
including building nuclear power plants. Although UK-China trade
had been steadily increasing, and had survived unscathed an
18-month period during which China had consigned the UK to thedeep freeze because of a meeting by Prime Minister David Cameron
with the Dalai Lama, the UK has always, and continues, to run a
substantial trade deficit with China. A July 14, 2020 House ofCommons Briefing Paper on UK-China trade, citing figures from the
Office of National Statistics for the years 1999 to 2019, shows
imports from China increased from £5 billion to £46.9 billion and inexports from £2 billion to £25.1 billion. The 2019 figures represent
4.4% of UK exports and 6.8% of imports (Chart).
The UK and China also saw substantial increases in people-topeople relations. Education has become a major UK “export” and thenumber of Chinese students studying in UK universities has risen
CHART

UK trade with China, 1999-2019
Goods & Services, £ billions
60

Imports

50
40

Exports

30
20
10
60
-10

Balance

-30

1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

-20

Source: Office for National Statistics (ONS)

50 Japan SPOTLIGHT • May / June 2021

progressively to a high of 120,000 by the beginning of 2020. As aresult, UK universities have come to be reliant on such students for asignificant proportion of their revenues. But as China under
President Xi Jinping has become more authoritarian and has sought
to suppress critical commentary about China around the world, thishas become an issue of concern as Chinese students haveincreasingly objected to teachers espousing “incorrect” ideas about
China and to the presence on campuses of speakers perceived to be“anti-Chinese”. Meanwhile, collaborations by university departments,
especially in areas of advanced technology, have come increasingly
under government scrutiny amid growing fears that this may lead tothe loss of sensitive technologies with national security implications.
A joint report by the Harvard Kennedy School and King’s College
published in early March 2021 has concluded that “the UK’s
dependence on a neo-totalitarian technology power for the financial
health and research output of its universities is now regarded as aparticular point of vulnerability.”

Huawei & 5G
In 2005, BT (formerly British Telecom) chose the Chinese national
telecommunications company Huawei to provide the equipment for a£10 billion upgrade of its core mobile network. By then Huawei,
founded in 1987 and awarded the status of national champion in
1996, had already established an international reputation forproviding reliable equipment at much lower prices than its Westerncompetitor due largely to generous state subsidies. This was a purelycommercial decision and there was at the time no serious
consideration of the national security implications, a reflection of thethen widespread perception of China as a benign status quo power. It
was not until 2010 that the UK government, increasingly concerned
about the potential security risks of reliance on Huawei equipment in
its 3G and 4G networks, established a Cyber Security Evaluation
Centre in the Oxfordshire town of Banbury, partially staffed byexperts from the UK signals intelligence agency GCHQ, to evaluate all
Huawei components and software going into the UK’s mobile
networks.
Neither Huawei nor the Chinese government was happy about thisevidence of a lack of trust but it was accepted as the price of doing
business in one of Europe’s most advanced digital markets. The
Centre has never found any evidence of malign exploits – so-called
backdoors – engineered by Huawei nor did they expect to do so,since the discovery of any such exploits would have been fatal for
Huawei’s business prospects not just in the UK but throughout theWestern world. But it did find what a 2019 report described as“significant technical issues” in Huawei’s engineering processes andcould hence “only provide limited assurance that all risks to UKnational security from Huawei’s involvement in the UK’s critical
networks can be sufficiently mitigated long-term”.
The issue of Huawei involvement in the UK’s telecommunications
infrastructure became much more contentious in the light of UK
plans to allow Huawei to participate in the country’s 5G network. In
this context Huawei came to be seen as a key component in China’s
strategy to become globally dominant in the provision of atechnology that, by providing greatly increased transmission speeds
and reduced latency, would be critical for the development of theInternet of Things, an industrial Internet that would enable
autonomous systems, and the generation of massive data sets thatserve as the “feedstock” for Artificial Intelligence and machinelearning. The US, which had no company able to manufacture acomplete 5G network, saw China’s efforts to establish dominance in
5G as a strategic challenge and began to orchestrate a global
pushback.
The UK was well aware of the risks posed by reliance on Huawei
for its 5G network, but was faced with the reality that the 4G
networks on which 5G would be built were already reliant on Huawei.
A decision to exclude Huawei from 5G would involve removing
existing Huawei equipment and replacing it at a cost of several billion
pounds and would significantly delay implementation of a 5G
network. Moreover, none of the Western alternatives to Huawei –Nokia, Ericsson and Samsung – could scale production to therequisite levels quickly enough. And in any case, their products
contained many Chinese-manufactured components which, unlike
those provided by Huawei, could not be examined to determine
whether they contained backdoors or other malware.
After careful deliberation, the UK concluded that it would befeasible to adopt a hybrid approach whereby Huawei equipment
would be allowed to comprise a maximum of 35% of components atthe “edge” of the 5G network but would be excluded from the “core”,
the intelligent central systems that controlled the networks. Huawei
equipment would be used in conjunction with equipment from othersuppliers in the expectation that over time a greater range ofsuppliers could be developed so as to minimise over-reliance on any
one source of supply. Though it could not be ruled out that a Huawei
5G network might be used for espionage purposes, the reality wasthat China was already conducting successful cyber operations
against the UK by exploiting existing technical vulnerabilities andwould likely continue on this path rather than compromise their own
equipment. Nor was it likely that China would be able to close down
the network which would be designed and built with resilience as apriority.
The US government’s technology experts agreed that the British
approach, based on risk management rather than risk avoidance,
would be feasible. But from a political perspective it was not seen as

acceptable and the US government orchestrated a pushback,threatening to restrict intelligence sharing with the UK (intelligencesharing takes place on dedicated and highly encrypted networks
entirely separate from the public Internet) and lobbying Conservative
politicians who understood nothing of the technology but who werereliably hawkish on China. In January 2020 the UK government
announced that Huawei would be allowed limited participation in the
UK’s 5G networks. In July of that year the UK government
backtracked on this decision, stating that all Huawei equipment
would have to be removed from UK networks by 2027. A decision by
the administration of President Donald Trump to deny Huawei accessto the advanced microchips it needed to build the network but could
not produce for itself, represented a face-saving get-out clause for
the UK since it called into question Huawei’s ability to deliver on its
commitments. But it was clear that the outcome was the result ofpolitical pressure. The volte-face elicited a predictably sharp reaction
from China’s “wolf warrior” ambassador to the UK, Liu Xiaoming,
who stated that in reaching its decision the UK had acted as a juniorpartner to the US in a way that called into question the Golden Era
and would raise doubts in other Chinese companies about the UK’s
credibility. Liu, however, stopped short of making specific threats ofChinese retaliation.

The Defence Dilemma
For many years following the end of the Cold War successive UK
national defence and security strategies have assumed that any
military action undertaken by the UK would be taken in conjunction
with allies. And the UK military’s own key benchmark of fitness forpurpose has been its ability to fight with US armed forces. The
government of Prime Minister Harold Wilson in the 1960s declared amilitary withdrawal from “East of Suez” in 1968 and although thisdid not betoken a total UK disengagement from the Asia-Pacificregion – the UK is still part of the Five Powers arrangement with
Australia, New Zealand, Malaysia and Singapore, and still has treaty
commitments to come to South Korea’s aid in the event of aninvasion from North Korea – it did result in a loss of a permanent
military presence.
But in a reversal of the Wilson policy, the UK is now looking to
re-engage militarily with the Asia-Pacific region in recognition of its
importance for its principal ally the US and to promote the postBrexit concept of a Global Britain. This move is already generating
friction with China. In 2018 the British naval vessel HMS Albion
incurred China’s wrath by undertaking a Freedom of Navigation
Operation in the South China Sea. And later in 2021 the new British
aircraft carrier HMS Queen Elizabeth will conduct another suchoperation which will be equally unwelcome to China. An
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uncomfortable question that no UK government wants to address is
how to respond to a possible US request for assistance in the eventof a military conflict breaking out in the Taiwan Strait. Much thenwould depend on what form that request took but if it was for acommitment of resources in the theatre that would pose a serious
dilemma.

The Five-Eyes: a Source of Dissension
The UK is a founder member of the Five-Eyes intelligence alliance,a grouping based on a strong shared history and Anglo-Saxon
cultural ties that involves not just systematic sharing of intelligencebut also operational co-operation. The Chinese government andChina’s nationalist media have now begun to take aim at what they
perceive to be a full-blown alliance directed against them,overlooking the reality that the Five-Eyes is simply an exercise inintelligence collaboration against a wide range of targets includinginternational terrorist and other non-state groups that in principle areat least as important preoccupations for China. It has become clearthat China has a strategic intention to weaken and if possible breakup this arrangement which is critical for the UK’s national security,
thereby ensuring that this issue will continue to generate animus
between the two countries.

Hong Kong: a Continuing Source of Tension
From 1997 until 2014 China broadly adhered to the terms of the
Joint Declaration on Hong Kong. But as China’s own economy grew,its dependence on Hong Kong diminished and as China took a moreauthoritarian turn under Xi, tolerance for Hong Kong’s separate
status diminished. In 2019 a long-brewing situation came to a head
when the Hong Kong government sought to introduce a measurethat would allow it to extradite criminal suspects to jurisdictions withwhich it had no extradition agreements, one of which was China.
Fears that this could lead to Hong Kong residents being extradited toChina for political crimes gave rise to widespread demonstrations,some of which turned violent. In response China demanded that theHong Kong government introduce a National Security Law,something they were committed to do in accordance with the Basic
Law but had refrained from doing due to popular opposition. Facedwith delaying tactics by pro-democracy legislators in Hong Kong’s
own legislature, China enacted a National Security Law through the
National People’s Congress.
China’s action was seen by the UK government as a prima facie
breach of the Joint Declaration, an international treaty deposited at
the United Nations which guaranteed that Hong Kong’s separate
status would remain unchanged for 50 years. In practice there was
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little the UK could do in response to China’s action. But one action it
did take was to offer holders of British National (Overseas) – BN(O) –passports the right to settle in the UK. The BN(O) passport was
originally designed by the UK as a means of encouraging Hong Kong
residents to remain in Hong Kong after the 1997 transfer ofsovereignty. The passports allowed overseas travel including to the
UK but did not confer residence rights. China had always had
reservations about these passports which are available to all Hong
Kong residents who had been British Overseas Territories residents
prior to 1997. China responded angrily to this move and it is likelythat henceforth Hong Kong residents will not be allowed to exit the
territory on these passports.

Conclusion
A consensus is slowly starting to emerge within the UK that
China’s increasingly assertive and authoritarian behaviour is a cause
for concern. And the implications of China’s bid to become a global
leader in advanced technologies is now seen as a threat to the UK’s
long-term prosperity.
This has now been formally recognised in the Integrated Review ofSecurity, Defence, Development and Foreign Policy released on 16
March 2021 which characterises China as a systemic competitor. The
Review goes on to say that “China’s increasing power andinternational assertiveness is likely to be the most significant
geopolitical factor of the 2020s... Open, trading economies like theUK will need to engage with China and remain open to Chinese tradeand investment, but they must also protect themselves against
practices that have an adverse effect on prosperity and security.”
Further pressure is building on the UK government to define acomprehensive strategy that takes account of a more assertive andrevisionist China. The reality of UK ambivalence is epitomised by thefact that in February 2021 Prime Minister Boris Johnson, at a
Downing Street meeting with Chinese business interests, declaredhimself to be “fervently Sinophile” whilst in the House of Lords
efforts were in train to establish a legal obligation for human rights
to be taken into account in any future trade deal the UK might
negotiate with China. It is likely that the UK will try to continue tocarry out a balancing act where China is concerned. However, it may
not be able to put off some hard choices.

Nigel Inkster CMG is senior adviser to the International Institute for Strategic
Studies and former assistant chief and director of Operations and Intelligence at
the British SIS (also known as MI6).