Two Major Events

Two major events have occurred this week.

George Osborne visited China and engaged in a series of announcements which drew the UK and China much closer.

President Xi Jingping visited the USA and met with President Obama and they each asserted a positive attitude to a positive relationship and each drew clear circles around areas of competing agendas. The USA around cyberspace, and China around the South China Sea.

At the same time Russia announced major moves in Syria to bolster the Assad regimes defence against ISIL, and the European Union was confronted by a huge number of refugees moving from Africa and the Middle East into an unprepared Europe.

How do corporate policymakers and national and regional policy makers develop coherent responses?

The initial response must be to deny the spin any part in the analysis.

Let me look first at George and China. Some say he is pragmatic. That is a rather narrow view of him. He is very clear about his views and where China sits within them. He clearly believes China can help deliver key components of the British Governments primary agenda – renewable energy targets for the next decade, and high speed trains to enable the UK to link with a global development of high speed trains.

He is prepared to agree to Chinese investment in the Northern region of the UK to enable that to become vibrant, and reduce the Governments financial contributions to an area that has never recovered from the mass unemployment, that followed the reduction of coal mining and steel manufacturing. For China the Manchester/ Liverpool area is a real competitor to Felixstowe as a logistical hub for China in a major market of the UK.

China’s desire to make its nuclear and high-speed trains global majors will be shown in the soon to be released five year plan, and the UK is a great showcase for China for both these.

The Chinese adoption of London as its primary Western and European financial centre is great news for the UK, although progress will be slowed by the uncertainty of the EU referendum. If the UK should exit then China would have to choose between an EU financial centre and London.

But the scene is set for a very festive of President Xi to London in late October. The Chancellor is doing all the things that the 48 Group has suggested for many decades, although the specifics are, naturally, contemporary.

He is taking advantage of the emergence of China for the British interest. The benefits to the UK are quite remarkable and unlikely to be seen in the UK for another century.

On the other hand Presidents Xi and Obama looked uneasy as China’s assertive response to President Obama’s Asia tilt is now quite clear to see. Rather like American pressure on Ukraine , and Iraq and Syria, it is the consequence that is having the major impact.

One thing President Obama now knows is that China is not backing away in the face of the Asian Tilt. On the contrary China is quite clear that it is not going to be “contained” by a superior American military agenda. China is ready to make substantial concessions to the American business community but not while they feel that would be done under duress. It is not how China works and President Obama may have been advised badly.

How does America deal with a rising China that challenges the USA in Asia –  not by trying to draw a TPPA net around China, although China would never say that. There is an element of reality about the effect of the changing face of Asia that is contemplated by China. It would offer the USA very significant economic opportunities, but within a new system that did not provide for the range of power and leadership, that the USA contemplated, when it first opened the USA market to Asia, by creating ASEAN back in 1968.

So the USA has to go through an election and then decide its approach to China and Asia. If it ratchets up the military agenda so will China. But not in the American way. China’s interest and history lies in a peaceful outcome.

At the moment we have two competing ways of dealing with China- the British and the American ways. Actually as the British do not represent a military threat to China the ways reflect very different realities.

If the American Chinese relationship goes bad then George may have to make choices. But that is some time off. My view is that the Sino-American relationship may get worse before it gets better. Much like the American relationship with Russia. But if globalisation realises the economic potential of American technological superiority, then the USA, ultimately, should seek that over a military outcome. Let’s hope that is not interrupted by an accident….

Meanwhile the Silk Road continues to develop the new continent of Eurasia, and the 48 Group advice of this in 1990 looks ever more realistic. We were then aware of China’s agenda from its borders, and regularly advised government and CBBC to create their offices in China’s borders as they were the long term development areas.

The Chancellor visited Urumchi about 30 years after the 48 Group first visited. Now was the right time for him to go there as it will rise to be one of the two capitals of Eurasia.

Eurasia will realise $8-10 trillion of investment in infrastructure for energy, transport and communications over the next 10 years. It will urbanise up to 1 billion new consumers. It is a prize not to be thrown lightly, just because it learns from the past and identifies a model that is different, learns from the past and creates a new world. The British had the wisdom to see that in 1930.

Interesting times indeed


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