A State visit with Chinese Characteristics

President Xi returned to China and immediately approved the new Five Year plan with his colleagues in the Party. This takes China through to its first centenary target of 2021 – 100 years since the Party was founded – and the realisation of the first stage of achieving moderate prosperity, measured by a per capita of $10,000 per head. This ushers in an era of a managed market economy, perhaps a sort of managed capitalism, where the modern Chinese economy is prepared and completed ready for the approach to the second centenary target of 2049 , when Socialism with Chinese Characteristics will enter its initial stages. This would mean that the distribution of the wealth of China would be shared more equally across the nation – more Denmark than the USA.

Immediately after Mrs Merkel arrived and included a visit to the Premier’s home town and, presumably, agreed the sale by China of German government bonds to help the European Central bank and Germany achieve their QE targets. It was a major visit which showed the unique relationship between Germany and China.

This was immediately followed by a visit by President Hollande of France who agreed climate change policies with China.

President Xi’s visit to the UK was preceded by a State visit to the USA.

So in a few short weeks China had met the heads of four of the leading economies of the West.

And to round this off, Premier Li went to South Korea for talks with President Park and Prime Minister Abe to develop their three way free Trade Area and agree to finalise the development of a new Free Trade Agreement known as RCEP, covering ASEAN, the three above, Australia, New Zealand and India. This may compete with or complement TTIP – the Transatlantic Free Trade plan – and TPPA – the Asia – Pacific Free Trade Area – both promoted by the USA. Maybe Li meeting with Park and , especially, Abe is a harbour of things to come….

Meanwhile the Vienna talks tried to create a basis for a peace in Syria as Russia, the USA, Saudi Arabia and Iran met with China and other key parties.

The world is in some turmoil and some real changes as Free Trade Areas take over from WTO in shaping the global economy and NATO and Russia are locked in to each other.

The USA sent a destroyer through China’s new “islands” in the South China Sea, which may prove to be symbolic or the first stages of a clash.

Lastly news broke of the possibility of China entering the IMF SDR status which is the first stages of becoming a world reserve currency.

Against that background, President Xi had a hugely successful visit to the UK, which was marked by the UK adopting the approach of the 48 group objectives of its founders – the UK received President Xi as a world leader of a nation that the UK respects and wants to enjoy a deeper and significant economic and international relationship with.

That is a huge change in the last three years. It is good for the UK and good for China.

China needs to develop its core industries globally – and two leading ones are nuclear energy and high speed trains – because they want to ensure they are at the leading edge of technology and the way to achieve that is to compete globally. The UK needs these two industries upgraded and China is the best show in town – at least for nuclear and maybe high speed trains to follow.

China needs to increase its returns from investing its foreign exchange reserves and the UK needs foreign investment, especially when it can include new exports.

China needs an open economy where it can invest without major limitations. The UK is such an economy and welcomes inward investment in all but a few areas.

China needs to internationalise its currency and London is the world’s biggest financial market outside the USA. London needs the RMB to build a significant base here for its global development and the arrival of Chinese banks and institutions and bonds and trading is all brilliant for the London economy.

There is much more to come on the economic front but it needs to be developed on the basis of China needs and not just UK ideas and needs. It needs to usher in a period of planned economic development. We may need to change our way of thinking and working with China and Asia to scoop the benefits of this opening.

Beyond that is the Miliband effect. This is hinted at with the words comprehensive global strategic relationship used to describe the relationship going forward. This hints at two major Security Council nations working together to understand global and regional issues and explore options for solving them. When State Councillor Dai Binguo came to the UK several years ago we played a part in counselling a new approach. David Miliband discussed options with regard to Iran with Mr Dai, who appreciated not being treated to familiar lectures of what China ought to think and do.

David Miliband’s approach worked and played a key role in the success of the Iran talks. The new relationship and words above – Global in particular –  build on that and create the possibility that the two nations can develop exchanges and talks to address many issues and help find ways to enable two systems to work together.

It is clear that two systems are developing – an Asian and Eurasian one around Free Trade areas and Silk Roads working right through to Eastern and Central Europe – and a traditional Western one – based upon G7 and other institutions formed since the Second World War. Both need reforming and developing into modern structures suitable for the 22nd century. Both need to work together to fulfil global sustainable development.

China and the UK can play a key diplomatic role in working at various levels and ways to enable these two systems to grow and develop and harmonise. They are not in competition or exclusive. They could be but what a waste.

So while some felt that President Xi’s visit was too much of a change too quick for them, the reality is that China and the UK need each other for their own interests and both can play together a key world role for the long term development of the world.

The relationship of China and the USA will determine the future of the world but the UK can play a significant part in helping manage some of the tensions.

We will know it is working if our leaders visit China much more often.

Perhaps with less fanfare but with significant substance.


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