UK economy cannot afford decoupling from China

Tony Danker, director-general of the Confederation of British Industry, said that thousands of British companies are cutting economic ties with China in anticipation of a further deterioration in relations between China and the West, the Financial Times reported on Saturday.

He also warned that this will heap more pressure on the country’s already high inflation.

As the head of the UK’s premier business organization, Danker’s observation is an indication that the difficulties and challenges facing China-UK relations may be beyond expectation. A large number of British companies switching business links out of China due to political reasons is something unseen for decades.

Needless to say, the shift in market sentiment was mainly driven by fear over the escalating tensions between the UK and China, for which British politicians should shoulder the blame.

Just a few years ago, some UK politicians hailed a «golden decade» in China-UK ties. However, in recent years, as Washington steps up its hostility toward and containment of China, UK politicians have also been constantly smearing China and even actively undermining bilateral relations. That gives the impression that the British political establishment has completely followed the US in drawing ideological lines.

This has cast a huge shadow over China-UK relations and will further lead the UK astray. Smearing China and undermining ties with China will not help the UK in any way to address its considerable economic problems. Indeed, the UK economy that is already in a terrible predicament cannot afford the consequences of politicians continuously hardening their anti-China rhetoric and seeking to politicize trade and economic issues, which will only exacerbate the severity of its domestic economic problems.

It is undeniable that the UK now is facing serious economic difficulties in terms of soaring inflation and a possible recession. Its consumer price index rose 9.4 percent year-on-year in June, another 40-year high as the country battles its worst cost of living crisis in decades. The Bank of England is expected to announce another interest rate hike this week in attempt to arrest inflation, but there is concern that there is little the central bank can do about inflation and the UK may be sliding into a recession just like the US. As wages fail to keep pace with soaring energy bills and food prices, public discontent is on the rise, with UK railway workers staging nationwide strike.

Against this backdrop, voices that are still clamoring for a decouple from China are clearly out of touch with the reality. China was the UK’s third-largest trading partner. The fact that bilateral trade in goods exceeded $100 billion in 2021 despite the headwinds of the pandemic and growing tensions is the best proof that China-UK economic and trade cooperation is a choice of the market, not politicians. And the consequences of going against the rules of the market will be detrimental to the UK economy. If the UK wants to follow the US into a «new Cold War» with China, it will be dragged deeper into its current economic malaise.

There is no fundamental conflict between China and the UK. It is unwise for UK politicians to use politics to disrupt normal economic and trade relations. In the context of rising global inflation, it is irresponsible for UK politicians to clamor for supply chain restructuring away from China just to score some political points, which will leave UK citizens facing an increased cost of living.

China continues to be one of the hottest destinations for global businesses. In the first half of this year, China’s actual use of foreign direct investment rose 17.4 percent year-on-year, while its foreign trade expanded 9.4 percent year-on-year, underlining the significant potential for economic and trade cooperation with the rest of the world.

It is regrettable for British business to artificially cut their ties with China and miss out the huge opportunities in the Chinese market due to political tensions. British politicians should reflect on the economic consequences of their words and deeds regarding China-UK ties and take a more pragmatic approach to China-UK economic relations.