A Complicated World

The UK’s Political Reset

The United Kingdom has just undergone a once in a lifetime type of political reset.  It was not just another election but a rout of the incumbent Conservative Party which have been in office for the past 14 years and a historic majority for the Labour Party which only 5 years ago was seen as unelectable for at least a decade. For observers of elections there is much to digest and ponder in the results.  National elections employ a first the post result method which means that winning is everything, with nothing for parties coming second or third even if the combined votes across the country are nearly as high as the winning party’s vote share.

Britain’s new Prime Minister, Keir Starmer, takes office knowing that his huge majority in seats was broad but shallow.  This was an election where the country wanted the Conservative Party out and the only way to ensure that was to vote Labour.

Labour’s election campaign was often described as the Ming vase strategy.  This was not some ancient Chinese wisdom from Sun Tzu’s Art of War, but an illusion to carrying a precious and delicate Ming vase across the room: no sudden movements only small cautious steps which would cause no slips or falls and see the vase fall and shatter.  The Conservatives were so exhausted and bereft of support after 14 years in power all Labour needed to do was not mess up and frighten the electorate.  To that end they succeeded but it did mean that during the campaign little in the way of policy or fresh ideas were discussed.  Those that were focused unsurprisingly on domestic issues.


European Uncertainties

Across the channel in France another set of elections for their National Assembly has just finished.  The far right National Rally party of Marine Le Pen failed to capitalize on their first round of success being forced into a distant third place after an oddly assorted coalition of far left candidates which came first and Macron’s centrist grouping.  The result though has left President Macron’s ability to rule in tatters and has called into question the longer-term viability of the fifth republic.  Le Pen’s unexpectedly poor showing did not stop the group announcing on Monday an alignment with other far right groups within Europe, most noticeably with Hungary’s Viktor Orban.

Hungary has just taken over the revolving presidency of the EU, a largely ceremonial position with little power but Orban has already caused disgust in Brussels and many other European capitals with his own peace mission to stop the war in Ukraine.  Last week Orban after over two years of war made his first visit to Ukraine, even though the two countries share a land border.  He then flew to Moscow to meet with Putin who he has long been close with and then onto Beijing to embrace Xi Jinping and hail China as the only country which has called for peace from the beginning of the conflict.  He conveniently ignores the reality that Beijing is effectively propping up Putin’s Russia and become the primary source of economic goods since the invasion began.  China might not be providing the direct munitions support which North Korea and Iran provide to Russia but it is China which has provided the primary lifeline to Putin.  The no-limits partnership is continually touted by both countries as the foundations of an alternate world order in opposition to the Western order of democracy and institutions.

Meanwhile China has welcomed Belarus in the Shanghai Cooperation Organization, SCO.  This China sponsored body was set up to extend China’s reach into the Central Asia region with the “-stans” and Russia being the early members.  By no stretch of even the most creative mind could Belarus, a country that borders Latvia, Lithuania, Poland, Ukraine and Russia be considered a central Asian power or even a natural fit to the grouping except as ally of Russian and another member of China’s axis of authoritarians.  To cement membership, and clearly planned well in advance of the formal announcement of Belarus’s member, China and Belarus are now holding military “anti-terrorist” training exercises very close to the Polish border.  What terrorists they are looking to counter isn’t said but Chinese PLA troops on the border of the EU can only heighten concern and suspicion of China’s intentions not only in relation to support of Russia, but also of its plans in the Asia Pacific and specifically the East China, and South China seas.

Such actions, while certainly not illegal, reflect the very poor judgement of Xi Jinping.  He either doesn’t understand how negatively this will be viewed in Europe, or he does understand it and simply doesn’t care.  It can be difficult to know which scenario is more worrying, but he is not a man who is intent on reducing tensions and misunderstandings.

If the changes and upheavals across Europe are not unsettling enough looking to the US only heightens concerns.  President Biden is clearly too old to stand, and frankly so is President Trump, but the dreadful debate performance of Biden shows he simply not fit to complete another 4-year term.  He has performed and spoken better in more recent events, but the damage has been done and another candidate should really be promoted by the Democratic Party.


Complicated world, consistent approach

It is hardly insight to state that we now live in a more complicated, and dangerous world when compared to only a few years ago.  The wars in Ukraine, Gaza and Myanmar continue to take a devasting toll on the local populations and should be vital reminders that war is never something that should be entered into lightly, and that it reflects a failure of leadership, not an act of strength.

The famed historian Niall Ferguson writing recently in the UK national newspaper the Daily Mail reflected on the last time a Labour government took power in Britain.  It was in the 1990s but he suggested that the world now looks more like the 1930s than the end of the last century.  He isn’t the first person to suggest such a comparison, and it certainly reflects the growing geopolitical tensions in the world.  

While the UK election campaign had little focus on international affairs and virtually nothing specific to China it would be unfair to say that the Labour leadership hadn’t already been thinking about the world into which they were likely to take power.  David Lammy, the Foreign Secretary, writing in the May/June 2024 issue of Foreign Affairs outlined his progressive realism approach to foreign policy had this to say on China, 

The United Kingdom must instead adopt a more consistent strategy, one that simultaneously challenges, competes against, and cooperates with China as appropriate. Such an approach would recognize that Beijing poses a systemic challenge for British interests and that the Chinese Communist Party poses real security threats.  But it would also recognize China’s importance to the British economy. It would accept that no grouping of states can address the global threats of the climate crisis, pandemics, and artificial intelligence unless it cooperates with Beijing.  There is a crucial difference between “de-risking” and decoupling, and it is in everyone’s interest that China’s relationship with the West endure and evolve.

That’s not a bad start but it is now important that with Labour in power Keir Starmer as Prime Minister expands on this to establish the approach needed to tackle the heightened threat which the PRC poses to the West, that is not the West as a geographical region, but a shorthand for range of institutional and constitutional norms, which have been embraced not only on both sides of the Atlantic but by many countries in Asia, such as Japan, South Korea, and elsewhere in Africa.

The threat that the CCP poses is not one that has been conjured in the minds of paranoid US senators or ill-informed die-hard cold war warriors, but it is explicit in what the CCP themselves write and publish.  For over a decade Xi Jinping has been saying he wants the PRC to stand counter to the open societies of the West.

For many on the right wing of politics whether in Europe or the United States, Putin has been a hero of sorts, and he has been seen as a defender of “traditional values” and Western civilization.  Too often right-wing populist politicians parrot Putin’s defense that NATO forced him to invade Ukraine to defend Russia from NATO advancement.  There is certainly much to lament at the failure to better capitalize on the peace dividend at the end of the cold war it, but it should not be forgotten that it was Russian tanks and troops that invaded Ukraine in February 2024.  In the Taiwan strait the threat doesn’t come from Taiwan invading or threatening the Mainland, nor does it come from the US or any of it’s allies which conduct freedom of navigation in the surrounding international waters.  The Philippines or Vietnamese aren’t building and militarizing artificial islands in the South China Sea.


The Asian Response

David Lammy is correct, the UK needs a consistent policy on China.  The EU too needs to urgently come together on the risks China poses but both the UK and EU are going to be distracted by many domestic issues around debt burdens, slow growth, economic inequality and immigration.  For China’s near neighbours the threat, and challenge is more immediate.  Notwithstanding the PLA troop exercises in Belarus the PLA is not invading Europe.  The North Korean threat to the South is real, as is military action against Taiwan, and a military confrontation with the Philippines at times appears imminent.

Japan, South Korea, Taiwan are instrumental in defining and implementing the West’s approach to China.  They have better intelligence and understanding of what is going on in China than their more distant Western allies.  The required consistent policy is across the board covering all areas of government activity.  Firstly, China’s neighbours must know that they have allies, reaching out to those allies, be it Australia, the EU, the UK and of course vitally the United States will help those countries better refine their own approach to China.  The need to invest in military preparedness in both manpower and defence systems is important.  A weak defence position only emboldens military adventurism.  Understanding the systematic theft of IP and key technologies from companies and universities by state directed actors in China is very important.  The CCP has made it very clear than bringing key technological and scientific know how to China by fair means or foul is essential to building a strong China.  The question of IP and technological theft is not limited to the US or UK universities and both South Korea and Japan have suffered from it.  But it is economic policy towards China that is likely to be the hardest to calibrate.  As the world’s second largest economy and number one trade partner to almost every country it is impossible to divorce your economy from China.  But what can be done is reduce dependencies on China, ensure multiple supply chains, understand the very real risks of politically driven economic coercion by the CCP and support domestic companies and industries where needed.

Will this reverse globalization that has been seen over the past three or so decades?  Yes, it does but it replaces it by a more resilient economic engagement with China which reduces Chinese economic leverage and strengthens national security.  Greater trade and globalization have brought clear benefits but it has been unbalanced and often blinded by short term economic gain.  To redress the balance there needs to be change from what went before.  A strong China policy, based on the realities of the PRC is an essential part of that redress.

フレイザー・ハウイー(Howie, Fraser)|アナリスト。ケンブリッジ大学で物理を専攻し、北京語言文化大学で中国語を学んだのち、20年以上にわたりアジア株を中心に取引と分析、執筆活動を行う。この間、香港、北京、シンガポールでベアリングス銀行、バンカース・トラスト、モルガン・スタンレー、中国国際金融(CICC)に勤務。2003年から2012年まではフランス系証券会社のCLSAアジア・パシフィック・マーケッツ(シンガポール)で上場派生商品と疑似ストックオプション担当の代表取締役を務めた。「エコノミスト」誌2011年ブック・オブ・ザ・イヤーを受賞し、ブルームバーグのビジネス書トップ10に選ばれた“Red Capitalism : The Fragile Financial Foundations of China's Extraordinary Rise”(赤い資本主義:中国の並外れた成長と脆弱な金融基盤)をはじめ、3冊の共著書がある。「ウォール・ストリート・ジャーナル」、「フォーリン・ポリシー」、「チャイナ・エコノミック・クォータリー」、「日経アジアレビュー」に定期的に寄稿するほか、CNBC、ブルームバーグ、BBCにコメンテーターとして頻繫に登場している。 // Fraser Howie is co-author of three books on the Chinese financial system, Red Capitalism: The Fragile Financial Foundations of China’s Extraordinary Rise (named a Book of the Year 2011 by The Economist magazine and one of the top ten business books of the year by Bloomberg), Privatizing China: Inside China’s Stock Markets and “To Get Rich is Glorious” China’s Stock Market in the ‘80s and ‘90s. He studied Natural Sciences (Physics) at Cambridge University and Chinese at Beijing Language and Culture University and for over twenty years has been trading, analyzing and writing about Asian stock markets. During that time he has worked in Hong Kong Beijing and Singapore. He has worked for Baring Securities, Bankers Trust, Morgan Stanley, CICC and from 2003 to 2012 he worked at CLSA as a Managing Director in the Listed Derivatives and Synthetic Equity department. His work has been published in the Wall Street Journal, Foreign Policy, China Economic Quarterly and the Nikkei Asian Review, and is a regular commentator on CNBC, Bloomberg and the BBC.