Memorandum submitted by Mr Hugh Davies
CMG
INTRODUCTION
Disclaimer: The following remarks are personal,
based on my personal views and not intended to reflect the views
of either my former employer (FCO) or my present employer. They
are intended to be constructive and helpful.
My comments are informed by a substantial number
of years involved with handling relations with China during a
33 year career in the FCO. I began as an FCO Chinese language
student in Hong Kong (1966-68) during the height of the Cultural
Revolution. I then served twice in the Diplomatic Mission in Peking
(the British Charge d'Affaires' Office until 1972). First in 1968-71,
and secondly in 1983-86, when I headed the trade promotion section
of the Embassy as Commercial Counsellor. In addition, at the UK
end, I served as Head of China Section in the FCO upon my return
to London in 1971, and later was Deputy Head of the Far Eastern
Department in 1979-82, and later still Head of the same Department
1990-93. In all these roles I was at the centre of policy-making
regarding the Sino-British relationship. I was then posted to
Hong Kong in 1993, first briefly as the Senior British Trade Commissioner,
and then for the final four years of the Transition, as British
Senior Representative (Ambassador) on the Sino-British Joint Liaison
Group, leading the negotiations on the Handover issues. Upon my
return to London, while awaiting a substantive posting, I was
commissioned to prepare "A Review of China Trade Promotion"
for the DTI and FCO. I became then for a number of months a supervisor
("Special Co-ordinator") of the China and Hong Kong
Departments at Director level and in that capacity planned and
executed the important visit to China of the Prime Minister in
October 1998.
I left the FCO at the beginning of 1999 on early
retirement, having failed to obtain the level of posting I was
seeking, and joined Prudential as Asia Adviser, and Executive
Director of Prudential Corporation Asia Ltd. In that capacity,
I maintain an oversight of Prudential's activities vis-a"-vis
China, and I have been a regular visitor there.
My background and current preoccupations have
given me a rare opportunity to observe China over many years and
to play a small part in managing the relationship between the
UK and China, both political and commercial.
OBSERVATIONS ON
THE ROLE
OF THE
FCO ON POLITICAL
ISSUES RELATING
TO CHINA
I am constrained from controversial commentary
by reason of my long-standing official position. Furthermore,
I was for a time during this period a player in the FCO's policy
making and execution. That said, I offer the following few thoughts:
— In preparation for the Prime Minister's
watershed visit to China in 1998, the two sides negotiated a Joint
Statement enshrining their shared views of and ambitions towards
the development of the relationship. This document was published
after approval by the two Prime Ministers. It constituted the
embodiment of the vision of the two Governments, and should be
read together with the other two major expressions of political
will, namely the Joint Statement on the Exchange of Ambassadors
of March 1972, and the Joint Declaration on the Question of Hong
Kong of December 1984.
— The relationship between UK and China
has assumed a totally new dimension since the return of Hong Kong.
For the first time for over 150 years there is no territorial
or colonial dispute between us. This has diminished the room for
misunderstanding, and potentially broadened the dimension of the
relationship (previously dominated by Hong Kong), but paradoxically
made the nurturing of the relationship more demanding, by reason
of the loss of the factor of direct shared interest.
— The new British Government that came
to office in May 1997 was well-placed to take advantage of the
new situation. The Hong Kong Handover took place within a few
weeks of the arrival of the new Government. Although there had
been a broad measure of cross-Party consensus on policy over Hong
Kong prior to the Handover, in Chinese eyes the new Government
had the advantage of no direct responsibility for the controversies
that had soured relationships.
— The catch-phrase coined in June 1997
that "Hong Kong should be a Bridge and not a Barrier"
caught the mood of the moment. But it was only useful because
the situation had totally changed once Hong Kong had returned.
This meant that for the first time since the Chinese Communist
Party came to power, the Chinese Government were able to relax
vis-a"-vis HMG in regard to Hong Kong.
— The Joint Declaration obliges the
Chinese Government to meet their obligations to HMG in respect
of Hong Kong for 50 years from the Handover. The winding up of
the Joint Liaison Group on 1 January 2000 has only removed the
established consultative channel. The broader diplomatic and political
channels still exist for HMG to continue to monitor and comment
on worrisome Hong Kong issues to the Chinese Government. HMG will
need to maintain expertise in the minutiae of the Joint Declaration
and be ready to intervene diplomatically as necessary.
— For the UK, China is increasingly
important in other respects. Besides the well-trodden line that
we have shared interests as nuclear powers and members of the
P5, China's growing economic strength and trading impact has already
affected us economically for some years. Her increasingly assertive
regional military stance affects some of our friends in the region
and has the capacity to affect our economic interests in the region.
Fears of China's future military strength are increasingly expressed
in the Asia Pacific. The relationship with the US is clearly one
of the major unresolved issues of the 21st century. HMG will need
to follow these developments with close attention. There may be
need to exert diplomatic influence to persuade Chinese policy-makers
of the need for prudence. Decisions about sales of defence-related
equipment, and about military-to-military exchanges, will be coloured
by developments on this front. FCO will have an important role
in all these matters.
— There are three particular political
issues that impact on the degree of warmth that can develop within
the relationship between Britain and China, namely: Taiwan, Tibet,
and Human Rights.
1. On Taiwan, HMG's formal position was
expressed in the Joint Statement on the Exchange of Ambassadors
dated 13 March 1972. It, together with the statement made to Parliament
by the then Foreign Secretary in announcing the agreement, constitute
most carefully-formulated wording and should not be tampered with.
The latest restatement of the position was included in the Joint
Statement issued by the Prime Minister and the Chinese Premier
in Peking in October 1998. The FCO needs to maintain expertise
on this complex issue, in order not to permit erosion of the balanced
position (frequently questioned by the Chinese in an attempt to
obtain HMG recognition of their claim to Taiwan).
2. On Tibet, HMG's formal position has been
expressed in Parliament on a number of occasions. The historical
British position was that China enjoyed "suzerainty"
in Tibet. Latterly the same relationship has been expressed in
less archaic terms, ie that HMG recognises that the Chinese have
a special position in Tibet on the understanding that Tibet is
regarded as autonomous (its autonomy is provided for in the Chinese
constitution). HMG does not recognise the Tibetan Government in
exile, but successive Governments have received the Dalai Lama
as a distinguished religious leader. The FCO has to maintain expertise
on this arcane but now highly political issue.
3. On Human Rights, successive governments
have sought to pursue a two-pronged approach: (a) to condemn particularly
heinous offences, individual or institutional; and (b) to engage
in dialogue and in assistance programmes directed particularly
towards the judicial system. The former requires (regrettably
regular) diplomatic action, for example over the crackdown on
the Falun Gong and the gaoling of democracy activists. It also
involves annual heart-searching over EU policy at the UN Human
Rights Commission debate over a resolution condemning China. The
latter approach has undoubtedly already had some beneficial effect,
both in Chinese readiness to discuss the issues, and more importantly,
in improving China's performance against UN standards. The initial
work on this was undertaken by a delegation led by Lord Howe of
Aberavon in 1992. A headline event was a mock trial held during
the Prime Minister's visit to Beijing in October 1998, including
participation by Cherie Blair QC. The FCO has to maintain the
resources to manage monitoring of human rights, organising the
dialogue with China, and satisfying the expectations of UK public
opinion.
Each of these issues places strains on HMG's
relationship with China and inflicts damage on the public and
media-driven image of the FCO's policy towards China.
1. Taiwan is now a democracy. Although knowledge
of and sympathy towards Taiwan in the UK is far less extensive
than in the US, there is nevertheless a growing questioning of
the attitude of the Chinese Government towards the island and
towards its economically successful and increasingly free people.
Were PRC bellicosity to increase to the extent of posing a real
threat to Taiwan, public opinion in the UK would undoubtedly strongly
sympathise with Taiwan and condemn the PRC. A declaration of independence
by Taiwan, however unlikely now, would face HMG (and the rest
of the West) with a major dilemma. It must be in the UK's interest
to continue to urge prudence on the Chinese Government. And, through
whatever appropriate channels, to do the same towards the authorities
in Taiwan.
2. Tibet has become a rallying issue for
a disparate alliance of NGOs, concerned individuals, supporters
of the Tibetan way of life, and religious and human rights activists.
The Tibet Lobby are now formidably organised nationally and internationally.
Their consistent objective is to shame the Chinese Government
into reversing its policies in Tibet. They are adept also at shaming
Western Governments for their association with the Chinese. A
prime example was the skilful campaign during President Jiang
Zemin's visit to London to present their demonstrators as the
victims of police heavy-handedness. HMG will be faced with continuing
problems in addressing how to manage a positive relationship with
China while distancing themselves from China's policies in Tiber
or encouraging change there. This issue is a particular challenge
for the FCO.
3. Human Rights issues have dominated public
and media attitudes towards China ever since the Tiananmen crackdown
in 1989. They were a major issue during the final years of the
transition in Hong Kong. This found expression in widespread concern
about the likely Chinese attitude after 1997 towards the freedoms
in Hong Kong enshrined in the Joint Declaration. (The JD has the
force of an international treaty binding the UK and China, and
therefore obliges HMG to take a close interest in the preservation
of those freedoms). PRC policy on the UN Covenants on Human Rights,
both in Hong Kong and on the mainland, became a touchstone of
their willingness to abide by international standards. Their eventual
readiness to permit reporting on the Covenants in relation to
Hong Kong together with their signature of the two Covenants in
relation to the mainland was greeted with relief. But, despite
considerable progress in recent years, human rights abuses continue
in China and remain an issue likely to cause serious rifts with
Western governments including HMG. So long as China remains a
one Party dictatorship, with little tolerance for political dissent,
such abuses are likely to continue. The FCO will need to continue
to tread a careful line, mixing carrots and sticks according to
the issues.
Another issue that could have an impact on the
handling of the relationship is non-proliferation, and illicit
diversification of high technology and weapons-related technology.
China has had a mixed record on this front. HMG has a strong interest
in seeking to improve Chinese performance. The FCO and MOD will
need to work together to monitor and respond to information in
this field, and to share such information and any corresponding
action with our allies.
The environment is par excellence a shared interest.
Much has already been achieved in finding common ground with the
Chinese on this front. A number of initiatives, governmental and
non-governmental have broadened the reach of the dialogue. While
other government departments have the lead on the environment,
the FCO will continue to play an important co-ordinating role
in expanding co-operation both at the micro and macro level.
Immigration and transmigration of peoples is
already an issue between the UK and China, if so far on a manageable
scale. But, as Chinese individuals increasingly travel abroad
and the operations of "snakeheads" expand in bringing
illegal immigrants to Europe, the management of this issue will
have further impact on the political and commercial relationship.
The imposition of Direct Airside Transit Visas on Chinese travellers
a few years ago as a disincentive to jumping ship has led already
to diplomatic protests, retaliatory measures and some impact on
trade relations. The FCO has an unenviable role in managing the
fall-out of this issue, which is bound to become an increasing
irritant as immigration pressures increase and domestic reaction
to asylum seekers continues to rumble or worse. Another cause
of complaint is EU-related, as Chinese travellers with Schengen
visas can travel freely in the Schengen countries but need separate
visas for the UK, allegedly affecting their propensity to travel
here for tourism or business. Another conundrum for the FCO to
manage.
Police co-operation is a promising area for
increased dialogue. Over recent years, and despite human rights
concerns about policing in China, there have been helpful and
constructive examples of information exchange and some training
between police forces in China and the UK. These have principally
involved the handling of kidnappings related to illegal immigration
and "snakehead" gangs. There is scope for expansion
of practical co-operation of this kind, and the FCO has a role
in encouraging and facilitating it.
Educational co-operation is a growth area. Press
reports state that the number of Chinese students in the UK has
more than doubled in recent years. Many are now self-financing,
as disposable incomes in China increase. Although the majority
is still probably at post-graduate level, increasingly Chinese
are coming for undergraduate courses and even secondary schooling.
Several Chinese children now grace our public schools, including
the children of prominent officials, a remarkable demonstration
of changing attitudes in China. China's embrace of English as
its first foreign language gives the UK a great advantage in attracting
the leaders of the future to study here. The British Council does
an outstanding job in this regard. The CBBC plays a significant
role in brokering commercial spin-off for UK education business.
The FCO is fully supportive of both these streams of activity
(and provides the obligatory visa-issuing back-up, which is often
a headache for all concerned). The FCO, with the British Council,
has an additional special role in administering the Chevening
Scholarship scheme. This has been hugely influential in China
and is fast producing an alumni corps throughout the upper reaches
of Chinese society that could rival the kudos of Rhodes Scholars
in the United States and the former Dominions.
FCO AND THE
PROMOTION OF
UK COMMERCIAL INTERESTS
As a former Commercial Counsellor in Peking
(1983-86) and as a former Head of Far Eastern Department in the
FCO (1990-93), I had considerable hands-on experience in assisting
British firms into the China market. My study of more recent trade
promotion efforts (the "Davies Review" of 1998) updated
my understanding of the current situation and has led to some
changes in the delivery of services by the official support agencies.
These agencies include, in particular, the FCO, DTI, China-Britain
Business Council, and now British Trade International.
Because of China's centralised and Party-dominated
structure, the role of foreign diplomatic missions has been and
still remains a crucial one in trade promotion. In this, China
differs markedly from OECD countries where commercial sections
hold a less prestigious position in local eyes. (Other countries
where embassies can play a similar role to those in Peking including
Vietnam and, in the past, the countries of the former Soviet bloc).
Clearly, the role of the British Embassy in Peking was more crucial
in the early days of the Reform and Opening Policy (introduced
from around 1979) than it is today, when many more channels exist
for firms seeking to sell goods and services in China.
Nevertheless, in important respects, the British
Embassy retains a highly significant role as a conduit of HMG's
views both on trade policy issues and over sectors where the Chinese
Government continues to exert regulatory control. A major example
in recent times has been financial services, where China has been
slow to open up to foreign firms. The issue of licences to insurance
firms has taken on as overtly political dimension, and firms have
found their attempts to obtain licences almost entirely subject
to the degree of favour in which their governments are held by
the Chinese Government. British insurers made no progress so long
as Sino-British relations were clouded by disputes over Hong Kong.
Since 1998, however, two British insurers, Royal
& Sun Alliance and Prudential have obtained licences. Both
owed their selection in large part to the support they obtained
from HMG, as expressed to the Chinese authorities by Ministers
and, importantly, by the FCO and the British Embassy. The experience
of Prudential can be cited. Prudential has devoted considerable
effort and resources to lobbying for its licence over several
years. It regards the assistance it received from the FCO (as
well as other relevant Departments) as crucial in persuading the
Chinese decision-makers that Prudential enjoyed their support
and merited a licence. In Prudential's experience, the effort
taken to keep the Embassy and the official support services (now
principally BTI) closely informed about its objectives can pay
off handsomely. Prudential continues this habit as it looks to
broaden the scope of its activities in China, and has extremely
close and productive relations with the Ambassador and his staff.
Prudential has nothing but praise for the support it receives.
Following the award of the licence in 1999, Sir Martin Jacomb
(then Chairman) wrote in appreciation of the Embassy's help to
Sir John Kerr.
China's imminent entry into the WTO is plainly
a very significant development. It will affect China's relations
with the rest of the world. It is likely to have profound societal
and economic effects in China itself. It has required much work
and hard analysis by British officials in many Departments. Prudential
has taken a close interest in those parts of the discussions with
China affecting insurance and asset management. It has found the
readiness of officials, whether in London or in the Embassy in
Peking, to share information on objectives and on progress extremely
positive. The negotiations between the UK and China and between
the EU and China have been detailed and complex, with significant
potential impact on the future operations of foreign insurers
in China. Keeping close to the thinking of the UK insurers was
an important element in ensuring that UK officials could reflect
business views to the EU negotiators. Prudential took care to
make its views known to officials in the British Embassy as well
as to DTI and EU officials.
In its WTO negotiations, China has committed
itself to the US and to the EU to considerable liberalisation
of financial services. These commitments will be of potentially
major important to UK firms, including Prudential. It should not
be taken for granted that all will now be plain-sailing in obtaining
the licences and the scope of operations desired. For this reason,
the role of the official support agencies, including the British
Embassy and Consulates-General in China will continue to be crucial.
For success in this highly controlled environment, even after
WTO entry, UK firms will be well-advised to rely on HMG for support.
FCO AND CHINA
INTO THE
FUTURE
Relations between the UK and China will continue
to require diplomatic channels into the foreseeable future. There
is no obvious substitute for the traditional Embassy model, supported
by increasing numbers of subsidiary posts around the vast, populous,
and rapidly developing country that is China. The need to offer
support to UK firms (and travellers) in the less developed parts
of the country may suggest that other less formal solutions to
those offered by Consulates-General would make sense, for example,
locally-staffed trade and information bureaux, perhaps under the
auspices of the CBBC (which already has five offices in China).
Knowledge of Chinese language is hard-earned.
So is knowledge of how to operate within the Chinese system. The
FCO has traditionally trained its Sinologues rather than recruited
them. As more and more British people study Chinese and the pool
of individuals with direct experience of living and working in
China increases, the FCO and the Embassy would be well-advised
to take on more such valuable resources on contracts. My personal
experience of crossing the divide from the public to the private
sector has convinced me of the great pool of expertise on how
to do business in China that resides in the business community.
Without tapping more systematically into that pool, the FCO risks
missing out on accumulated wisdom and could risk losing the confidence
of the business community about its understanding of the market.
The demands of that community on the Embassy and Consulate-General
grows all the time and the expectation is of excellence in the
services provided. When that falls short, the business community
is not slow in complaining. The FCO and its China based staff
need to constantly raise their game if they are to satisfy their
clientele.
The Internet revolution is changing the traditional
ways of doing business, of acquiring and storing information,
and of analysing present and future trends. China is taking to
the Internet enthusiastically, if with considerable misgivings
by those who wish still to control information and its dissemination.
Already, however, vast volumes of information about China are
available On Line. This poses new challenges to the FCO and the
diplomatic posts in China. But it also offers new opportunities
and convenience. It is striking that the challenge appears to
have been taken up and those working in posts in China are fully
internet capable and enthusiastic users of e-mail and video conferencing.
CONCLUSION
China is of growing importance to the rest of
the world. The UK has embarked on the 21st Century in a new relationship
with China unencumbered with the baggage of the past colonial
relationship. But Hong Kong remains a beacon of good practice,
the rule of law, respect for human rights, and accountable government
that will continue to reflect well on the UK for its legacy in
China. Policy towards China will always be complicated by the
unexpected (but we can hope for no repeat of the unfortunate bombing
of the Belgrade Embassy). Because of the complexities of China,
its distance from Europe, its difficult language, its size and
growing economic impact, the FCO will need to devote important
resources to the relationship into the future.
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