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13 Oct 2009 : Column 26WH—continued

In fact, that power is already manifesting itself. Take, for instance, China's refusal to condemn explicitly the nuclear ambitions of either Iran or North Korea. Look at its military action in Tibet, despite the international outcry, and the continued unease in Taiwan, of which, I
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suspect, we have heard only the first Act. The influence that China exercises across large swathes of commodity-rich Africa, from Sudan to Zimbabwe, is also apparent. Similarly, from the Caribbean to the south Pacific, it is systematically buying up influence at the United Nations among its smallest sovereign nations. I have seen with my own eyes the number of countries that only a few years ago recognised Taiwan but that now recognise the People's Republic of China, and those countries are all individual voters in the UN. China is increasingly likely to reject US military, economic and humanitarian pressure, even when it is under Barack Obama's leadership. It will have greater success in any future competition for resources and power and will be able to ignore the norms and rules, as we have set them, of the international community.

What does all that mean for the UK? I am interested to hear what the Minister will say, and I appreciate that his eyes are now slightly closer to home, following his latest promotion, on which I congratulate him, but I am sure that he will have some things to say about this matter, and no doubt his successor, when looking at Chinese affairs, will have this at the top of the agenda.

Curiously, now that the price of our national profligacy has been put into sharp focus, policy makers seem determined to return to business as usual. Further borrowing and the maintenance of historically high levels of public expenditure seem, I fear, the order of the day, as the Government seem reluctant to prepare voters for some very inconvenient truths. With typical impatience, the media are already beginning to ask when the recession will end, as they hunt for green shoots in every dark corner. The cold reality, however, is that we must accept that for too long this country has been living way beyond its means, riding a wave of abundant credit, low inflation and inflated house prices, which have combined to create a false hope of ever-rising living standards. As a medium-sized economy primarily reliant on a hitherto booming financial services industry, we shall remain vulnerable, I fear, for some time to come.

For those middle-income folk outside the gilded corridors of finance who are unwilling to accrue wealth largely via housing debt, the economic stagnation has became ever clearer well before the recession. Average salaries and wages have stagnated for almost a decade, a fact that has been disguised by the grossly inflated asset prices, particularly private housing. For younger people in particular, merit and hard work were no longer translating into secure, well-paid jobs and affordable homes. Despite this, I believe that the past 15 years will soon be regarded, and for some time to come, as having been the very best of times. The long, hard slog of a slow recovery will be difficult to swallow for a nation used to assuming that its debts would never be called in. British employees are owed nothing more than the Asian sweatshop worker, and even the graduate-level openings of tomorrow might equally be filled in the decades ahead by qualified and hard-working 20-somethings from the east.

A rapid return to sustainable economic growth cannot be taken for granted. Complacent hopes of British exceptionalism might not see us through. We might not have the money to cushion this blow, as we have had in the past, with a generous welfare system. In the short
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term, we need to take a long, hard look at the books and sharply pare down our spending commitments. In the longer term, we need to make a strategic decision on the direction of our economy: whether to gamble our future on the possible resurrection of the financial services industry alone, going it alone as some sort of beacon of dynamism, or whether to diversify our economy and, implausible as it might sound today, tie our future more firmly to Europe in the hope that our strength-in-numbers approach will shield us from the stiffest of economic competition from the east.

The City of London, which is in my constituency, is already acutely aware of the increasing influence and economic power of China and has been preparing for Chinese growth for some time. Over the past decade, the City of London corporation has actively sought to engage with the Chinese leadership and with Chinese regional governments and business leaders, particularly since China became a member of the WTO eight years ago. While much of the corporation's work in China has been undertaken by representative offices in both Beijing and Shanghai, the City's annual, high-level outward visits involve a significant role in advancing relations for visiting delegations. The City appreciates that the regular interaction with China's economic decision makers is vital to London's continued position as an international financial centre as it provides the City with an ongoing opportunity to influence the development of China's financial sector. It is an approach that is already reaping dividends. China's State Council has cited the City of London as a model for Shanghai. The willingness of both countries to engage openly and share expertise has resulted in a greater flow of trade, which benefits UK-based industries in financial services and those firms seeking to expand and grow in a developing market.

With emerging markets accounting for an increasing share of world growth, London knows that it can no longer act in isolation if it is to remain a leading financial centre. The City has therefore worked to foster a web of financial, educational and cultural connections with traditional financial centres, such as New York and Hong Kong, but also with Shanghai and Bombay. Under the umbrella of the memorandum of understanding between the City of London and Shanghai, the corporation has also developed a strong partnership with the Shanghai financial services office, which is tasked with developing Shanghai as a financial and maritime centre. That interaction provides a vital insight into the thinking of the Shanghai government and gives City firms attending round tables and meetings access to Chinese officials. It also allows the UK model to be better understood by China and helps UK firms to win business as the Chinese financial sector grows.

The corporation has also been supporting the Treasury's economic and financial dialogue with China. That collective effort to assist UK firms, share UK expertise and reinforce with the Chinese authorities the fact that there is a two-way benefit of greater trade flows is vital to the success of many UK-based financial services firms, especially the large number seeking to expand in China. As a result, 13 of the 79 qualified foreign institutional investor licences available are held by UK companies, which is higher than for any other European country. UK firms have been sharing knowledge of the corporate bond market in order to reduce China's reliance on the
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banking sector, and those UK banks will be well placed when foreign banks are allowed to underwrite corporate bonds.

Due to the work being done to link the UK financial services industry to China, the UK now runs an invisible trade surplus with China, in which the balance of trade is about 2:1 in Britain's favour. That contrasts sharply with our visible trade balance, which runs 5:1 in China's favour. UK banks now account for 10 per cent. of foreign banking in China, generating significant revenues for the UK. Our companies are heavily involved in Chinese markets for insurance, legal services and other professional services. For instance, PricewaterhouseCoopers, the global accountancy firm, is the leading firm in China, measured by fee revenue, followed by Ernst and Young, Deloitte and KPMG. Amid all the gloom and doom in the financial services industry, from our own shores and perhaps also from Wall street, there are some good news stories, and this has been one specifically important area, and I would be interested to hear what the Government will do to ensure that it continues to work in that fashion.

Thankfully, the City of London welcomes China's increasing role in the global economy and regards it as not only a major opportunity for UK firms, but a way of influencing Chinese policy. China will remain a major exporter, but the City believes that Chinese leaders accept that a balanced economy also requires increasing domestic consumption. The UK-based financial services sector can play a crucial role in that and will feature prominently at the Shanghai Expo in 2010. By working in partnership with the Chinese Government and firms, the City of London Corporation seeks to derive maximum benefit for UK firms in mainland China, and from Chinese firms establishing operations in the UK and becoming part of the international financial centre that is the City.

The recent economic demise has never been outside the bounds of possibility. History is full of banking crises, burst bubbles and periods of economic darkness, but the breathtaking speed at which economic power will shift firmly to the east is new. The fundamental imbalance in the economic relationship between the United States and China will now either cause that relationship to implode, or problems will be prolonged and made more acute by a continued tsunami of debt. Either way, the coming decades are likely to be shaped by the emergence of an increasingly confident China that is keen to flex its muscle economically, politically, culturally and, in short order, I suspect, militarily. Others may wish to discuss further the military aspect. Understandably, given the constituency that I represent, my speech has focused more on matters economic and financial.

I believe and fear that the west's hope that it can somehow assume continued dominance in the knowledge economy may prove optimistic. Within the next 20 years, it is quite likely that intellectual property rights as we know them, be it licensing, patents or copyright protection, which have underpinned the west's competitive advantage, will undergo an overdue radical philosophical shake-up. An ever more assertive China will argue that traditional IP structures are no more than the west's attempt to impose its own form of protectionism to suit its particular demographic.

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We should not assume that the dominance of our values in determining global trade will remain unchecked. If there is to be a longer-term price for our collective indebtedness, I fear that it will be for the UK to watch, with increasing impotence, it become our turn to suffer as the rules of the global trading game are changed to our detriment. It is fundamentally for that reason that we need to get balance back in our economy and reduce the debt at the earliest opportunity.

I look forward to hearing what the Minister and other Members who wish to contribute to this debate have to say. As I said, the subject is rather wide-ranging, and I have perhaps focused unduly on matters financial and economic. I hope that others will feel that that they can speak openly about matters in respect of China that are closer to their heart.

11.22 am

Mr. James Gray (North Wiltshire) (Con): I thank my hon. Friend the Member for Cities of London and Westminster (Mr. Field) for his initiative in calling this debate and congratulate him on the magnificent tour d'horizon that he gave just now, particularly in respect of economic relations between China and the west. It is perfectly reasonable that, as the Member who represents the City of London, he should do so.

Looking forward over the next 20 to 50 years, anyone who ignores the likelihood of China becoming an economic superpower, to use my hon. Friend's expression, is ignoring some basic economic realities of the world's history. If, 50 years from now, China and India between them-alongside the United States and, one presumes, some European influence as well-do not dominate the world's economy, I would be extremely surprised. I do not have the figures to hand, but they are simply astonishing, particularly on information technology. I believe that I am right in saying off the top of my head that 400 million Chinese-some five times the entire population of Great Britain-currently own a mobile phone, 400,000 Chinese are actively blogging, and the number of personal computers is simply beyond the realms of imagination.

The fantastic developments in China in every kind of industry, often but not necessarily in partnership with western companies, are second to none. Anyone who looks at either Shanghai or Beijing, as my hon. Friend did, sees just from the quantity of pollution in the air how much industry there is in those gigantic cities. They are without question economic superpowers.

China's membership of the World Trade Organisation is very much to be welcomed and gives a flavour of things to come, and the Chinese are to be congratulated on the enormous investment that they made in preparing for the Olympics last year. I recently saw with my own eyes the change in Beijing over the past 10 years, which is simply astonishing.

In all of that, it is vital that the UK, which is one of China's most important trading partners, extends and harnesses economic and trading relationships-and we are doing so: things are going remarkably well. Some very good relationships have been developed between us and the Chinese over the past 20 years or so, and I am sure that that will continue over the next 20 years.

I wanted to take part in this debate to speak not about the economy, but about a fly in the ointment of good relations between us and the population of
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1.2 billion in the People's Republic of China. My comments result from a visit that Lord Alton, Lord Steel, the hon. Member for Sittingbourne and Sheppey (Derek Wyatt) and I made to China and, in particular, Tibet during the summer. I wish to touch on a couple of Tibetan issues, if I may.

One of the arguments that I advanced in meetings with senior Chinese officials in Beijing was that it seems extraordinary, at a time like this, with the economic potential that my hon. Friend described so well, that there should be visits from parliamentary delegations such as ours. Indeed, the previous week, the Minister of State, Foreign and Commonwealth Office, the hon. Member for Bury, South (Mr. Lewis), who I believe at the time was the Foreign Office Minister with responsibility for China-we are all slightly muddled as to which Minister has responsibility for which areas at the moment. I believe that I can correct my hon. Friend by saying that the Minister present here today-the Under-Secretary of State for Foreign and Commonwealth Affairs, the hon. Member for Rhondda (Chris Bryant), whom I congratulate on his promotion-now has responsibility for China, unless I am much mistaken. If I am, he will no doubt clarify that later. We are all mistaken-we do not know who does what at the Foreign Office.

Mr. Keith Simpson (Mid-Norfolk) (Con): Lord Mandelson.

Mr. Gray: Is Lord Mandelson in charge of everything? [Interruption.]

David Taylor (in the Chair): Order.

Mr. Gray: I beg your pardon, Mr. Taylor. I am being diverted from my subject.

My point was that our parliamentary delegation and the one the previous week, which included the Minister of State, headed to Tibet and Beijing for high-level discussions, and those meetings were dominated not by the potential for trade with China, nor by its economic influence in the world, but by the issue of an ageing, retired priest living in north India-namely, the Dalai Lama. Important as other issues are, that little issue of Tibet-a country whose population is some 2 million, compared with China's population of 1.25 billion-has such overwhelming influence on our relations with the People's Republic of China. We tried to make the argument to the senior Minister whom we met that it would surely be in China's best interests to find some sensible solution to the difficulty of Tibet and the Dalai Lama, so that the effect on China's relations with the rest of the world is removed.

It seemed to us that several things could be done. My hon. Friend the Member for Cities of London and Westminster mentioned in passing the military presence in Tibet, and we certainly saw plenty of evidence of that. Tibet was opened briefly for the visit of the Minister of State and for us, and then of course was closed again for the 60th anniversary of the foundation of the People's Republic, but during our brief visit we certainly saw a significant military presence. There were
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many soldiers and vehicles and definite evidence of suppression of pro-Tibet or free Tibet feelings within Tibet.

We sought to raise with the Chinese in Tibet a large number of human rights issues, including absurdities such as Tibetan monks who put up a picture of the Dalai Lama being arrested for doing so and any Buddhist monk refusing to condemn the Dalai Lama being arrested. Such things are absurd. They are symptoms of a totalitarian state of the kind that we no longer see in western Europe.

We tried to argue to the Chinese authorities that suppressing pictures of the Dalai Lama was not dissimilar to our attempts to suppress the speaking voice of the Northern Ireland IRA. Do Members remember that we used to have pictures on television and actors reading out the words over the picture? Suppressing pictures of the Dalai Lama is an absurd thing to do. It calls attention to him and gives wrong messages.

We tried to develop with the Chinese a middle-way solution, to use the Dalai Lama's expression. Lord Alton was particularly keen on the potential of looking at some parallel with Vatican City, where the Pope reigns supreme in an independent little parcel or palace in the middle of Italy.

There is a variety of different solutions and all sorts of ways that we could think about the situation. The first thing that has to happen is face-to-face negotiations between senior Chinese officials and the Dalai Lama himself. There is absolutely no point in having the Dalai Lama's representatives; there must be face-to-face negotiations. Surely, then, the Chinese could find some kind of solution to the problem.

The all-party group produced a weighty document yesterday. I will not bore hon. Members with it this morning, but I recommend that people-officials in particular-have a look at it. We took forward some discussions with Chinese officials. As my hon. Friend mentioned briefly, I found that there was some degree of puzzlement about why the Chinese should allow Tibet to become such an important matter and such a big fly in the ointment. We have to ask why the Chinese built the railway on which the train in which we went from Xinang to Lhasa ran, which cost, along with the road, many billions of US dollars to build. The Chinese said, "Oh, it is to encourage tourism." It really was not. There has not been all that much tourism in Tibet, particularly not when the borders are closed and visas are refused even to visiting ambassadors. I am not sure that it is to do with tourism. They said that it was to do with economic development in Tibet. If that was so, there are large parts of China where they could, today, be building railways. The notion that they built the railway simply for economic development in Tibet seems wrong. A glance at the map shows that Tibet lies somewhere between China and India, and I suspect that that probably has much more to do with it. The large number of troop movements that we saw on the trains, as we passed them on the way in, seems to suggest that it has more to do with the Chinese interest in Tibet.

All of that is worrying. I hope that Her Majesty's Government begins to look at the matter as follows. This is an insignificant dispute, involving an ageing priest living in north India and the questions of who is in charge of Buddhism and what the exact meaning of "autonomy" is. The area is called the Tibet Autonomous
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Region and there is some dispute between the Dalai Lama, the Chinese and ourselves as to what autonomy is and what sort of autonomy Tibet should have. Is it the same as Scottish autonomy within the United Kingdom, for example, or the same as the Tamils might wish for in Sri Lanka? There are many different kinds of autonomies. Is it not extraordinary that such a detailed, historical matter of insignificance in the big picture of world events should be souring our relations, and those of western Europe and the United States, with the People's Republic of China?

It seems to me that the officials to whom we spoke were beginning to accept that argument. I got the impression that they were slightly yawning and saying, "This is all very silly, can't we talk about important matters?" Her Majesty's Government ought to try to find a way of saying to the Chinese Government, "Let's solve that one. Let's move forward. Let's think about your strategic reasons for the vast Chinese investment in Tibet. Let's have a look at what our real relationships ought to be. Let's find a way of solving a rather silly little problem in the big picture and move forward from here."

I found it chilling, when we returned to our hotel in Beijing, on the way back to London, to be told as we tried to go for a walk along one of the main boulevards after Tiananmen square that we were not allowed to leave. Being British, I just ignored that and strolled out down said boulevard and no one seemed to object, although it could have caused an international incident had it gone wrong. We were told not to leave our hotel because of the rehearsal for the 60th anniversary parade through the centre of Beijing, for which the whole of the middle of Beijing was closed down, with all the population removed from it. This gave us a bird's eye view of the military part of the parade-the whole parade was quite extraordinary-amounting to hundreds, perhaps thousands, of military vehicles, including intercontinental ballistic missiles, endless nuclear weapons and a vast array of military hardware redolent of the Soviet Union at the height of Soviet power. I found it slightly chilling that, at a time like this the Chinese should not, in this parade, focus on trade, industry or history, or on joyful peasants dancing in the streets, but on hundreds and thousands of vast pieces of military equipment parading. They did that to send a strong message to the west. It certainly sent a strong message to us.

I endorse the remarks made by my hon. Friend the Member for Cities of London and Westminster. There is more to China than the vast economic potential that we all know about. We have to think carefully about precisely what its military, diplomatic and international ambitions may be.

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