Foreign Affairs CommitteeWritten evidence from the Foreign and Commonwealth Office

Introduction

1. China’s rise in global political and economic influence has made it one of our most important bilateral relationships. As China continues to grow quickly compared to the rest of the world, new opportunities emerge not only for trade and investment but also for the exchange of talent, ideas and expertise.

2. We continue to broaden and strengthen our ties with China, with deeper cultural links, more students studying in each other’s countries, more tourism and more trade than ever before.

3. We work with China on a range of bilateral and multilateral issues and we are working to deepen our cooperation in areas such as prosperity and security. Dialogue is vital; by engaging with China we will expand our economic relationship while working towards making positive changes to human rights and addressing global challenges like climate change and poverty.

UK-China Bilateral Relations

UK’s relationship with China

4. The relationship between China and the UK is broader and deeper than at any other time in our history. We have a number of shared interests and there is now a steady stream of tourists, students, business leaders and politicians travelling in both directions.

5. China now has new leaders in place, and the Prime Minister has had friendly exchanges with President Xi Jinping and Premier Li Keqiang since they arrived in their positions. The Foreign Secretary has also had a positive conversation with his new Chinese counterpart Minister Wang Yi.

6. Although we will inevitably have differences of opinion, the UK and China regularly work together at international level to discuss issues of global importance such as development, climate change, Syria or the DPRK. China has a growing global voice and the breadth and depth of our cooperation is increasing accordingly.

7. We have over 40 regular dialogues with China at both Ministerial and official level covering a range of issues from the economy to human rights, including a Summit between the Prime Minister and the Premier and an Economic and Financial Dialogue led by the Chancellor of the Exchequer and his counterpart in the State Council. Given the priorities we share, we expect there to be a busy programme of visits to and from China over the next year.

Trade, growth and investment

8. China has the second largest economy in the world. What marks out the Chinese economy is not only the scale of recent development but the speed: between 1978 and 2011, average growth exceeded 10 percent. This means that the Chinese economy could be more than 50 percent larger now than it was at the start of the global financial crisis in 2008.

9. Although the era of super-fast Chinese growth may be ending, with growth slowing and beginning to stabilise, the opportunities for trade and investment are significant. As China rebalances its economy and the domestic consumption increases, there will be a greater need for UK expertise to help China develop financial services, use green technologies to ensure sustainable development and provide low-cost healthcare.

10. UK goods exports to China are growing strongly, rising 12.8% last year to £9.9 billion. In April this year Britain’s monthly exports to China hit the £1 billion level for the first time. We are also attracting significant inward investment from China. Last year Chinese enterprises committed several billion pounds to a series of major UK investments. The last two months alone have seen Wanda commit to invest £700 million into the South Bank and ABP launch a major new project to invest £1 billion into the Royal Albert Docks. Both sides recognise the growing importance of our economic relationship. UK and Chinese leaders have publicly described the UK–China relationship as being a “partnership for growth”.

11. The Foreign and Commonwealth Office (FCO) and UK Trade & Investment (UKTI) are working hard to promote UK exports and attract inward investment. There has been a significant increase in the HMG resources allocated to China, the “network shift” discussed below, which has enabled us to expand our ability to promote UK prosperity. Posts across the China network have UKTI staff and prosperity staff, who run projects aimed at sharing UK best practice while also providing opportunities for UK companies to engage with Chinese institutions. Posts also lobby on specific market access issues for UK companies, both at national and provincial level.

FCO capability

12. In his statement to Parliament on 11 May, the Foreign Secretary set out his ambitions for Britain’s future diplomatic network and expenditure allocation plans up to 2015. He announced a strategic shift in Britain’s overseas network to expand our connections with the 21st century’s rising powers. The FCO China network has been at the forefront of this programme, with an additional £4 million investment to increase staff numbers, aimed at increasing our reach, understanding and influence in China.

13. At present, the FCO’s China network has added 63 new staff, an increase of approximately 14%. Around one-third of these are new FCO diplomatic staff, the remainder are locally-engaged appointments. This uplift has led to new positions being created in priority areas such as financial services, health cooperation, and energy security. It has also enabled us to deepen cooperation in existing areas, such as on RMB internationalisation and intellectual property protection. We have also assigned more staff to increase our capacity to conduct digital diplomacy, getting UK messages out to China’s internet users who numbered 564 million at last count. We have allocated a significant number of new staff to conducting outreach activity in China’s second and third tier cities, improving our understanding and influence, boosting our prosperity agenda, and giving the UK a bigger presence.

14. To equip these new diplomats with appropriate language skills, we have expanded our Mandarin language training programme to meet the increased demand for Chinese speakers and we now offer Mandarin training to London-based FCO staff.

15. In addition to new staff, we are running a programme to upgrade our estate, through renovations to our existing estate and preparations to move, to more cost-effective buildings in Shanghai and Guangzhou, co-locating with HMG partners and other organisations in these key cities. We are in negotiations with the Chinese authorities to open a further Consulate-General, alongside our existing Posts in Hong Kong, Shanghai, Guangzhou and Chongqing.

Cross-Whitehall approach

16. China impacts directly on the delivery of many areas of the Government’s agenda, both international and domestic. Increasing numbers of Government Departments are developing links with the Chinese State. China Department in the FCO coordinates the overall strategic framework for the Government’s approach to China and, alongside the FCO China network in-country, advises and assists other departments in their contacts with the Chinese system. FCO Research Analysts provide in-depth expertise to support policy-making on issues involving China, and ensure this takes account of the latest thinking by external experts.

17. Coordination occurs at a number of different levels—from informal working level contacts for day-to-day requirements, to senior official-led cross-Whitehall meetings. The FCO also works closely with the National Security Secretariat in Cabinet Office to provide oversight and direction across the scope of Government business. Inside China, the Ambassador chairs the cross-departmental China Board of Management, which oversees delivery of a single county business plan bringing together a range of departmental objectives.

Cyber security

18. The UK is vigorously pushing the international debate around cyber security. We do this multilaterally including at the Organisation for Security and Co-operation in Europe and the Association of Southeast Asian Nations (ASEAN) regional forum, of which China is a key member. Senior Chinese government officials also attended the Budapest Cyber Conference.

19. We welcome China’s contribution to the recent UN Group of Government Experts (UNGGE) discussion on Cyber Security. Agreeing recommendations for responsible state behaviour, confidence building measures and capacity building measures is a significant step forward to tackle challenges in cyberspace which affect us all. We hope China will join us in supporting the adoption of the UNGGE’s report at this year’s UN General Assembly.

20. In addition to raising cyber issues with the Chinese at official-level meetings, we fund exchanges and dialogues on cyber issues which increase our dialogue with China on a range of issues from cyber security, cyber crime and internet governance. We also work closely with the Chinese to combat cyber crime. For example the State Council Information Office blocked a number of websites in China that were illegally streaming live Premier League football matches. We continue to stress to China the importance of an open internet as the basis for thriving creative industries.

21. The UK is a leading player in cyber security. HMG has developed a risk mitigation strategy which enables the government to work with the major communication service providers in the UK to ensure that their networks and the services they provide are appropriately secure, regardless of the vendor used for infrastructure equipment.

China’s Internal Policy

New Chinese leadership and direction of internal policy

22. Since taking office General Secretary Xi Jinping and Premier Li Keqiang have set out an economic and social reform agenda with the stated goal of achieving “China’s national rejuvenation”. There appears to be a broad consensus on the need for further economic reforms to rebalance China’s economy away from investment and towards domestic consumption. China’s new leadership have spoken about the challenges ahead and the need to tackle vested interests within the Chinese system if they are to put in place a more sustainable growth model. The direction of any new policies is likely to emerge in the run up to the Third Plenum, a major Party meeting due this autumn.

23. Xi Jinping has made a number of statements which appear to be aimed at reassuring the Chinese people that the Party and Government will be more responsive to public concerns. His “Chinese Dream”, while not yet fully defined, appears to be trying to link individual aspirations with the Government’s policy programme; on corruption he has said that “power should be wielded within the cage of regulations” although it remains to be seen what this would mean in practice. Initiatives to promote the private sector and to push ahead with further urbanisation would require removing many controls and restrictions if they are to be effective, ie China’s household registration system which limits access to urban welfare schemes for rural migrants.

24. Nonetheless the new leadership has explicitly ruled out moving towards a Western-style political system. Instead, their approach is likely to focus on intra-Party reforms.

Hong Kong

25. The handover of Hong Kong in 1997 marked a major milestone in the development of UK-China relations. We continue to have important legal, parliamentary, educational and professional connections with Hong Kong, as is shown by the intensity of high level exchanges. Hong Kong is a significant trading partner for the UK—bilateral trade between Hong Kong and the UK in goods for the period January to December 2012 amounted to £12.1 billion. Hong Kong was the UK’s 14th largest export market for goods and the second largest in Asia Pacific, after mainland China.

26. We take seriously our obligations to Hong Kong under the Sino-British Joint Declaration. We continue to publish Six-Monthly Reports to Parliament and the latest Report was laid before the House on 31 January. We consider that, in general, the principle of “One Country, Two Systems” continues to work in practice and that the rights and freedoms enshrined in the Joint Declaration continue to be upheld. We think it is important for Hong Kong’s future success that this principle continues to be respected.

27. We are clear that the transition to universal suffrage for the elections of the Chief Executive in 2017 and the Legislative Council in 2020 will be in the best interests of Hong Kong’s stability and prosperity. The precise shape of any constitutional package will be for the governments of China and Hong Kong and the Hong Kong people to decide, and it will be important that any proposals give the people of Hong Kong a genuine choice and enable them to feel they have a real stake in the outcome.

28. In general, the Hong Kong media has continued its tradition of lively reporting and investigative journalism. This was most evident in the blanket coverage of CIA whistleblower Edward Snowden who was in Hong Kong in June. Media coverage included reporting of government handling; and extensive commentary about the relevance of the case to Hong Kong’s rights, freedoms and legal and judicial system.

Human Rights

29. China has made progress in improving the economic and social freedoms of its citizens in the last three decades. But we would like to see China lift the barriers that still remain with regards to ratification of the International Covenant on Civil and Political Rights, as part of China’s ongoing process of internal modernisation and reform.

30. We believe that the international community should take a coherent, consistent and constructive approach to engaging China on human rights issues. We work with the EU and other partners to achieve this, placing an emphasis on constructive long-term engagement. We focus in particular on: rule of law issues, especially the death penalty and criminal justice reform; freedom of expression; and the development of civil society.

31. On Tibet, we understand Chinese concerns and sensitivities about this complex issue. We continue to recognise Tibet as part of China and we do not support Tibetan independence. However, we encourage all parties to work towards the resumption of dialogue to ease tensions and work towards achieving meaningful autonomy for Tibetans within the framework of the Chinese constitution.

32. Our values engagement is built on three pillars: high-level exchanges, a bilateral human rights dialogue and a programme of technical support delivered in-country. We consistently raise human rights concerns directly with the Chinese leadership, both publicly and in private. We publish an annual report on human rights in China and provide online updates on a quarterly basis. In support of our human rights engagement we are stepping up our online public diplomacy. We aim to raise the profile of aspects of British society and promote values which resonate with the rapidly growing number of netizens on social media.

China’s Foreign Policy

China’s role on the global stage

33. China is increasingly taking on a more active international role as its global economic and political influence grows and its interests become more globalised. Securing the energy and other resources that China needs to grow is a major driver in its foreign policy: China consumes 60% of the world’s iron ore exports, worth over $110 billion per annum, and imports over half of the oil it uses and a third of its gas. But it is also looking to open up new opportunities for trade and investment in areas other than resources, especially in Europe and North America.

34. China describes its foreign policy approach as non-interference in other countries’ internal affairs. But its global economic footprint means China is likely to play an increasingly active role outside of East Asia, to protect its economic, military and diplomatic interests, as well as expatriate workers and businesses in unstable or disaster-prone regions. China’s counter-piracy operations in the Gulf of Aden since 2009, dispatch of naval vessels to support the evacuation of more than 35,000 Chinese nationals from Libya and first-ever deployment of combatant peacekeepers, to South Sudan, are examples of its growing reach and willingness to engage on matters of international peace and security.

35. As China’s global interests diversify, so too will the opportunities, and the challenges, in working with it on international issues. The UK’s interest is in encouraging China to play an active and responsible role and to recognise the full breadth of its interests on the world stage. We see China as a key partner with whom we want to expand our wider ties and common interests while having a constructive dialogue on areas where we disagree. The UK/China Strategic Dialogue, between the Foreign Secretary and his Chinese counterpart, now State Counsellor Yang Jiechi, is an important part of this relationship. It is supported by bilateral foreign and security dialogues and defence talks between UK and Chinese officials and military officers.

36. Our dialogue and cooperation with China on international issues is focused on three areas. Firstly, we want to encourage China to do more to help resolve international conflicts and prevent the spread and use of weapons of mass destruction. This includes taking action, in concert with the international community, to tackle the problem of a nuclear-armed North Korea. We work closely with China in the E3+3 format to stop Iran acquiring nuclear weapons. China has also made a contribution to peace and security in Mali and Sudan and South Sudan, and shown signs of increased commitment to stability in Afghanistan. Finally, China has an important part to play in tackling organised crime and illegal migration, as well as Chemical, Biological, Radiological, and Nuclear terrorism.

37. Secondly, we want to work with China to take action against dangerous climate change and to promote energy security. In the last year we have collaborated with China on influential energy and climate change projects, including on China’s future role in international energy governance and a tool that helps policy makers see the future impact on emissions of current energy policy decisions.

38. Thirdly, we are looking to expand our partnership with China on reducing global poverty, through multilateral initiatives such as the Millennium Development Goals and development co-operation in third countries. This year we began our first joint development projects with China, in Malawi and Uganda, under a Memorandum of Understanding that will allow for further collaboration in the future.

China and the major powers

39. China’s most important relationship is with the US, with whom it must manage a multiplicity of issues of global consequence, including human rights, cyber security, and most crucially, security in East Asia and the Pacific. China and Russia coordinate their activity on international issues, notably in recent vetoes of UN Security Council resolutions on Syria. But although their relationship is growing closer, each also views its relationship with the US as a major priority, and some regional and economic differences persist. China’s relationship with India has improved in recent years, buoyed by deepening trade and growing economic ties. Yet tensions remain, notably over disputed border areas.

40. The EU is central to many UK interests in China. We want it to be open to Chinese trade and investment, but also to effectively exercise constructive influence based on its position as China’s largest export market and a strategic political partner. In preparing for the next EU-China Summit, in Autumn 2013, we will work within the EU to engage China positively on our concerns about market access and a level playing field for our firms, and encourage the EU and China to reach an amicable and negotiated solution on the Commission’s proposal for trade defence measures on solar panels and other trade issues.

China and key security issues in East Asia

41. China has a complex relationship with other states in East Asia. It has built close economic and trade ties with Japan, the Republic of Korea and ASEAN and, the US-led Trans-Pacific Partnership aside, participates enthusiastically in regional trade initiatives. But many of China’s neighbours have welcomed the US “rebalancing” to Asia as a counterbalance to its growing economic and military power, and what is perceived by some as growing Chinese assertiveness in territorial disputes.

42. China traditionally has a very close relationship with North Korea, but recently has publically expressed its concerns about North Korea’s behaviour and voted with us for new UN Security Council sanctions in March. It has repeatedly expressed its commitment to denuclearising the Korean Peninsula and supports the resumption of the Six Party Talks to work towards that goal. We encourage China to stress to North Korea that the international community will not tolerate its nuclear and ballistic missile programmes and that its long term interests will only be served by engagement with the international community.

43. Tensions between China and Japan over the Japanese-controlled Senkaku/Diaoyu Islands in the East China Sea have increased since their purchase by the Japanese government from a private owner last summer. This prompted a strong reaction by China, a rival claimant, including anti-Japan protests in September and regular movements near the islands by surveillance ships to assert Chinese claims. Meanwhile in the South China Sea, territorial disputes between China, Vietnam and the Philippines continue to cause worrying confrontations in one of the world’s busiest shipping lanes.

44. In both cases, the UK is concerned that an unforeseen event between rival parties, perhaps involving military or civilian enforcement vessels, could escalate into a more serious incident. Threats to Asia-Pacific peace and stability might have far reaching effects, including on the UK: for instance, recent tensions in the East China Sea have had a negative impact on trade between China and Japan, when the West is looking to Asia to generate global growth. Together with our partners in the EU, we encourage all sides to exercise restraint, resolve territorial issues through a process of dialogue and keep communication channels open.

5 July 2013