China and the Rules-Based International System Contents

3China’s strategic outlook

The Belt and Road Initiative

21.The Belt and Road Initiative, first announced in 2013, is presented by the Chinese government as Xi Jinping’s signature foreign policy. Its stated purpose, according to a key 2015 policy document, is to

promote the connectivity of Asian, European and African continents and their adjacent seas, establish and strengthen partnerships among the countries along the Belt and Road, set up all-dimensional, multi-tiered and composite connectivity networks, and realize diversified, independent, balanced and sustainable development in these countries.43

In practical terms, it is organised around land connections (the Silk Road Economic Belt) and sea connections (the 21st Century Maritime Silk Road). At its core is Chinese financing and construction of infrastructure in Asia, but as the FCO notes, its vision has expanded dramatically: it is no longer regional but global in vision, and is not only concentrated on infrastructure, but encompasses “trade policy and financial integration; shared standards; a ‘digital BRI’; cultural, media and tourism exchanges; a Chinese ‘model’ for developing countries to follow; and new ‘Chinese solutions’ on global goods and global governance”.44 A major component of the BRI, in an area in which the UK has significant interests, is the $60 billion China–Pakistan Economic Corridor (CPEC).45 It includes plans for motorways, railways and energy pipelines in Pakistan, accompanied by power plants and industrial facilities, as well as a Chinese-operated port at Gwadar.

22.Popularly cited estimates of China’s intended investment in the BRI range from $1 trillion to $8 trillion.46 We were told, however, that precisely defining the size, scope and purpose of the BRI is difficult, because of the tendency for pre-existing and overlapping projects to be badged as BRI activities, the challenge of distinguishing hypothetical projects from concrete plans, vagueness in official descriptions of BRI, and bureaucratic complexity. Nigel Inkster said that although he did not know how much had been spent by China on the Belt and Road Initiative in the past five years, he was “in good company, because the Chinese government itself does not know”.47 As Helena Legarda, Research Associate at the Mercator Institute for China Studies, put it, the BRI descriptor “covers projects new and old, failed and successful. A project may be Belt and Road today and not Belt and Road next month.”48 These remarks tally with the impression we were given in Beijing: the ambition and scale of the BRI, and its importance to Xi Jinping’s government, is obvious—but the definition of what it covers and why is not. This may be a product of its bureaucratic structure: as George Magnus observed, the BRI has no single, clearly identified secretariat.49 Dr Yu Jie assessed that 15 ministries and agencies influence which projects are selected to become part of the BRI, and noted that more than thirty administrative areas are also contributing to the process.50

23.We were told both of an objective need for some of the investment that China is offering under the Belt and Road, and of an appetite among developing countries to accept it. In 2016, the Asian Development Bank estimated that total investment needs for infrastructure in the bank’s 45 developing member countries between 2016 and 2030 amount to $26 trillion, or $1.7 trillion per year.51 Dr Knoerich told us that China’s infrastructure investments under the BRI “can have a huge positive impact on development” in recipient countries if “done the right way”.52 Dr Yuka Kobayashi noted that in geographic terms “the scale and breadth of the BRI is much more ambitious” than previous infrastructure-focused initiatives in Asia, that the resources China is contributing are several times those offered by the UN, the EU and the United States, and that, unlike other investors, China has not “shied away from investing in regions seen as too unstable and presenting investment risks”.53 Recent media and expert commentary, however, has noted some pushback on the part of recipient states wary of excessive debt burdens, and Chinese officials have been reported as advising some caution in China’s lending strategies.54

24.The UK was the first major Western country to express its support for the Asian Infrastructure Investment Bank, a new Chinese-led financial institution established in 2016. It did so despite US opposition at the time.55 We were told that the UK’s support, and that of other developed countries, had had a positive impact in shaping the governance and standards of the AIIB. What was “going to be very much a Chinese institution”, as George Magnus put it, became something much closer to a traditional multilateral development bank.56 This claim applies both to the AIIB’s lending practices and its governance structure, leading many observers to argue that the AIIB now complements, rather than seeks to substitute for existing institutions.57 However, although the AIIB was set up with reference to the Belt and Road Initiative, its financing accounts for only a small fraction of the massive funds pouring into the BRI: the vast majority to date comes from China’s policy banks and state-owned commercial banks.58 As Dr Kobayashi put it, the BRI “is actually a product of the policy banks—the China Development Bank and the Exim Bank … They are not going to the standards of the AIIB, and oftentimes they are pushing Western donors out”.59

25.One motivation for the BRI is that it serves China’s domestic economic needs, allowing China to export industrial overcapacity (especially in construction) and capital. This helps China to maintain the economic model that it used to overcome the effects of the 2007–8 financial crisis, but which is now reaching saturation point at home—although in doing so, it risks reinforcing problems with that existing model.60 The BRI provides a market for Chinese companies, including state-owned enterprises. In 2018, Jonathan Hillman of the US-based Center for Strategic and International Studies (CSIS, a think tank), told the U.S.–China Economic and Security Review Commission that CSIS had studied 2,200 Asian transportation infrastructure projects, and found that, of all contractors participating in Chinese-funded projects, 89% were Chinese, 7.6% were local companies, and 3.4% were foreign. By contrast, projects funded by multilateral development banks had 29% Chinese contractors, 40.8% local, and 30.2% foreign.61 Witnesses also told us of other domestic motivations for BRI. For example, BRI could be a mechanism for channelling investment into the underdeveloped western regions of China in particular, as the BRI’s gateway into Eurasia—regions which have been plagued by instability.62 A further benefit for China, as Dr Knoerich put it, is that BRI “multiplies the routes for the transportation of much-needed natural resources imports to China, potentially enhancing China’s resources and energy security”.63

26.Various concerns have been raised about the implications of the Belt and Road Initiative, including the standards that apply to BRI deals.64 For example, Drs Jones, Zeng and Hameiri told us in written evidence that BRI standards “still fall well short of international ‘best practice’”, citing “poor” investment risk management, and a risk of “social, environmental and other costs”. They wrote that examples of such projects in the past included the construction of pipelines, dams and ports “that have forcibly displaced populations, led to militarisation as armed forces move in to protect investments, and sparked widespread social protest”.65 The Overseas Development Institute noted that the BRI “could make fragile situations worse by failing to consider local conflict dynamics”, and said that BRI projects in Pakistan had already been targeted by separatists, “being perceived as driven by central government and not benefitting local groups”.66

27.A related concern is whether loans are being offered to states that they will simply be unable to repay on time. The most high-profile evidence in support of this concern, cited by the Minister in his evidence session with us, is Sri Lanka’s signing of a 99-year lease for the port of Hambantota to Chinese state-controlled entities, in exchange for being freed from its debt payment obligations to China.67 Other states that have encountered or anticipated difficulties with repayments to China include Myanmar, where the Government downsized plans for a Chinese-built port,68 and Malaysia, where incoming Prime Minister Mahathir Mohamad suspended a Chinese-funded rail project and natural gas pipeline.69

28.A further set of concerns relate to the impact of Chinese investment in fragile or conflict-affected areas. One such area where UK policy has had to adapt is disputed Kashmir. The planned route for the China-Pakistan Economic Corridor—which the Department for International Trade’s guidance to British businesses says “presents huge opportunities for Pakistan and the wider region, bringing economic development, greater connectivity and regional security”70—runs in part through Pakistan-administered territory claimed by India. The FCO told us in its submission to our inquiry on Global Britain and India that “the UK recognises the potential of BRI in helping to meet Asia’s infrastructure needs whilst noting it is only one of many regional and sub-regional initiatives in Asia. The UK does not support commercial projects in disputed territories.”71 Shashank Joshi, Defence Editor of The Economist, noted that in this area UK has to “walk a fine line”, and that the Government’s support for CPEC while opposing projects in disputed areas “is an effort to assuage Indian sensitivities while reflecting what we perceive as the importance of investment in Pakistan”.72

29.The apparent geopolitical drivers behind the BRI include a desire to improve China’s global image, especially among developing countries; to hedge against American containment in China’s near seas; and to increase China’s influence in Eurasia and the Indo-Pacific.73 Regardless of the intent behind BRI, it appears to be having geopolitical effects, and will continue to do so. In hard power terms, BRI provides a physical platform for expanded Chinese state presence worldwide. Under the framework of the BRI, China has gained control of a collection of ports in the Indian Ocean, and some see this “string of pearls” as a conduit to geopolitical and even military influence.74 Mr Joshi suggested that the question surrounding Chinese controlled facilities abroad was not one of their use in a direct conflict with the West, but instead “for thinking about how China might intervene in other places in smaller contingencies and scenarios … in ways that may be problematic for our interest or that may run against it, particularly in weaker states with less capacity.”75 Witnesses also told us that Chinese investment via BRI has also led recipient countries to align with China politically.76 Such alignment could be particularly useful in diplomatic terms when it comes to smaller states, such as in the Pacific islands, whose votes carry equal weight in the United Nations.

30.The UK has engaged substantially with the Belt and Road Initiative as it has developed. The Government told us that it has “regular senior engagement” with China on the BRI, including through the Economic and Financial Dialogue, and has set up a variety of mechanisms including the appointment of Douglas Flint as the Chancellor’s Financial and Professional Services Envoy to the BRI.77 However, as the Minister told us, concerns about certain aspects of the BRI have led the UK to stop short of signing a formal Memorandum of Understanding proposed by China in support of the initiative.78 In March 2019, the Italian government signed a memorandum of understanding in support of the BRI on the occasion of a visit by Xi Jinping, making Italy the first G7 country to sign such a document.79

31.A number of witnesses, including Dr Knoerich, Nigel Inkster and Shashank Joshi, suggested that there was no obstacle in principle to the UK providing support to specific BRI projects, but emphasised that appropriate standards must be met.80 Dr Kobayashi argued that the UK was missing a particular opportunity to provide legal services in support of the international joint venture contracts involved in the BRI.81 Mr Joshi implicitly endorsed the UK’s decision not to sign a Memorandum of Understanding, remarking that “we can endorse Chinese investment abroad in very welcome, positive and enthusiastic ways without rubber-stamping an overarching, world-straddling scheme that covers absolutely everything under the sun”.82 Helena Legarda expressed scepticism that there were very considerable gains on offer for the UK, and advised the Government to ensure that, if it was to formally sign up to the BRI, “it is key to make sure that you get in writing something tangible in return.”83

32.Chinese-led investment in foreign countries, and particularly developing countries, need not inherently conflict with British interests. Asia’s infrastructure gap is real, and exporting the fruits of China’s spectacular growth could be a way to close that gap while addressing China’s own economic needs. The UK could potentially help China in this effort and can secure economic benefits from doing so, especially by focusing on areas in which the UK has particular value to offer, such as in the provision of legal and financial services. The UK’s early support for the Asian Infrastructure Investment Bank provides a positive example of how UK engagement can help to encourage China to adopt higher standards, in a way which might be relevant to the UK’s approach to the Belt and Road Initiative (BRI) in the coming years.

33.However, the Belt and Road Initiative, in the form it is currently being pursued, raises concerns regarding UK interests. These include the risk that Chinese investment will encourage countries to strike deals that undermine international standards that the UK seeks to promote, or that leave countries with unsustainable debt that undermines development and political stability. There is also a risk that the promise of Chinese investment, or the coercive leverage of indebtedness to China, could encourage countries to join China’s efforts to undermine certain aspects of the rules-based international system, and could weaken the alliances and partnerships that help preserve international peace and prosperity. We therefore commend the Government’s decision not to sign a Memorandum of Understanding in support of the Belt and Road Initiative on the basis of these risks. Further, the Government is right not to accede to China’s request for the UK to give what would be in effect a blanket endorsement of a key pillar of its foreign policy.

34.The Belt and Road Initiative is likely to have geopolitical effects that are as important as, and potentially more important than, its economic impact. As such, crafting and monitoring the Government’s response to and engagement with the BRI is solidly within the FCO’s remit, and the FCO should take an activist approach in ensuring that the work of other departments on BRI is in line with UK strategy as a whole. The Government must ensure that economic considerations do not crowd out questions of UK strategic interests, values and national security. In several reports we have noted the need for the FCO to lead and coordinate across the entire range of the Government’s internationally focused activities. This is a prime example of that need, and the FCO must rise to the challenge.

35.We encourage the Government to employ a strictly case-by-case approach to assessing Belt and Road Initiative projects, and to refrain from expressing an overarching view on the merits of the initiative as a whole. A Memorandum of Understanding endorsing the Belt and Road Initiative would be an inappropriate response, given that the project does not follow a single coherent approach, and that it represents a foreign policy ambition with repercussions for other states, as well as both positive and negative implications for UK interests. We urge the FCO to provide “health warnings” to other Government departments, and to UK businesses, on the strategic context surrounding the Belt and Road Initiative and the risks outlined above. Given that other Government departments, including the Treasury and the Department for International Trade, have a structural incentive to promote the gains on offer from participating in BRI projects, it is the FCO’s job to identify those projects in which UK involvement will serve the whole spectrum of UK interests. The FCO’s role in providing such strategic context and advice on BRI projects should be explicitly acknowledged in the UK’s China strategy. Lastly, the position of the Chancellor’s Special Envoy on the Belt and Road Initiative should be subsumed into the UK’s existing diplomatic mission in China.

The South China Sea

36.The maritime features of the South China Sea are claimed by a number of regional coastal states, including China. These include, to the north, the Paracel Islands (occupied by China since 1974, but also claimed by Taiwan and Vietnam); to the south, the Spratly Islands (claimed in their entirety by China, Taiwan and Vietnam, and partially by Brunei, Malaysia and the Philippines, and also occupied by several parties); and, to the east, the Scarborough Shoal (claimed by the Philippines and by China, which has maintained a constant coastguard presence since a standoff with the Philippines in 2012). The sovereignty claims in this region are complex, and it is not only China whose claims in the South China Sea are considered questionable.84 However, many observers, including witnesses to this inquiry, have argued both that China’s claims in the South China Sea are particularly excessive, and that China’s actions in support of those claims run counter to the principles of the rules-based international system.85

37.China has used a map with a nine-dashed (or “U-shaped”) line to assert that, as a 2009 diplomatic note put it, “China has indisputable sovereignty over the islands in the South China Sea and the adjacent waters, and enjoys sovereign rights and jurisdiction over the relevant waters as well as the seabed and subsoil thereof.”86 China refers to its “historic rights” in the South China Sea, asserting that there is history of Chinese activities there dating back over 2,000 years, and that it recovered and resumed the exercise of its sovereignty over its islands after the Second World War.87 In 2013, the Philippines brought a case against China at the Permanent Court of Arbitration in the Hague, under the UN Convention on the Law of the Sea (UNCLOS). In 2016, the Court ruled conclusively in favour of the Philippines. Among its findings was that China’s claim to historic rights via the nine-dashed line was contrary to UNCLOS and “without lawful effect” to the extent that it exceeded China’s entitlement under UNCLOS.88

38.China refused from the outset to accept the legitimacy of the arbitration or to participate, and when the Court’s award was issued the Chinese Ministry of Foreign Affairs declared that the it was “null and void and has no binding force”, and that China “neither accepts nor recognizes it”.89 The FCO told us that since the 2016 ruling, China “has increased private dialogue with other claimant states, but has also continued to strengthen military facilities on the features it occupies”.90 China has reportedly installed military equipment and weapon systems on features in the South China Sea including Subi, Mischief and Fiery Cross reefs in the Spratly islands, and Woody Island in the Paracel Islands.91

39.In written evidence, Bill Hayton, Associate Fellow at Chatham House, noted that aside from the sovereignty claims themselves, China insists on its right to request a foreign state to seek advance approval or give notification of passage, which is not specified as a condition of innocent passage under UNCLOS.92 China has also drawn straight baselines around its coastline, including around the Paracel Islands.93 In the case of the Paracels, other states see this as a violation of UNCLOS, which permits only archipelagic states to draw straight baselines around the entirety of a collection of islands.94 The FCO told us that the UK “does not support any claimant over another” in the South China Sea—though it does regard the Court of Arbitration’s ruling as binding on both China and the Philippines—but it “calls on all sides to refrain from activity likely to raise tensions”. The Government says its “commitment is to international law, and to freedom of navigation and over-flight, both commercial and military”.95

40.The United States has conducted a number of “freedom of navigation operations” (FONOPs) in the South China Sea since 2015, designed to challenge various maritime claims, including operations to assert innocent passage and to challenge straight baselines.96 The US has signed UNCLOS, but not ratified it. In the past year or so, the UK has stated its support for freedom of navigation in the South China Sea and reportedly conducted at least one specific operation to that end. In February 2018, the Defence Secretary said that the anti-submarine frigate HMS Sutherland would return from its Australian tour through the South China Sea, “making it clear our navy has a right to do that”. He did not specify whether Sutherland would pass within the 12 nautical miles territorial sea of disputed features, as US warships have done, but stated that “we very much support what the US has been doing”.97 In June 2018, the French Minister of the Armed Forces announced that the UK would join a French maritime task group when it sailed through the South China Sea.98 In August 2018 the British amphibious warship HMS Albion reportedly sailed close to the Paracel Islands and was challenged by a Chinese frigate and two helicopters.99 Reuters quoted a UK spokesperson as saying that Albion “exercised her rights for freedom of navigation in full compliance with international law and norms”, but giving no more specific detail. An anonymous source told Reuters that Albion had not passed within 12 nautical miles of any features, but had “demonstrated that Britain does not recognise excessive maritime claims around the Paracel Islands”.100

41.Although it concerns a distant region, the UK has specific interests in the South China Sea debate. It is a vital shipping lane for global and UK maritime trade: one think tank study estimated that in 2016 some 12% of the UK’s total trade in goods passed through the South China Sea.101 A broader UK interest is the need to uphold UNCLOS.102 In October 2018, the First Sea Lord said that he expected the UK would do more operations in support of freedom of navigation in the South China Sea when British ships transit through the region, saying that China’s interpretation of UNCLOS “has to be resisted”, because otherwise “you could see right around the world nations who will start to make their own interpretations”.103 The UK also has commitments to countries of the region with a stake in the dispute, including the FPDA that include Malaysia and Singapore, and a forward defence presence in Brunei.104 Mark Field told us that during his visit to Vietnam in January 2019, he found that “many countries are pleased to see that the United Kingdom, along with others, is standing up to ensure that there is that free navigation”.105

42.We were told that there are risks to the UK becoming directly involved via freedom of navigation operations. The China–US confrontation has become tense and at times dangerous, as Chinese coastguard and naval vessels have challenged US operations; and although the risk of all out conflict over the South China Sea may be low, the possibility of accidental escalation is real.106 Moreover, as with any diplomatic dispute, there is also a risk that the deployment of military forces will simply heighten tensions, rather than contribute to settlement of the underlying issues. Some witnesses also had sympathy with certain aspects of China’s position, noting the South China Sea’s importance to China’s strategic interests and the tendency of other countries to attempt to bend international rules.107 Others pointed out, however, that China has made use of the right to innocent passage in its own naval activities, making its position inconsistent.108

43.We welcome the Government’s commitment to exercise freedom of navigation in the South China Sea. The UK has a firm interest in preserving the principle and practice of freedom of navigation worldwide, and it is entirely proper that the Government should demonstrate to China that rules will be upheld.

44.However, we are concerned that the Government has not yet constructed a clear strategic narrative for its participation in specific naval operations to uphold freedom of navigation in the South China Sea. The strict, and clearly expressed, purpose of UK operations in the South China Sea should be to uphold international law, rules and norms, in collaboration with allies and like-minded partners. We believe that to use freedom of navigation purely to demonstrate military power, or as a sign of Britain’s global presence, would be a mistake. By leaving the Government open to cynical accusations of belligerence and militarisation of the region, it could undermine the legal principles that the UK is trying to protect. This is not the right instrument to send broader strategic messages to China.

45.The Government should continue to exercise freedom of navigation in the South China Sea, and to uphold the UK’s role in ensuring regional stability. However, it should ensure that its actions sit within a clear strategic narrative and are not open to misinterpretation. The Government should make a public statement about the purpose of its naval operations in support of freedom of navigation in the South China Sea in future, which identifies the legal basis on which they are conducted, and the specific claims or practices they are intended to challenge. This statement could do some or all of the following: make reference to the Permanent Court of Arbitration’s ruling on the validity of claims to “historic rights” in the South China Sea; reject the drawing of straight baselines around groups of islands in the case of a continental state; and assert the validity of the right to innocent passage. The Government should also urge the United States to ratify the UN Convention on the Law of the Sea.

UK presence in the “Indo-Pacific”

46.UK allies and partners in Asia have been debating their own responses to China’s increasing strategic influence. One product of these debates is the concept of the “Indo-Pacific”, and the related elaboration of the Quadrilateral Security Dialogue between Australia, India, Japan and the United States. The UK has endorsed the idea of a “free and open Indo-Pacific”, including in recent joint statements with Japan and India.109 The Government does not appear to have given an independent national definition of what it means by the term, but on being asked for one the Minister referred us back to the Japanese joint statement.110 The two joint statements refer primarily to “connectivity” between countries of the region, to maritime security, and to freedom of navigation. The UK already has structures of military engagement with Quad nations, including participating in joint naval exercises. The UK also participates in the Five-Power Defence Arrangements with Australia, Malaysia, New Zealand and Singapore, which provide for consultation in the event of armed attack and, more broadly, are a platform for defence cooperation between these five Commonwealth countries. The FPDA’s agenda has broadened in recent years to include discussions of counter-terrorism, piracy, cyber security and disaster relief. Supporters of the arrangements have argued for them to be strengthened, including seeking greater interoperability of the FPDA countries’ military forces, and playing a greater role in regional maritime security, potentially involving consultation with non-FPDA members.111

47.In addition to the freedom of navigation issue discussed above, the broader context for these developments is that China and the UK disagree significantly over the role of alliances in regional security. As we heard one senior Chinese official phrase it in Beijing, China promotes “partnership, not alliance”. China particularly opposes US alliances in the region, which it sees, as Professor Katherine Morton put it, “as a bulwark against the advancement of Chinese strategic interests”.112

48.Kevin Rudd told us that a greater UK military presence in the region would be welcome, and that “it is incumbent on those who wish to maintain the continuing robust, forward-leaning Western presence in multiple theatres around the world to physically be there, not simply declare that you are from time to time”.113 In an interview with the Sunday Telegraph in December 2018, Defence Secretary Gavin Williamson said that he was

very much looking at how can we get as much of our resources forward based, actually creating a deterrent but also taking a British presence. We are looking at those opportunities not just in the Far East but also in the Caribbean as well.114

A “source close to Mr Williamson” told the Sunday Telegraph that new UK bases “could be sited in Singapore or Brunei in the South China Sea”.115 We asked the Minister whether the Defence Secretary’s remarks had been coordinated with the FCO. He said that although he had not been party to discussions between the FCO and MOD on the issue, he understood that they had taken place.116

49.In a speech to the Royal United Services Institute in February 2019, the Defence Secretary announced that “the first operational mission of the HMS Queen Elizabeth will include the Mediterranean, the Middle East and the Pacific region”. The same speech included a reference to the need for Global Britain to mean taking “action to oppose those who flout international law”.117 The speech was widely reported in the UK press as sending a strategic message to China, and it was subsequently reported that the speech had led the Chinese government to cancel a scheduled visit by the Chancellor of the Exchequer to Beijing.118 The Chancellor commented on BBC Radio 4’s Today programme that the UK-China bilateral relationship is “complex” and “hasn’t been made simpler by Chinese concerns about Royal Navy deployments in the South China Sea”. He further commented that:

The aircraft carrier isn’t going to be at full operational readiness for another couple of years, no decisions have been made or even discussed about where its early deployments might be. And when those decisions are made, they’ll be made in the National Security Council.119

In March 2019, the Chinese Ambassador to the UK published an op-ed in the Daily Telegraph claiming that freedom of navigation “has long been an excuse for certain Western politicians to flex their military muscles by sending naval vessels to the South China Sea”. He stated that some countries “still choose to steer their navy warships close to the waters adjacent to China’s islands and reefs” and that some “even illegally enter China’s territorial waters”. Referring to the Government’s ambition for Global Britain, the Chinese Ambassador called for the UK to make an “active contribution to world peace and development, rather than the oldfashioned gunboat diplomacy I have heard being suggested in some quarters”.120

50.We support the Government’s efforts to increase the UK’s presence in the Indo-Pacific, including its military presence, in line with its capacity and other defence commitments. The Indo-Pacific is a vitally important region for global trade, and home to a number of UK partners and allies. The manner of communication of these efforts is crucial. Military deployments are not simply a matter of defence policy: they fit into a broader picture of foreign policy. Poorly communicated military deployments in the Indo-Pacific could be misperceived or depicted by China as a crude attempt to contain the expansion of its influence, while undermining the UK’s own strategic goals. We note that even if that were the UK’s intention—which we strongly believe is not the case—a modest military presence would not be a credible instrument. While recognising this context, however, the UK should not feel inhibited from exercising its right to cooperate with its partners and allies in the Indo-Pacific, and this right should not be a matter of negotiation in economic dialogue with China.

51.While exploring further opportunities to engage with regional actors, including through the Quadrilateral Security Dialogue and the Five Power Defence Arrangements, UK policy in the Indo-Pacific should remain tightly focused on preserving key rules and principles of international order. The Government should not permit a mistaken impression to arise that the UK seeks direct military confrontation with China. The UK should focus on core principles: freedom of navigation; the rights of states—including China’s neighbours—to form and maintain alliances of their choosing; and the importance of maintaining a balanced and consensual regional security order. We urge the Government to ensure that initiatives to expand the UK’s military presence in the Indo-Pacific are explained with reference to these principles. The Government must ensure in future that both the content and the messaging of UK policy towards the region is closely coordinated across departments, and especially between the FCO and the Ministry of Defence. Confident in these principles, the Government should not permit them to become a matter for negotiation in economic dialogue with China.


52.The UK recognised the People’s Republic of China as the sole legal government of China in 1972, and acknowledged the Chinese position that Taiwan is a province of the PRC. Since then, the UK has not engaged with Taiwan on a government to government basis. Since the election of Taiwanese President Tsai Ing-Wen in 2016, China has taken an increasingly assertive posture towards Taiwan, pressuring Western companies not to refer to Taiwan in a way which implies it has sovereign status, opposing official contacts with the Taiwanese government, and urging countries to recognise China instead of Taiwan. A Chinese policy paper on the European Union issued in 2018 is representative of this assertive posture.121 In January 2018, we wrote to the Foreign Secretary to express concern when China’s civil aviation authority approved new flight routes over Taiwan without consulting Taipei. The Foreign Secretary said in response that the Government encouraged both sides to settle such matters through dialogue and that “on the issue of cross-Strait relations, we are concerned by any move which creates tensions”.122

53.The Minister told us “Obviously, one has recognised the sense in which the space for Taiwan is being crowded out on the international stage” and referred to pressure from China on countries to rescind recognition of Taiwan. He said “the change of Government in Taiwan in the last 18 months or so has had an impact on relations” between the two sides, “so we step back. We want dialogue to ensure that those relations remain as cordial as possible”.123 In answer to a written question in 2017, the Government said that it “support[s] Taiwanese participation in international organisations where there is precedent for involvement, where Taiwan can contribute to the global good, and where there is no pre-requisite of nationhood for participation.124

54.We are concerned at the possibility of an escalation in tensions between China and Taiwan, and by the potential for China to apply increasing pressure on the UK to weaken its links with and support to Taiwan. We call on the Government publicly to restate the position that it supports Taiwanese participation in international organisations where there is precedent for its involvement, where Taiwan can contribute to the global good, and where there is no prerequisite of nationhood for involvement. This position should not be treated as a bargaining chip in the UK’s bilateral relations with China.

44 Foreign and Commonwealth Office (CIR0018)

45 Total investment under CPEC rises to $60b, Radio Pakistan, 29 November 2017

46 See, for example, China has a vastly ambitious plan to connect the world, The Economist, 26 July 2018. One Deloitte report refers to the BRI as a “$900 billion” initiative; quotes a senior Chinese official promising $600–800 billion of outward investment over the next five years, a large proportion of which will be BRI-related; and notes media estimates of a total capital cost for future BRI projects of between $4 trillion and $8 trillion. Embracing the BRI ecosystem in 2018, Deloitte, 12 February 2018.

50 Dr Yu Jie (CIR0014). Drs Lee Jones, Zeng Jinghan and Shahar Hameiri suggested that the “agglomeration of many competing interests and schemes” in the BRI’s structure mean that it is unlikely to follow a single, coherent strategic purpose. Dr Lee Jones (CIR0002)

51 Asian Development Bank, Meeting Asia’s Infrastructure Needs, 2016. These figures include the cost of climate-change mitigation and adaptation.

52 Q17. See also Overseas Development Institute (CIR0019)

53 Dr Yuka Kobayashi (CIR0022). See also Q34

54 See, for example, Keith Bradsher, China Taps the Brakes on Its Global Push for Influence, New York Times, 29 June 2018

55 See Geoff Dyer and George Parker, US attacks UK’s ‘constant accommodation’ with China, Financial Times, 12 March 2015

56 Q2

57 See, for example, Dr Lee Jones (CIR0002)

58 Providing exact figures is challenging because of a lack of public data. However, the AIIB reported $4.22 billion in loans approved at the end of 2017. AIIB Annual Report, 2017. By comparison, a May 2017 report in the Chinese state-run Global Times newspaper said that the China Development Bank and the Export-Import Bank had $200 billion in outstanding loans to BRI countries, and that Chinese state-owned commercial banks had “so far offered a total of $527.2 billion in loans and equity investments for 1,012 projects in Belt and Road countries”. Wang Cong, Chinese banks expand loans in Belt and Road nations, Global Times, 12 May 2017.

59 Q2

60 See Q98 and Dr Yu Jie (CIR0014)

61 Jonathan E. Hillman, China’s Belt and Road Initiative: Five Years Later, statement before the U.S.–China Economic and Security Review Commission, 25 January 2018.

62 See Q17. For an argument that China’s repression of the Muslim community in Xinjiang is motivated by a need to make a success of the BRI, see Robert D. Kaplan, Why China Is Brutally Suppressing Muslims, Wall Street Journal, 16 September 2018

63 Jan Knoerich (CIR0024)

64 See Foreign and Commonwealth Office (CIR0018); Q16; Q37

65 Dr Lee Jones (CIR0002)

66 Overseas Development Institute (CIR0019)

70 Department for International Trade, Doing business in Pakistan: Pakistan trade and export guide, updated 16 August 2018

71 FCO (CBI0015)

73 See Qq33–35 and George Magnus (CIR0023)

74 See Dr Yuka Kobayashi (CIR0022) and George Magnus (CIR0023). Nigel Inkster noted the “potential for military deployments”, although he urged us to keep this in context, arguing that China “doesn’t want to do colonies—that’s for sure—and it doesn’t want very expensive basing commitments all around the world”. See Q35

76 See, for example, Q2.

77 Other mechanisms include a Financial and Professional Services BRI Expert Board, a UK-China Infrastructure Alliance, and an “Infrastructure Hub” which “catalyses joint collaboration in third countries along the Belt and Road”. The Government says it is “scoping opportunities to establish London as the BRI financing hub.” Foreign and Commonwealth Office (CIR0018).

80 See Jan Knoerich (CIR0024), Q31 and Q37

85 See Bill Hayton (CIR0026) and Henry Jackson Society (CIR0020)

88 The Court also found that: the Spratly Islands do not generate extended maritime zones and none of the features claimed by China were capable of generating an EEZ; Scarborough Shoal falls within the exclusive economic zone of the Philippines; China had breached the Philippines’ sovereign rights under UNCLOS; China had failed to prevent harmful fishing; China’s island-building activities had breached several articles of UNCLOS, causing “devastating and long-lasting damage to the marine environment”; the conduct of Chinese law-enforcement vessels had “created serious risk of collision and danger to Philippine vessels and personnel”; and China had “aggravated and extended” its dispute with the Philippines “through its dredging, artificial island-building, and construction activities”, thus destroying evidence of the natural condition of features in the South China Sea that formed part of the Parties’ dispute. Permanent Court of Arbitration, Award in the matter of the South China Sea arbitration, PCA case no 2013–19, 12 July 2016.

90 Foreign and Commonwealth Office (CIR0018)

91 For an overview, see China’s Actions in South and East China Seas: Implications for U.S. Interests—Background and Issues for Congress, Congressional Research Service, 31 January 2019, pages 15–16. See also Katherine Morton, China’s ambition in the South China Sea: is a legitimate maritime order possible?, International Affairs, 2016

92 Bill Hayton (CIR0026)

93 For the Chinese government’s declaration of baselines, see Declaration of the Government of the People’s Republic of China on the baselines of the territorial sea, 15 May 1996. See also Bill Hayton (CIR0026)

94 Bill Hayton (CIR0026). For the relevant provisions of UNCLOS, see United Nations Convention on the Law of the Sea, Articles 7 and 47

95 Foreign and Commonwealth Office (CIR0018)

96 For an explanation of some of these operations, see Eleanor Freund, Freedom of navigation in the South China Sea: A practical guide, Asia Maritime Transparency Initiative, 10 August 2017.

97 Greg Sheridan, Brits to assert right of navigation in claimed sovereign waters off China, The Australian, 13 February 2018

98 Florence Parly, remarks at the Shangri-La Dialogue, Singapore, 3 June 2018

103 David Bond, Royal Navy chief vows to send ships through South China Sea, Financial Times, 22 October 2018

104 See Q49; and Bill Hayton (CIR0026)

107 See Q47 and Q102

108 See Bill Hayton (CIR0026) and Q47

109 See UK-Japan Foreign and Defence Ministerial Meeting 2017 - Joint Statement, 15 December 2017; and UK-India Joint Statement during the visit of Prime Minister to UK, Indian Ministry of External Affairs,18 April 2018. The UK-Indian joint statement refers to a “secure, free, open, inclusive and prosperous Indo-Pacific”.

111 See, for example, Tim Huxley, Developing the Five Power Defence Arrangements, IISS, 1 June 2017

112 Professor Katherine Morton (CHI0039)

115 Britain to become ‘true global player’ post-Brexit with military bases in South East Asia and Caribbean, says Defence Secretary, Daily Telegraph, 30 December 2018. This appeared to be information that had not previously been announced in public, although it was announced in 2016 that a new regional British Defence Staff—a much less significant measure than a new base—would be established in Singapore. Britain extends global Defence reach, Ministry of Defence, 12 December 2016

117 The Rt Hon Gavin Williamson MP, Defence in Global Britain, speech at RUSI, 11 February 2019

118 See, for example, George Parker and Henry Mance, ‘Gunboat diplomacy’ dispute upsets UK trade mission to China, Financial Times, 15 February 2019

119 Today, BBC Radio 4, 21 February 2019

120 Ambassador Liu Xiaoming, ‘Gunboat diplomacy’ does not promote peace, Daily Telegraph, 20 March 2019

121 The paper states: “The EU should explicitly oppose ‘Taiwan independence’ in any form, support China’s peaceful reunification, and handle Taiwan-related issues with prudence. Exchanges between the EU and Taiwan should be strictly limited to nonofficial and people-to-people activities, and there should be no official contact or exchanges in any form. The EU should refrain from signing with Taiwan any agreement with sovereign implications or official in nature. No institutions of an official nature should be established. The EU should not endorse Taiwan’s membership in any international organization where statehood is required, not sell Taiwan any weapons or any equipment, materials or technologies that can be used for military purposes, and not carry out military exchanges or cooperation in any form.” Full text of China’s Policy Paper on the European Union, Xinhua, 18 December 2018

124 Taiwan: World Health Organisation, HC Deb 19 July 2017 4281W

Published: 4 April 2019