The British business delegation to China headed by George Osborne and Boris Johnson was more interesting than these things usually are. Chinese people still have bitter memories of imperial arrogance during the colonial era. So, if they noticed the visit at all, they must have been amused by Britain hustling for Chinese custom.
Osborne and Johnson—deadly rivals to succeed David Cameron as Tory leader—seemed to have quite forgotten the latter’s criticisms of Beijing’s human rights record. Cameron’s meeting with the Dalai Lama in May 2012 led to China putting its relationship with Britain in the deep freeze. He now says he has “no plans” to meet the Tibetan leader again.
But the whole visit was most revealing in what it said about Britain. Probably the most significant deal agreed allowed the City of London greater access to foreign trade in the renminbi, the Chinese currency, and reduced the regulation of Chinese banks operating in Britain.
Even though China is now one of the main driving forces of global capitalism, its economy is still subject to considerable state control.
Capital is still not allowed to flow freely in and out of the country, and the authorities still fix renminbi’s exchange rate with the dollar at a level that keeps Chinese exports cheap.
The controls on capital movements are becoming increasingly hard to sustain, and Beijing is allowing the renminbi to become traded internationally, although still only on a modest scale. The renminbi is unlikely to become a major international reserve currency like the dollar and the euro until money is allowed to flow freely in and out of China.
Hong Kong, which still has considerable economic and political autonomy, is the main centre for foreign trade in the renminbi. But London now accounts for 62 percent of renminbi business outside China and Hong Kong.
Osborne wants London to play an even bigger role in the growing offshore business in the renminbi. Maybe this will work, though Beijing is putting resources into Shanghai, which is now the centre of a financial free-trade zone.
In any case, the effect of the policy is to reinforce the role of the City as the most important single global financial centre. Grabbing the renminbi trade fits in with London’s specialisation in the foreign exchange market, which dates back to the 1930s.
Despite the 2008 crash, the City has actually increased its share of foreign exchange and hedge fund business. The funny thing about this is that the City acts as a platform mainly for American and European banks. Now Osborne is trying to encourage Chinese banks to make London their foreign base as well.
All this puts in question the Conservative-Liberal coalition’s claims to be seeking to “rebalance” the economy, shifting investment away from finance into production. The City took flight as a global centre under Margaret Thatcher, particularly thanks to the Big Bang of deregulation in 1986.
Cameron and Osborne are continuing this strategy. One of its main elements—very evident in the transformation of the City—is government indifference to the national base of companies operating in Britain.
So it’s no surprise that Osborne signed a memorandum of understanding allowing state-owned Chinese General Nuclear Power Group joining a consortium headed by EDF Energy to build a new nuclear power station at Hinkley Point. After all, EDF is owned by a French state company, Électricité de France. It controls, along with what used to be the London Electricity Board, six British nuclear power stations.
The coalition, like Thatcher before it, is operating according to the pure logic of neoliberalism—let global capital reign, irrespective of national differences.
The irony is that this opens the British economy up to foreign companies—including the Chinese banks, still under tight government control—owned by states less willing to worship the market.
The problem here isn’t that the companies are foreign-owned. But that the Chinese deals underline that the coalition is trying to drive the neoliberal counter-revolution even further.