Sanctions, China hawks and Land Rovers – a very British dilemma

Amidst a global deterioration of relations with China, the pressure is growing on the United Kingdom from all sides to employ its new sanctions regime against Chinese officials.

The implications are huge. Sam Armstrong, the strategy advisor for the Inter-Parliamentary Alliance on China, an international group of legislators working to reform how democracies approach and toughen their China policy, says that a reset of relations could be “the defining issue of the 21st century". 

The UK has recently launched its “Magnitsky Act” of sanctions legislation. The first wave of 49 individuals and organisations who will be subject to UK asset freezes and visa bans are mostly Russian and Saudi Arabian.

But now attention is turning to China, and the British business community is worried that political decisions won’t be taken with economic interests in mind, leaving the government with a dilemma.

Pressure

The US has, in recent months, escalated its tough dealings with China, imposing sanctions on Chinese officials and businesses involved in the infringement of Hong Kong’s autonomy and in human rights abuses of the Uighur minority in Xinjiang province. It has sought to devise a diplomatic coalition of the willing to further challenge China.

“We hope we can build out a coalition that understands this threat [and] will work collectively to convince the Chinese Communist Party it’s not in their best interest to engage in this kind of behaviour” Secretary of State Mike Pompeo recently told a press conference.

The US has been vocal in its desire for UK to join them in imposing unilateral targeted sanctions on China. It had indicated that the UK should choose a side in the technology dispute between Beijing and Washington, which was followed by the UK government's decision to remove Huawei from British telecommunications infrastructure.

The pressure on the UK government is not only coming from the US, but also from within the House of Commons. The increasingly persuasive ”China Research Group” (CRG) has been vocal in demanding sanctions and was previously extremely influential in shifting government policy on Huawei. After that win, they are hungry for more.

“Sanctions are one of a number of fronts we’re looking at” according to Armstrong. “They come about as a real opportunity in that the UK has passed these sanctions chiefly to tackle the threat from Russia but they now apply just as clearly, if not more clearly, to the Xinjiang situation and also Hong Kong”.

The parliamentary pressure comes from both sides of the floor: during Secretary Pompeo’s visit to the UK, he met a cross-party group of MPs to discuss how to challenge Beijing. In recent questions to the Foreign Secretary Dominic Raab, Shadow Foreign Secretary Lisa Nandy asked if he was “working with our US counterparts to build the case for UK sanctions” on Chinese officials involved in persecuting the Uighur people, before probing why Chinese Communist Party officials had not been banned from entering the UK.

A Conservative backbencher also raised the point that, “if there is enough evidence for the Americans to apply sanctions on officials in Xinjiang, can the Foreign Secretary have sight of that evidence to see whether we can do the same here?”.

Parliamentarians from across the House could point to the recent Russia Report authored by the Intelligence and Security Committee, which detailed that targeted sanctions have “a powerful impact” on, in that case, members of the Russian elite and “provide a significant primary disruption when imposed”.

A leading member of the CRG and former minister, Sir Iain Duncan Smith, has called for targeted sanctions on Carrie Lam, Chief Executive of Hong Kong, a move recently made by the US and already seen as a serious escalation in the US-China dispute.

The call for sanctions on Lam has been echoed by the All-Party Parliamentary Group for Hong Kong in their recently released report into violations of human rights in the area. Armstrong adds: “we’ve been very clear that we would like to see Carrie Lam on that list. There’s no doubt in my mind that Beijing will see this as an enormous provocation but we aren’t necessarily bothered by that fact. Lam is very much part of that internationalist class of Chinese officials and is an eminently attractive target for sanctions.”

Business community

As diplomats and legislators on either side of the sanctions argument trade barbs, the business community is watching from the fringes with trepidation. As leaders and lobbyists, their opinion carries much weight, but crucially they will not be in the room when the decisions are made.

As the government looks ahead to post-Brexit future, it will be aware that China is the UK’s second largest import and export partner after the United States outside of the EU. A timely research report produced by the China-Britain Business Council (CBBC), the UK’s voice of business with China, concluded that links with China in terms of trade, tourism and education support well over 100,000 full time jobs in the UK. The CBBC predicts that “continued growth in China could generate further demand for UK output and further jobs”.

UK-China trade has seen a dramatic increase in recent years - in 1999, China was the UK’s 26th largest export market and 15th largest source of imports. In 2019 these ranks were sixth and fourth respectively.

China's foreign policy is still deeply shaped by a century during which foreign invasions and coercion became a central part of their experience with international society

A massive 26.4% of all UK exports to China come from Scotland. The majority of this figure is Scottish oil exports. Oil industry regions traditionally return Conservative MPs and have strong support for the Union – so as support for the Union is dwindling in Scotland, taking decisions that could blow back on Scottish oil revenues represents yet another careful tightrope for the government to tread.

There is worry in the business community that the importance of trade and economic relationships will be subjugated to the political goals of the nation-state. British businesses that are worried of political splashback will recall that Mr Johnson, then Foreign Secretary, responded to reported industry leaders’ fears of Brexit by remarking “fuck business”. 

If there is enough evidence for the US to apply sanctions on officials in Xinjiang, can the Foreign Secretary do the same here?

The Confederation of British Industry (CBI) was an opponent of a no-deal Brexit and has  been  supportive of further growing the UK-China business relationship. At their 2018 Chinese New Year Dinner (in partnership with Huawei), CBI chief Dame Carolyn Fairbairn told guests: “last year, China accounted for 3.1% of UK exports. But just imagine what we could do if the dial reached 6%. We have an opportunity to do this right now”.

Growing the relationship will now be in the rear-view mirror for the CBI: maintaining it will be a greater concern.

Armstrong is not convinced by the idea that a tougher geopolitical approach will harm business with China: “There’s two communities in business on this. One that says: we have extensive business relations in China and what you’re doing will impact it all badly. Another community in business don’t necessarily have extensive interests in China but worry about uncertainty in the market at this time... [but] you won’t find a financial analyst who does not believe that COVID-19 will impact the overall economic landscape with China [and] will lead to decoupling of the economies”. 

However, the risk of retaliation has been loudly voiced by China. The UK-China business relationship is now so vast and diverse that policies designed to retaliate could cover anything from £230 million of UK beef exports to 120,000 Chinese students studying in UK universities.  The Daily Mail recently reported that executives from British companies operating in China had been briefed by Chinese officials that retaliation could target their operations. AstraZeneca, BP, HSBC and Jaguar Land Rover are just some of the British companies with large operations in China.

The business community has not directly confronted the question of sanctions, as this leads to an uncomfortable dilemma between values and prosperity. 

On this point, Armstrong is resolute: “Where there is worry is your likes of Jaguar Land Rover who are selling goods to the Chinese market. I don’t think it’s hawkish to stand up for minorities over luxury car manufacturers.” When contacted for comment, Jaguar Land Rover stated: “We are monitoring the situation.”

What the business community fears is a deterioration in the UK-China relationship to the point that jobs, companies and the UK economy suffer. The effects of COVID-19 look likely to surpass the previously anticipated “no-deal” Brexit recession, so the worry of the business community is legitimate.

'National humiliation'

The rhetoric from Chinese official and state media channels throughout has encouraged the UK to carefully evaluate its next steps. An Embassy spokesperson recently remarked that “if the UK imposes sanctions on Chinese institutions or individuals in total disregard of the facts, China will respond resolutely and the UK will have to bear all the consequences”. 

China's foreign policy is still deeply shaped by a century during which foreign invasions and coercion became a central part of their experience with international society

And speaking to the BBC’s Andrew Marr, the Chinese Ambassador to the UK warned that he did not want to see the tit-for-tat sanctioning present in the US-China dispute to creep into UK-China relations. Individual retaliatory sanctions have been imposed on US senators Ted Cruz and Marco Rubio, do UK legislators fear the same? “Privately, many parliamentarians I’ve spoken to aren’t worried about getting sanctioned, they see it as a badge of honour” says Armstrong.

China has utilised a recent EU foreign affairs statement, denouncing the use of unilateral sanctions as contrary to international law, to lend weight to their own opposition to unilateral US sanctions. Evoking colonial language, Chinese government officials have described the US sanctions as “blatant hegemonic acts”. 

'The “Century of Humiliation” period of Western intervention, colonialism and subjugation of China from 1839-1949 is memorialised in the form of the words wu wang guo chi. Etched into national monuments and sculptures around the country, this phrase translates as "Never forget national humiliation”.

“China's foreign policy is still deeply shaped by a century during which foreign invasions and coercion into unequal international treaties became a central part of their experience with international society,” according to Professor Rana Mitter, Professor of the History and Politics of Modern China at the University of Oxford and director of the University’s China Centre. 

Rhetoric claiming that China will remain undaunted by “intimidation from any external forces” and “wolf warrior” diplomatic tactics are just some indicators of this aspect of Chinese foreign policy. “This means that China is still extremely wary of becoming too dependent on the norms of the international community” adds Mitter. 

As the pressure grows on the UK, it appears more a matter of when, not if, targeted sanctions will be imposed. The calculation that the government will have to make will be how far to go with its targeted sanctions to satisfy the US and the House of Commons, whilst not going so far as to damage a vital trading relationship and further destabilise the economic environment for the British business community.

How do you have your cake and eat it too? A very British dilemma.

Philip Crowe is a foreign affairs journalist and former parliamentary researcher.

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