Closer ties with China could leave Britain exposed to political and economic turmoil in the country

Should Britain jump into bed with China quite so enthusiastically?

Should Britain jump into bed with China quite so enthusiastically?

By James O'Malley

Xi Jinping is in Britain this week for a state visit. So don’t be surprised if you see a smitten George Osborne parked outside of Buckingham Palace, where he is staying, holding a boombox aloft and declaring his undying love for the Chinese president.

The reason for this outburst, of course, would be because he thinks China can stump up the cash to pay for all of the infrastructure Britain will ever need.

On a recent trip by the chancellor to Beijing, he made a number of major announcements about how Britain was scooping up Chinese cash. For example, he announced Britain would be guaranteeing Chinese investments in a new nuclear power station. Another biggie was that he is encouraging Chinese firms to bid for the lucrative contracts to build the High Speed 2 railway.

What could go wrong? Perhaps I’m paranoid, but I can’t help but wonder if George Osborne should really be betting so much of Britain’s economy on red.

What China has achieved over the last few decades is nothing short of astonishing. It’s the second largest economy in the world, it can build entire high speed railway networks in the time it takes for Britain build a few miles of track and so on – but is this really sustainable?

Despite talk of investment opportunities, China is not a black hole that spews out cash and iPhones. It is perhaps easy to understand why we might sometimes perceive it like that. But how much do we actually know about China? Do we know where the money is supposed to be coming from?

Have you heard of these cities, which all have a population larger than Manchester: Shantou (population 11m)? Hangzhou (8m)? Or Busan (3.4m)? That last one is a trick question – Busan is in South Korea, but if you didn’t spot that, you’re proving my point that a little more due diligence might be necessary.

What Osborne seems to either not have realised or is wilfully ignoring is that it isn’t inconceivable that the Chinese miracle might come to a juddering halt.

Arguably, one of China’s strengths is that it's a one party state: This means that if the government wants to get something done (such as build a massive new development), it can get such projects approved and built more quickly without pesky things like “accountability” or “listening to people” to worry about.

Unfortunately, being a one party state could also be its greatest weakness: Eventually, it is likely that China will face another situation like it did in 1989 in Tiananmen Square, where people have had enough of the ruling party, yet have no mechanism to peacefully change the government.

Amplifying this is China’s emergent middle class who are educated and materially wealthy – who sooner or later will want a say in the country’s affairs. For example, amazingly, according to a new report by Credit Suisse, the number of “middle class” people in China (109m) now outnumbers the number of “middle class” people in the United States (92m).

Political theorist Francis Fukuyama argues that it's the middle classes that make revolutions happen. The Arab Spring didn’t take place in the poorest countries, but the middle income ones, as it is much easier to worry about political representation when you’re not starving. The same is true for other middle income countries, like Brazil and Russia, which have experienced political turmoil in recent years.

The reason this hasn’t happened yet in China is because the staggering growth of the country’s economy has essentially bought off anyone likely to complain by increasing their wealth. Inevitably though, there will come a point where this growth comes under pressure.

Whether it's due to a cyclical recession or even just a slow-down to western speeds of growth, the 100m Chinese people who now have material wealth and gold iPhones are going to demand change – something the one-party Chinese system cannot deal with easily.

In a democracy like we have, if everyone dislikes the government there is a relief valve in place and an orderly process to decide and legitimate any new political arrangement. When we turf out one government and replace it with another, we hold an election, and all of the significant players understand and respect the outcome. In China, if the Community Party loses its legitimacy in the eyes of enough people, it will be forced to make concessions or send in the tanks again – with a greater risk of chaos because of the lack of any coherent framework for doing so.

And this brings me back to Britain. This situation in China isn’t too hard to imagine and comes with huge potential economic consequences. And yet here is Osborne, who boasts about how exposed Britain will be to China’s economic fortunes. What happens when it all goes sour?

Osborne says he wants the UK to be China’s “best partner in the west”, and that “No economy in [the] world [is] as open to Chinese investment as UK”, which ultimately means Britain will be more exposed to political and economic turmoil in China. If our economy is so dependent on Chinese cash for jobs and running our infrastructure, what happens when the the mysterious black hole stops coughing up money?

To paraphrase the old cliché: When China sneezes, the rest of the world might catch a cold, but could Britain end up coming down with the flu?

James O'Malley is a technology and politics writer. You can follow him on Twitter here.

The opinions in Politics.co.uk's Comment and Analysis section are those of the author and are no reflection of the views of the website or its owners.