Foreign Affairs: Global Role, Emerging Powers and New Markets

Lord Bates Excerpts

Thursday 6th December 2012 Lords Chamber

[Lord Bates]

My Lords, it is a privilege to take part in this debate and I join many others in paying tribute to my noble friend Lord Howell for securing it. Many years ago, I had to complete an essay question which was to explain the difference between a politician and a statesman, and to give examples. I often think that had I known the noble Lord at that point, my answer would have been so much better illustrated. Undoubtedly, he is one of our great statesmen and it is a privilege to continue to hear him dispense his wisdom from the Back Benches.

Another thing I learnt from essays was that you are supposed to look at the question before answering it. I note that the noble Lord has been very careful in choosing the title for this debate. He has used the word “new” twice and the word “emerging” once, thereby suggesting that there is a passage from an old order, an old world view, to something new. I very much share the view of my noble friend Lady Morris of Bolton and the noble Lord, Lord Bilimoria, that in going into that new world we should have great self-confidence and self-belief.

We are very much in a global race, as the Prime Minister illustrated and set out in his speech to the CBI last month. I would contend that we are not so much in a single global race but that we are in a number of global races for key markets and that we are engaging with key powers. In my time today, I shall focus on one of those new markets—China—and will make the argument that we need to engage in some fresh, new thinking and to shift from an old paradigm view of Chinese conduct in the world to a new view. I do so with some trepidation, knowing that one of the foremost authorities on these matters, my noble friend Lord Green, will respond to the debate. I look forward to hearing his response.

The scale of the Chinese miracle has been well rehearsed but it bears repeating for a few moments. First, China has not gone through a period of boom and bust, as some countries have. In fact, it has delivered 30 years of uninterrupted growth, averaging 10% per annum. When people talk about the Chinese miracle perhaps beginning to slow, they are talking about it slowing to 7.5% per annum for the next decade. It is the second largest economy in the world. By the end of this decade, it will be the largest economy in the world.

What is more interesting is what China has used that new wealth for. It has invested in infrastructure. Before 1988, it had no motorways whatever. By 2010, it had 74,000 kilometres of motorway. China has more kilometres of high-speed rail lines than the rest of the world put together. In the three years that it has taken us to debate whether we should have another 200 kilometres of HS2 in this country to be completed by 2026, China has added 8,000 kilometres of high-speed rail lines. Sometimes, we need to have a little sense of humility as to what people are doing and how they are going about it.

Secondly, we should look at what China has done for its people. It has lifted more people out of poverty than any country in history. According to the World Bank, 600 million were lifted out of poverty between 1981 and 2005. A new self-confident middle class is emerging, the numbers of which are open to some debate but roughly settle around the figure of 200 million people. There are 400 million internet users and 700 million mobile phone users in China. The Chinese savings rate is one of the highest in the world at 38%, compared to 7% in this country.

China’s foreign currency reserves dwarf anything in the world at $3 trillion. They are the largest in the world and amount to three times those held by Japan. In that sense, China is keeping the global ship afloat. China has 20% of the world’s population but only 7% of the land mass. Therefore, it is heavily dependent on importing commodities from around the world. That has led it to have a—some would say paranoid but others would say very natural—national interest in developments around the energy-rich waters of the South China Sea. Its defence budget is growing dramatically. It is already the second largest in the world and will overtake the United States in another 20 years.

However, our approach to China has often been characterised by a degree of suspicion and perhaps even a little distrust. When we look at some of the agreements that we have had, such as the transfer of powers over Hong Kong, most people would recognise that those undertakings given in 1997 have largely been honoured and adhered to. Hong Kong retains a distinctive and vibrant economy and a large degree of autonomy. Of course it is right to raise human rights concerns but I would argue that that should be done in proportion.

How do we respond to China? We need to respond by recognising that there is a great market out there. When Wen Jiabao visited this country last year a target was set to increase bilateral trade to $100 billion by 2015. When Wen Jiabao went on to visit Germany, he and Chancellor Merkel announced that they were going to increase their trade to $284 billion. If we are engaged in a global race, let us start racing with our friends in Germany to tap into that market in China. Yes, we are in a global race, but it is one not only with China but also for China, so we need to engage in some fresh thinking.

The current policy document which underlies the UK’s approach to China was published in January 2009 under the previous Government. Perhaps it is time that we looked at that again. When we approach China and try to encourage it to take a new and constructive role as a major global superpower, let us recognise that we need to engage with it not only with a new policy but with a new mindset and, more importantly, with a new relationship.