Sino-British Honeymoon

Chinese President Xi Jinping met British Prime Minister, David Cameron, in London on Wednesday, declaring new business deals amounting £30 billion. It was a bolt from the blue for Japanese policy makers, who had been focusing on maintaining Japan-United States alliance. Competition between Japanese companies and Chinese business sector in Britain should be active for coming years.

Japanese newspapers quoted Xi’s speech in Royal Gallery as “It is fair to say that China and U.K. are increasingly interdependent and becoming a community of shared interests.” They also introduced Cameron’s elaboration that U.K.-China relation was reaching “new golden era.” The protocol of British government, including welcome ceremony in front of Buckingham Palace with attendance of Queen Elizabeth or a speech at the Parliament, was reported as enthusiastic reception of British people in Japanese media.

Actually, two Chinese companies including China General Nuclear Power Group is going to invest in new nuclear power plant in Hinkley Point, located southeast of England, operated by a U.K. major energy company, EDF Energy. Chinese companies are sharing 33.5% of the investment in whole project. Other Chinese companies are willing to invest in high-speed train system between London and major cities in central England and other infrastructure projects for housing. It is inevitable that those positive involvements of China in British business will compete with ongoing projects with Japanese companies like Hitachi or Toshiba.

China and Britain are also deepening their relationship in monetary policies. They expect broader settlement service in Chinese Yuan in London Market or future issuing of British national bond in Renminbi. Chinese government has been requiring International Monetary Fund to include Renminbi in the currencies for special drawing right, which is constituted by U.S. dollar, Euro, Japanese Yen and U.K. Pound. According to Society for Worldwide Interbank Financial Telecommunication, the share of Renminbi in international settlement rose up to the fourth place, taking over Japanese Yen. U.K. is willing to include China in international monetary system so much as deciding to join Asian Infrastructure Investment Bank initiated by China.

It was common in Japanese media that the chief motivation of China to approach U.K. was to counteract emerging free trade framework in Asia-Pacific region, called Trans-Pacific Partnership. China was described as trying to escape from containment policy by U.S. or Japan. That matched expectation of U.K., which was searching for alternative economic policy not dependent on European Union.