From Bonds to Nukes: UK-PRC 'Special Relationship'?

UK Chancellor George Osborne declares his country open for Chinese business.

The hoary notion of a US-UK 'special relationship'--one hegemon passing the baton to another it shares considerable socio-historical ties with--has been a constant one in the post-WWII order. As it adjusted to a new, then-unaccustomed role of second fiddle, the UK sought to maintain global influence by being close to #1. In this 'realist' mode of thinking, Britain may no longer be top dog, but it has the top dog's ear nonetheless.

China's rise presents an interesting challenge insofar as the PRC is socio-historically dissimilar to the UK. Will it enjoy as close a relationship nonetheless? We can endlessly debate whether China will overtake the US economically and politically in the next few decades, but this much is certain: the PRC already has an oversized role in global affairs--especially in Asia. So, it certainly makes sense for the UK and its skilled diplomacy to get on China's good books anyway. Aside from being a charter member of the Asian Infrastructure Investment Bank (AIIB), the recent visit of George Osborne to Britain occasioned more rapport-building.

First, the Chinese are set to issue dimsum bonds (RMB-denominated bonds issued outside the mainland) in London:

Beijing is to issue short-term debt in London, the first time it has done so abroad, in a move hailed by chancellor George Osborne as proof that Britain was becoming “China’s bridge into western markets”. Mr Osborne, on a visit to Beijing, said the move by the People’s Bank of China was another step towards his goal of making the City the principal offshore base for Chinese finance.

Second, the Chinese are seeking to link their stock markets with those of the the UK:

George Osborne on Tuesday played down fears over the state of China’s economy and confirmed his hope to link up the stock exchanges of Shanghai and London. Speaking at the Shanghai stock exchange, the chancellor said Britain and China would “stick together” and predicted the Chinese economy would continue to fuel global growth.

Mr Osborne said he wanted to see Chinese companies listing in London to create a deeper capital market to help them grow. “China needs a financial system that is truly global and there’s no better place to start than the global centre of finance that is the UK,” he said. A feasibility study to link the two exchanges has been launched and Mr Osborne said Britain should not fear greater links to the Chinese economy.

Third, the chancellor is encouraging the Chinese to help build nuclear plants in the UK:

With that in mind, the U.K. also announced a number of trade deals with China on Monday, including a £2 billion nuclear project. This will see China invest in the U.K.'s first government-guaranteed nuclear power station to be built in 20 years. The countries also agreed to two joint space programs, including one worth £24 million on remote sensing for agri-technology.

The U.K. has been among the keenest in the West to woo China and attracted nearly $12 billion of Chinese foreign investment in 2013—more than France and Germany combined—according to the Treasury. It was the U.K.'s sixth largest goods export market in 2014, up from 14th in 2003.

It may be smart geopolitics on the UK's part, but you have to wonder if all these actions will increase its leverage over the burghers of Beijing. With more commercial ties, it is possible since money's at stake. Then again, having established so many ties while turning a blind eye to other things China does that it does not find so desirable may send the opposite signal when push comes to shove.