China and the opportunity for Britain

This week saw more anti-democracy arrests in Hong Kong, Trump signing an executive order banning Ali pay (the Chinese PayPal) and seven other apps, and another executive order “blacklisting” 35 Chinese companies, which caused the SEC to flip-flop, but ultimately ended with the NYSE deciding to delist three Chinese telecoms. On the other side of the Atlantic, after 35 rounds of talks dating back to 2013, the EU and China agreed a “Comprehensive Agreement on Investment,” which covers a lot of ground, including the removal of requirements for joint venture in several areas (i.e., a European company can go do business in China, without having to form a joint-venture with a Chinese partner), commitments on labor standards, subsidy transparency, and a number of other items.

Ultimately, whether the US Executive Orders amount to anything or not will be determined in a few weeks, because they don’t go into effect until after Biden takes office. On the EU side, this looks quite good for Germany and France, but many see it as a huge win for China — and I agree. Given what I’ve already said about China’s global ambitions (see “Afghan lives matter” in newsletter #56) and the hard lean into more traditional (read, Stalinist) communism (“China is becoming more communistic”, newsletter #46), I find it very unlikely that the Chinese will live up to their end of the bargain, while the EU will. Certainly, this will be good for Europe for the next 5–10 years, but ultimately, it’s just strengthening China.

Cue Brexit music

All of that is well and good, but what’s more interesting is the opportunity it presents for the UK. Now that the UK is no longer part of Europe, the country is free to pursue it’s own policies — and one of their big opportunities is with China. I teed this up back in June (“Hedge Funds and New Hong Kong”, newsletter #34). UK PM Boris Johnson has kept good on his pledge, with the country having issued over 200,000 UK passports to Hong Kong residents in the first 10 months of 2020. The recipients of these special passports can start arriving in the UK from 31 January this year, and estimates indicate that between 150,000 and 330,000 of them could arrive this year alone. But this is just the tip of the iceberg. As the Guardian writes, Britain’s approach to China, “represents as swift and complete a reversal in foreign policy as the UK’s shift from treating Russia as an ally in 1945 to cold war foe in 1946.” This could not have happened were the UK still part of the EU.

On the one hand, no one wants another cold war. But on the other hand, the lack of a common enemy seems to have exacerbated, if not created, tremendous internal divisions in both the US and the UK. If Britain keeps heading down this path, it has a genuine opportunity to once again be a world leader, and to unite its people in a way that really no country has seen since the 1980s. The next decade in the UK is going to be very exciting, and I think represents the biggest opportunity in the developed world.

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