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George Osborne is qualified right-hand man of David Cameron
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George Osborne is qualified right-hand man of David Cameron
Frank Oct. 13, 2015, in Waterloo, On. Ca.
Today, Oct. 13, 2015, I read article The Osborne Doctrine, it criticizes that British First Secretary of State George Osborne is too close with China, with a photo as follow.
The photo has told us everything.
I appreciate the pragmatism of Mr. George Osborne very much for his unaffected by ideological prejudices of great many others, but fully focus on the development of economy as same as that of Prime Minister David Cameron.
I believe that Mr. Osborne is the qualified right-hand man of British Prime Minister David Cameron.
I think of my June 6, 2014 article Why David Cameron insists that British exits from the EU, that showed my appreciation about the pragmatism of Prime Minister David Cameron for his pragmatism.
British Prime Minister David Cameron has been insisting to leave the European Union and eagerly to seek cooperation with China.
He is also paving the road to China for future - David Cameron urges UK schools to teach Mandarin.
There are two reports may help us to re-understanding of China and to help sure that Prime Minister David Cameron is a rational leader of Britain, and George Osborne is qualified right-hand man of David Cameron.
Oct. 5, 2015, the British Secretary of State for Health Jeremy Hunt says tax credit cuts will help to teach British to work as Chinese
Sept. 17, 2015, Israel plans to hire 20000 Chinese construction workers due to that Chinese construction workers build high-rise buildings 50% faster than Israelis, Palestinians or others according to Israel’s Finance Ministry.
--- Frank Oct. 13, 2915, in Waterloo, On. Ca.
--- Follow is reproduced articles.
The Osborne Doctrine
Britain is sleepwalking into a much closer relationship with China
Sep 26th 2015 | From the print edition
http://www.economist.com/news/britain/21667935-britain-sleepwalking-much-closer-relationship-china-osborne-doctrine
A FAST, eight-car motorcade ploughs a furrow through the Beijing rush hour. Police lights blink in the smog. Officers guard the junctions, arms raised to hold back the cars. Hardly braking, the convoy sweeps past hutongs and luxury clothes shops, over gridlocked motorways and under the gaze of Chairman Mao (and the security cameras, six to a lamppost) in Tiananmen Square. Such is the style in which George Osborne, who arrived in China for a five-day tour on September 20th, treads the boards of the world stage.
Usually the Chinese authorities reserve the jiaotong guanzhi, or traffic controls, for Politburo members and foreign heads of state. But Britain’s urbane chancellor of the exchequer is no mere finance minister. He is David Cameron’s closest ally and, in all but name, deputy prime minister, foreign secretary and chief re-negotiator of Britain’s membership of the EU. In the past three years he has made the British economy dynamic, the Conservative party electable and himself liked—or at least tolerated—by voters who used to loathe him. His odds of succeeding Mr Cameron have never been better.
That is welcomed in China, for Mr Osborne is perhaps the West’s most pro-Beijing statesman of his stature. He is clearly exhilarated by the country’s boom. Sitting down with Bagehot in the British ambassador’s residence, the chancellor animatedly describes his spell backpacking around China in the early 1990s; contrasting the “staid and dull” capital of that era to the buzzing metropolis of today, in the trendy, high-tech corners of which “you could be in San Francisco”. Since 2012, when Mr Cameron’s meeting with the Dalai Lama froze relations between the countries, the chancellor has been the face of the thaw. Britain should be “China’s best partner in the West”, he argues, promising a “golden decade” of co-operation. His hosts, too, issue encomiums; Shi Yaobin, the vice-minister of finance, says that Mr Osborne’s “positive and remarkable” deals in Beijing pave the way for the state visit of President Xi Jinping to London next month.
Not everyone in Whitehall shares the chancellor’s brio. Liberals argue that Britain should confront China’s noxious human-rights record more vocally. Hawks fret about its cyber attacks and intellectual-property violations against Western states and firms. Lefties see Chinese money as inferior to investment by the British state. Yet Mr Osborne believes that a happy moment has come in which the interests of the two countries align like never before. China’s growth is slowing, but its emerging middle class and welfare state mean it hankers less for commodities and machinery from Australia, Brazil and Germany and more for the services and posh consumer goods in which Britain specialises. China’s foreign reserves, meanwhile, give it the wherewithal to finance Britain’s acute infrastructure needs. Thus the chancellor used the trip to hail, among many other agreements, the forthcoming issuance of yuan-denominated bonds in London, new licences for British banks operating in China and a guarantee for up to ?2 billion ($3 billion) of Chinese investment in Hinkley Point, a nuclear power station in Somerset.
This stance entails three gambles—economic, political and diplomatic—that together comprise a sort of Osborne Doctrine. The first bet is that binding Britain to the Chinese economy is worth the risk of violent shocks to British banks and infrastructure projects if the world’s second-largest economy experiences a hard landing after its mighty boom. The second is that British voters are liberal enough not to mind foreigners owning swathes of their country. Mr Osborne cites their relaxed attitudes towards the Indian takeover of their leading car producer and Chinese stakes in their sewers, concluding: “The UK is coping with globalisation a lot better than most other European countries.” The third bet is that China responds better to the carrot than to the stick. The chancellor is no foreign-policy dove, yet believes that the best way to influence Beijing is to increase trade and disagree only behind closed doors. Britain’s reluctance to back the prodemocracy protests in Hong Kong last year and its unilateral decision in March to join the Asia Infrastructure Investment Bank, which angered the French and Americans (who see it as a rival to the World Bank) exemplify this new posture.
Kowtow if you want to
That this shift is so little discussed in Britain is remarkable. It could transform the country’s role in the world. The Foreign Office is already diverting resources from Europe to China; from political desks to trade ones. Britain’s growing friendship with Beijing appears to be losing it pals in Washington. Its new commercial links hard-wire its economy into that of a vast partner whose stock market has fallen by almost 40% in the past three months. Mr Osborne points out that Britain is bound to the EU, too. But it is about to have a year-long debate, followed by a referendum, about that relationship. Where are the parliamentary wrangles over China? The prominent sinologists in Britain’s public life? The headlines about the intrusions on British sovereignty by the economic giant to which Britain is, for better or worse, tethering itself?
Though unconvinced that stern words in private will stop Beijing from being beastly to its liberals and minorities, Bagehot otherwise accepts the chancellor’s main argument: that China is now too big a power for a global entrep?t like Britain not to embrace. But the country is doing so by default; a change from which much of its establishment (let alone its electorate) is disengaged. As it plunges into a bunfight about its membership of the EU, it is up to the likes of the chancellor to forge a parallel debate about its much less certain, but increasingly close, relationship with the world’s new superpower.
A full transcript of Bagehot’s interview with George Osborne can be read on Bagehot’s blog: www.economist.com/blogs/bagehot/2015/09/britains-foreign-policy
Britain's foreign policy
An interview with George Osborne
Britain’s chancellor of the exchequer talks China, globalisation, the EU and his country's place in the world with our Bagehot columnist
THIS week my column covers George Osborne’s trip to China and his attempts to make Britain the country's “best partner in the West”. Relations between the two have recovered since David Cameron’s 2012 meeting with the Dalai Lama—and no British politician is more closely associated with that shift than the chancellor. That matters not just because he is a leading figure in the new Conservative government, but also because his chances of succeeding Mr Cameron as prime minister by 2020 have never looked better.
As music thudded and Beijing’s beautiful people mingled outside in the garden (ahead of a fashion show for Superdry, a British clothing brand about to expand into China), I sat down with Mr Osborne in the British ambassador’s residence for a discussion on Britain's role in the world. I started off by asking him about his trip.
NB: The interview has been lightly edited for clarity.
George Osborne: I find it such a fascinating and interesting country. Each time I come back something has changed and it’s moved on in leaps and bounds.
Bagehot: When did you first visit China?
George Osborne: I visited China in the early 1990s essentially as a student—just after I had left university—and I backpacked around the country. I went to Beijing and Shanghai but also Chengdu (where I’m going again [on this trip] for the first time since then). I took the boat from Shanghai to Wuhan, went to the south of China as well. And now when I turn up I’m in the embassy car and I’m whisked into the pavilions to meet the Chinese leaders, but it’s good to have seen this country with a backpack on my back, staying in a hostel.
Bagehot: What are your memories of it back then?
George Osborne: What’s interesting to me is what’s changed: Beijing at the time was quite a staid and dull place, Shanghai was the place with all the energy—although Pudong had not yet been properly developed. And what’s interesting is whilst Shanghai has gone stellar—literally, in these massive buildings which have appeared since I first visited—Beijing has become a much more vibrant and interesting place. A lot more business is done here. Tech Temple [which the chancellor had just visited], that start-up business with its distressed, brutalist interior…
Bagehot: You could be in Old Street.
George Osborne: Literally, you could be in Old Street or you could be in San Francisco. And that fact would have been inconceivable when I came to Beijing as a student all those years ago. So each time I come it’s amazing to watch the development of this incredible country.
Bagehot: Fast-forwarding a bit, how has Britain’s relationship with China changed over the five years of your chancellorship?
George Osborne: Look, we have made a determined effort to ensure that—as I have put it today—Britain is China’s best partner in the West. And that has been a conscious decision.
Bagehot: Was it taken right at the start of the coalition government?
George Osborne: Actually it started out of our economic and financial co-operation. My opposite number at the time was Wang Qishan, who is now very senior in the Chinese government, and we started this process of working with China to internationalise the renminbi. And that became a very fruitful channel of co-operation and led to substantive steps forward in our partnership. Because the danger of these sorts of dialogues is that nothing of substance comes out of it; there’s a lot of talking but nothing is ever actually agreed. But we set the tone early on, and I tried to do that five years ago: what is the concrete decision that has been taken today? And if you take, for example, this latest dialogue, the People’s Bank of China is now going to be issuing central bank instruments through the London markets, something that has never happened outside China.
Bagehot: Not just nice words?
George Osborne: Not just nice words. Substantive progress on the economic and financial channel. But in the past couple of years we have been able to start to broaden that. The Olympic Games gave us an opportunity to start talking about security issues for China. The big cultural delegation I have brought here… We are broadening this relationship on every front. China is absolutely one of the biggest players in the world and if Britain wants to be connected to the world it has to be connected to China.
Bagehot: If you were explaining this to one of your constituents in Tatton, or anywhere else, how would you explain what the opportunities that China offers mean for ordinary people in Britain?—not just in the City of London, not just in Old Street.
George Osborne: I would tell my constituents to come with me to the edge of my constituency in Cheshire, where it meets the border with Greater Manchester, and they will see there cranes in the sky, a vast construction site for what is called Manchester Airport City. That is literally on the border of my constituency. And there are a load of people working on that construction site who are British. And when the buildings are constructed there are going to be a load of companies there employing British people; local people. And that investment is coming from a combination of the government (me designating it an enterprise zone), Manchester City Council working with me to attract foreign investment and then Chinese investment coming in, one billion pounds of Chinese investment. So that is, I would say, a really concrete example, a visible example you can go and see today, of the benefits for British people across the UK, not just in the centre of London, of Chinese investment. And we want to see more of it. We have agreed today further steps towards building this nuclear power station in Somerset [Hinkley Point C] with Chinese money. There’s another concrete advantage for British people (maybe not as visible as the cranes over the Manchester Airport skyline), but the fact is I do not need to stump up billions and billions of pounds of taxpayers’ money to build a new nuclear power station, as all previous nuclear power stations have been built—money I can’t then spend on the health service or can’t then spend on the education system or can’t use to cut taxes. This approach means I’ve got Chinese investment doing that for me and I don’t need to use taxpayers’ hard-earned cash for it. So it’s a bit more intangible but it affects every single taxpayer in the country.
Bagehot: Notwithstanding the benefits, there must be a bit of you that worries about the volatility of the Chinese economy when you are hard-wiring Britain so thoroughly into China’s economic success or otherwise.
George Osborne: Well look, at the moment we are hard-wired into the European markets—50% of our exports go to Europe—and that has not been good for the UK. So I’m not saying “make Britain entirely dependent on China”. I’m saying “let’s diversify a bit”. When I became chancellor, China was our ninth largest trading partner. This is the world’s second biggest economy. China was doing more business with Belgium than it was with Britain.
Bagehot: You think we under-performed?
George Osborne: I think we more than under-performed. I think we woefully failed to connect Britain to the growing Chinese economy in the previous decade, and I have sought to remedy that. China is now the sixth biggest trading partner with the UK. We have attracted now the lion's share of Chinese investment that is going into Europe. Neither of those things were true five years ago. And I think it is absolutely central to our economic plan as a country not only that we put our own house in order but that we better connect ourselves with other parts of the world, particularly the faster growing parts of the world. I’ve made this point publicly but I make it again: even a China growing at 7% or indeed less is still adding to the world economy an economy equivalent to the UK or more. So there is massive opportunity there. And one of the exciting things for me has been bringing Jim O’Neill [former chief economist of Goldman Sachs] into the Treasury. I went to get him, phoned him up, said: “look Jim, I need you to become a Treasury minister.” He’s helping a lot on the Northern Powerhouse, which he has written reports about, but to have one of the world’s foremost experts on the Chinese economy sitting next to me, literally, in these meetings and being with me on this trip is a sign of our intent to take China very seriously and make sure Britain benefits.
Bagehot: On that, what role does the Foreign Office play? Because this trip is very Treasury-driven. You have talked about the next “golden decade” [in Britain-Chinese relations].
George Osborne: Yes.
Bagehot: What role does the Foreign Office have in that?
George Osborne: The Foreign Office is a very important arm of the British state and I think Britain has a fantastic diplomatic service. We are the only country in the world spending 2% of our national income on defence and 0.7% of our national income on aid. We are the only country in the world doing both of those things. And far from shrinking the Foreign Office in China, while I have been the chancellor and my colleagues William Hague and Philip Hammond have been in the Foreign Office, we have opened a consulate in Wuhan, we have increased our staff here [in Beijing]. We have reduced, frankly, the Foreign Office footprint in a lot of those European capitals where every single one had quite a big Foreign Office establishment, and just rebalanced the Foreign Office a bit. Not so we neglect Europe but so we take even more seriously the rest of the world.
Bagehot: You have been speaking in quite a mercantilist way throughout this trip and your Chinese colleagues have reflected on your “pragmatism”, but your reputation in Westminster is as someone with strong views about Britain’s role in promoting liberal democracy and human rights. How do you reconcile those two things?
George Osborne: Well first of all this is an economic and financial dialogue. But what I’m interested in is Britain projecting itself abroad, and through that its values and the things it holds dear. And I don’t think you do that by refusing to talk to the world’s second-largest economy. In fact, that is positively counter-productive in my view. So I see absolutely no contradiction. I think Britain needs to get out there on the world stage and make itself heard. And for much of my political career, there has been a sense of retreat from the world stage because of what happened in the Iraq War. I think the Cameron government is turning that around, reversing that sense that there existed in our society that the world’s problems were all too difficult and that we didn’t want to be part of it. But these big commitments we make on the defence budget, the aid budget, and our willingness to go out now and really sell that message, really show that Britain is coming back.
Bagehot: But if Britain is to be “China’s best friend in the West”, does that not create new responsibilities for Britain to sit down with China and say “we’re not happy about this, we’re not happy about that”?
George Osborne: With any friendship you can always raise issues of concern, and I’ve done that on that trip, but I’ve done it privately; I haven’t used megaphone diplomacy. And I’ve also been a respecter of the fact that China is a country that contains one fifth of the word’s population and has a civilisation stretching back 5,000 years. You can have a dialogue with the Chinese on many different levels. And just as it wouldn’t be right to only to have an economic dialogue with China, equally you shouldn’t restrict your dialogue solely to issues around, say, human rights. You can raise all those issues, and that is what reflects a mature discussion. So I don’t think essentially we have to choose between being partners in China’s economic development and being proud defenders of British values.
Bagehot: In recent years the financial crisis, the rise of UKIP, perhaps even the election of Jeremy Corbyn [as Labour Party leader], have suggested that there are new challenges in Britain to the public’s consent for globalisation, for global markets. Are you concerned by where the public’s mood is on that?
George Osborne: Do you know, I actually take a slightly contrarian view on this. Because that is the fashionable theory. I would say that it is not surprising that after a massive recession, the great recession of 2008-9, that there is some political reaction to that or that the public debate is shaped by that event. It would be extraordinary if it hadn’t been. But if you look at—generally—the reaction in our country, I do not see the rise of some great protectionist sentiment. In fact those who advocated that at the recent general election, both in the Labour Party and in UKIP, were rejected. I see no real argument in our country that is concerned that an Indian company owns our most successful car manufacturer or that the sewer system under London is being renewed in part by Chinese investment. There are the odd voices that express concern but they are very marginal and they are not being listened to by the British people. So I am actually quite encouraged and I think, actually, the UK is coping with globalisation a lot better than most other European countries. And that is reflected in the fact that (whilst of course there are people who are still unemployed) our unemployment rate is low and (whilst of course we need to export more) we are attracting a huge amount of inward investment into Britain. So I’m not saying “job done” but I am actually pretty confident that Britain can be one of the biggest winners from these big global changes that are taking place and indeed become the richest of the major economies in the world in this coming generation.
George Osborne: I think essentially if you look at British public debate around the issues of our interconnectedness with the global economy you do not find a ready audience, of any large scale, for pulling up the shutters. Indeed if anything I find the debate shifting a little bit in the other direction. In 2013 there were plenty of people saying we shouldn’t get involved in Syria and, as I’ve said publicly before, in my view the House of Commons took a terrible decision not to take action when Assad used chemical weapons. It was very easy at the time to tot up the potential cost of intervening. Two years later we begin to see the cost of not intervening. That is not always as visible, and always as apparent, and you can’t always get the same headlines for the consequence of not getting involved, but actually I think there is now a much readier audience for hearing that argument: that Britain cannot afford to cut itself off from what is going on in the world, we are too interconnected with what is going on, we have a powerful history and tradition of taking an interest in what is going on in the world, we’ve also got a very real interest in the future, in remaining connected.Bagehot: And you think public opinion is not in a bad place?
Bagehot: Is that an argument that the government is going to put before the House of Commons?
George Osborne: Well look, it’s very straightforward. I think everyone knows that we feel there is more that needs to be done in Syria. The prime minister has made that abundantly clear. But we can’t go back to the House of Commons unless it is clear that there is a majority for action and that there’s some kind of consensus; not necessarily between the party leaders, but a consensus in parliament. There would be no point going to the House of Commons and not winning that vote. We’ll just have to wait and see what is going on in other political parties.
Bagehot: On the EU, David Cameron and you are looking to establish more protections for countries not in the Eurozone. Are you able to give us any detail on that and in particular whether you want to put legal force behind those protections?
George Osborne: I think this is a central issue. You can be the most ardent Europhile, you can be someone who has no other questions about British membership of the EU—and that’s not me, I would describe myself as a Eurosceptic—and still see this as a problem. Even The Economist tower in St James’s should recognise that there’s a real issue here, which is: Britain is not part of the single currency. That is a decision we have taken, a voluntary decision of this country, but as a result are part of a European Union 19 of whose members are rapidly integrating, creating political, fiscal, monetary, economic union to make their currency work. And that is increasingly rubbing up against the operation…
Bagehot: And you would encourage them to do that?
George Osborne: They need to do that. In fact, I said four years ago in the Financial Times that there was a remorseless logic that was driving them in this direction. And Britain wants the single currency to be a success. It is massively in our interests that we have a stable financial system on our doorstep. So this integration is the logical consequence of having a single currency, but Britain doesn’t want to be part of it. The problem is the treaties as currently written, the European Union as currently devised, did not really envisage this situation where 19 members, potentially more, were integrating whilst you had member states including the United Kingdom who didn’t want to be part of this ever-closer union and wanted to preserve the integrity of the single market at 28. And that is causing all sorts of tension. You have the example of the European Central Bank saying that a derivatives clearing house cannot be physically located in the UK. Well that seems to me incompatible with the free movement of business and capital, one of the fundamental principles of the EU. We have taken them to the European Court of Justice, we won that case, but we should not be having to deal with these on an individual basis. Equally, earlier this summer, the Eurozone decided when we weren’t in the room to attempt to raid the European Financial Stabilisation Mechanism that exists for all 28 members and which Britain is a big contributor to. Now, again, we made sure that couldn’t happen and received protections for the UK, but again it’s just a sign of the direction things are heading in. So establishing proper economic governance that allows the Eurozone to undertake the integration it needs whilst protecting the interests of the single market for all 28, the rights of member states who are not in the Euro—including of course the UK—is really important for the future of the European Union. Britain should not be forced to make a choice between joining the single currency and leaving the EU, because if we’re forced to make that choice we would leave the EU. I think there is a better way forward, which is reform in Europe, and that’s what we are fighting to achieve.
Bagehot: And we should expect a precise ask along those lines at the December summit?
George Osborne: Well I set out at the Ecofin council last weekend some of the principles that we would want applied around non-discrimination, around the fact that British taxpayers should not bear the costs of problems in the Eurozone, around transparency—so we know what’s being discussed—and set out that there were various mechanisms to enforce those principles, so we’ve started that conversation but we haven’t concluded it yet. But in the room there was a positive response from every single member state whose representative spoke.
Bagehot: Back to globalisation, who are the thinkers or experts—the people whom you read or whose advice you seek—about the way the world is changing, particularly economically?
George Osborne: Two particularly interesting thinkers at the moment are Ken Rogoff—his prognosis of what happens when you have financially interconnected systems and of the consequences of financial crashes is very compelling (I should say with his colleague, Carmen Reinhart)—and I think Paul Collier is one of the most interesting thinkers around development and he’s been very influential on the thinking of the government. But you could do worse than go and read John Stuart Mill.
Bagehot: Anything in particular? “On Liberty”?
George Osborne: “On Representative Government” is not bad either. I don’t know if he ever wrote for The Economist.
Bagehot: He knew our founder.
George Osborne: Mr Wilson. I think he contributed to the Edinburgh Review, which was probably a rival publication at the time. But there’s no Edinburgh Review “app” these days.
[Laughter]
Bagehot: Chancellor, many thanks.
George Osborne: Thank you.
Britain’s chancellor of the exchequer talks China, globalisation, the EU and his country's place in the world with our Bagehot columnist
THIS week my column covers George Osborne’s trip to China and his attempts to make Britain the country's “best partner in the West”. Relations between the two have recovered since David Cameron’s 2012 meeting with the Dalai Lama—and no British politician is more closely associated with that shift than the chancellor. That matters not just because he is a leading figure in the new Conservative government, but also because his chances of succeeding Mr Cameron as prime minister by 2020 have never looked better.
As music thudded and Beijing’s beautiful people mingled outside in the garden (ahead of a fashion show for Superdry, a British clothing brand about to expand into China), I sat down with Mr Osborne in the British ambassador’s residence for a discussion on Britain's role in the world. I started off by asking him about his trip.
NB: The interview has been lightly edited for clarity.
George Osborne: I find it such a fascinating and interesting country. Each time I come back something has changed and it’s moved on in leaps and bounds.
Bagehot: When did you first visit China?
George Osborne: I visited China in the early 1990s essentially as a student—just after I had left university—and I backpacked around the country. I went to Beijing and Shanghai but also Chengdu (where I’m going again [on this trip] for the first time since then). I took the boat from Shanghai to Wuhan, went to the south of China as well. And now when I turn up I’m in the embassy car and I’m whisked into the pavilions to meet the Chinese leaders, but it’s good to have seen this country with a backpack on my back, staying in a hostel.
Bagehot: What are your memories of it back then?
George Osborne: What’s interesting to me is what’s changed: Beijing at the time was quite a staid and dull place, Shanghai was the place with all the energy—although Pudong had not yet been properly developed. And what’s interesting is whilst Shanghai has gone stellar—literally, in these massive buildings which have appeared since I first visited—Beijing has become a much more vibrant and interesting place. A lot more business is done here. Tech Temple [which the chancellor had just visited], that start-up business with its distressed, brutalist interior…
Bagehot: You could be in Old Street.
George Osborne: Literally, you could be in Old Street or you could be in San Francisco. And that fact would have been inconceivable when I came to Beijing as a student all those years ago. So each time I come it’s amazing to watch the development of this incredible country.
Bagehot: Fast-forwarding a bit, how has Britain’s relationship with China changed over the five years of your chancellorship?
George Osborne: Look, we have made a determined effort to ensure that—as I have put it today—Britain is China’s best partner in the West. And that has been a conscious decision.
Bagehot: Was it taken right at the start of the coalition government?
George Osborne: Actually it started out of our economic and financial co-operation. My opposite number at the time was Wang Qishan, who is now very senior in the Chinese government, and we started this process of working with China to internationalise the renminbi. And that became a very fruitful channel of co-operation and led to substantive steps forward in our partnership. Because the danger of these sorts of dialogues is that nothing of substance comes out of it; there’s a lot of talking but nothing is ever actually agreed. But we set the tone early on, and I tried to do that five years ago: what is the concrete decision that has been taken today? And if you take, for example, this latest dialogue, the People’s Bank of China is now going to be issuing central bank instruments through the London markets, something that has never happened outside China.
Bagehot: Not just nice words?
George Osborne: Not just nice words. Substantive progress on the economic and financial channel. But in the past couple of years we have been able to start to broaden that. The Olympic Games gave us an opportunity to start talking about security issues for China. The big cultural delegation I have brought here… We are broadening this relationship on every front. China is absolutely one of the biggest players in the world and if Britain wants to be connected to the world it has to be connected to China.
Bagehot: If you were explaining this to one of your constituents in Tatton, or anywhere else, how would you explain what the opportunities that China offers mean for ordinary people in Britain?—not just in the City of London, not just in Old Street.
George Osborne: I would tell my constituents to come with me to the edge of my constituency in Cheshire, where it meets the border with Greater Manchester, and they will see there cranes in the sky, a vast construction site for what is called Manchester Airport City. That is literally on the border of my constituency. And there are a load of people working on that construction site who are British. And when the buildings are constructed there are going to be a load of companies there employing British people; local people. And that investment is coming from a combination of the government (me designating it an enterprise zone), Manchester City Council working with me to attract foreign investment and then Chinese investment coming in, one billion pounds of Chinese investment. So that is, I would say, a really concrete example, a visible example you can go and see today, of the benefits for British people across the UK, not just in the centre of London, of Chinese investment. And we want to see more of it. We have agreed today further steps towards building this nuclear power station in Somerset [Hinkley Point C] with Chinese money. There’s another concrete advantage for British people (maybe not as visible as the cranes over the Manchester Airport skyline), but the fact is I do not need to stump up billions and billions of pounds of taxpayers’ money to build a new nuclear power station, as all previous nuclear power stations have been built—money I can’t then spend on the health service or can’t then spend on the education system or can’t use to cut taxes. This approach means I’ve got Chinese investment doing that for me and I don’t need to use taxpayers’ hard-earned cash for it. So it’s a bit more intangible but it affects every single taxpayer in the country.
Bagehot: Notwithstanding the benefits, there must be a bit of you that worries about the volatility of the Chinese economy when you are hard-wiring Britain so thoroughly into China’s economic success or otherwise.
George Osborne: Well look, at the moment we are hard-wired into the European markets—50% of our exports go to Europe—and that has not been good for the UK. So I’m not saying “make Britain entirely dependent on China”. I’m saying “let’s diversify a bit”. When I became chancellor, China was our ninth largest trading partner. This is the world’s second biggest economy. China was doing more business with Belgium than it was with Britain.
Bagehot: You think we under-performed?
George Osborne: I think we more than under-performed. I think we woefully failed to connect Britain to the growing Chinese economy in the previous decade, and I have sought to remedy that. China is now the sixth biggest trading partner with the UK. We have attracted now the lion's share of Chinese investment that is going into Europe. Neither of those things were true five years ago. And I think it is absolutely central to our economic plan as a country not only that we put our own house in order but that we better connect ourselves with other parts of the world, particularly the faster growing parts of the world. I’ve made this point publicly but I make it again: even a China growing at 7% or indeed less is still adding to the world economy an economy equivalent to the UK or more. So there is massive opportunity there. And one of the exciting things for me has been bringing Jim O’Neill [former chief economist of Goldman Sachs] into the Treasury. I went to get him, phoned him up, said: “look Jim, I need you to become a Treasury minister.” He’s helping a lot on the Northern Powerhouse, which he has written reports about, but to have one of the world’s foremost experts on the Chinese economy sitting next to me, literally, in these meetings and being with me on this trip is a sign of our intent to take China very seriously and make sure Britain benefits.
Bagehot: On that, what role does the Foreign Office play? Because this trip is very Treasury-driven. You have talked about the next “golden decade” [in Britain-Chinese relations].
George Osborne: Yes.
Bagehot: What role does the Foreign Office have in that?
George Osborne: The Foreign Office is a very important arm of the British state and I think Britain has a fantastic diplomatic service. We are the only country in the world spending 2% of our national income on defence and 0.7% of our national income on aid. We are the only country in the world doing both of those things. And far from shrinking the Foreign Office in China, while I have been the chancellor and my colleagues William Hague and Philip Hammond have been in the Foreign Office, we have opened a consulate in Wuhan, we have increased our staff here [in Beijing]. We have reduced, frankly, the Foreign Office footprint in a lot of those European capitals where every single one had quite a big Foreign Office establishment, and just rebalanced the Foreign Office a bit. Not so we neglect Europe but so we take even more seriously the rest of the world.
Bagehot: You have been speaking in quite a mercantilist way throughout this trip and your Chinese colleagues have reflected on your “pragmatism”, but your reputation in Westminster is as someone with strong views about Britain’s role in promoting liberal democracy and human rights. How do you reconcile those two things?
George Osborne: Well first of all this is an economic and financial dialogue. But what I’m interested in is Britain projecting itself abroad, and through that its values and the things it holds dear. And I don’t think you do that by refusing to talk to the world’s second-largest economy. In fact, that is positively counter-productive in my view. So I see absolutely no contradiction. I think Britain needs to get out there on the world stage and make itself heard. And for much of my political career, there has been a sense of retreat from the world stage because of what happened in the Iraq War. I think the Cameron government is turning that around, reversing that sense that there existed in our society that the world’s problems were all too difficult and that we didn’t want to be part of it. But these big commitments we make on the defence budget, the aid budget, and our willingness to go out now and really sell that message, really show that Britain is coming back.
Bagehot: But if Britain is to be “China’s best friend in the West”, does that not create new responsibilities for Britain to sit down with China and say “we’re not happy about this, we’re not happy about that”?
George Osborne: With any friendship you can always raise issues of concern, and I’ve done that on that trip, but I’ve done it privately; I haven’t used megaphone diplomacy. And I’ve also been a respecter of the fact that China is a country that contains one fifth of the word’s population and has a civilisation stretching back 5,000 years. You can have a dialogue with the Chinese on many different levels. And just as it wouldn’t be right to only to have an economic dialogue with China, equally you shouldn’t restrict your dialogue solely to issues around, say, human rights. You can raise all those issues, and that is what reflects a mature discussion. So I don’t think essentially we have to choose between being partners in China’s economic development and being proud defenders of British values.
Bagehot: In recent years the financial crisis, the rise of UKIP, perhaps even the election of Jeremy Corbyn [as Labour Party leader], have suggested that there are new challenges in Britain to the public’s consent for globalisation, for global markets. Are you concerned by where the public’s mood is on that?
George Osborne: Do you know, I actually take a slightly contrarian view on this. Because that is the fashionable theory. I would say that it is not surprising that after a massive recession, the great recession of 2008-9, that there is some political reaction to that or that the public debate is shaped by that event. It would be extraordinary if it hadn’t been. But if you look at—generally—the reaction in our country, I do not see the rise of some great protectionist sentiment. In fact those who advocated that at the recent general election, both in the Labour Party and in UKIP, were rejected. I see no real argument in our country that is concerned that an Indian company owns our most successful car manufacturer or that the sewer system under London is being renewed in part by Chinese investment. There are the odd voices that express concern but they are very marginal and they are not being listened to by the British people. So I am actually quite encouraged and I think, actually, the UK is coping with globalisation a lot better than most other European countries. And that is reflected in the fact that (whilst of course there are people who are still unemployed) our unemployment rate is low and (whilst of course we need to export more) we are attracting a huge amount of inward investment into Britain. So I’m not saying “job done” but I am actually pretty confident that Britain can be one of the biggest winners from these big global changes that are taking place and indeed become the richest of the major economies in the world in this coming generation.
George Osborne: I think essentially if you look at British public debate around the issues of our interconnectedness with the global economy you do not find a ready audience, of any large scale, for pulling up the shutters. Indeed if anything I find the debate shifting a little bit in the other direction. In 2013 there were plenty of people saying we shouldn’t get involved in Syria and, as I’ve said publicly before, in my view the House of Commons took a terrible decision not to take action when Assad used chemical weapons. It was very easy at the time to tot up the potential cost of intervening. Two years later we begin to see the cost of not intervening. That is not always as visible, and always as apparent, and you can’t always get the same headlines for the consequence of not getting involved, but actually I think there is now a much readier audience for hearing that argument: that Britain cannot afford to cut itself off from what is going on in the world, we are too interconnected with what is going on, we have a powerful history and tradition of taking an interest in what is going on in the world, we’ve also got a very real interest in the future, in remaining connected.Bagehot: And you think public opinion is not in a bad place?
Bagehot: Is that an argument that the government is going to put before the House of Commons?
George Osborne: Well look, it’s very straightforward. I think everyone knows that we feel there is more that needs to be done in Syria. The prime minister has made that abundantly clear. But we can’t go back to the House of Commons unless it is clear that there is a majority for action and that there’s some kind of consensus; not necessarily between the party leaders, but a consensus in parliament. There would be no point going to the House of Commons and not winning that vote. We’ll just have to wait and see what is going on in other political parties.
Bagehot: On the EU, David Cameron and you are looking to establish more protections for countries not in the Eurozone. Are you able to give us any detail on that and in particular whether you want to put legal force behind those protections?
George Osborne: I think this is a central issue. You can be the most ardent Europhile, you can be someone who has no other questions about British membership of the EU—and that’s not me, I would describe myself as a Eurosceptic—and still see this as a problem. Even The Economist tower in St James’s should recognise that there’s a real issue here, which is: Britain is not part of the single currency. That is a decision we have taken, a voluntary decision of this country, but as a result are part of a European Union 19 of whose members are rapidly integrating, creating political, fiscal, monetary, economic union to make their currency work. And that is increasingly rubbing up against the operation…
Bagehot: And you would encourage them to do that?
George Osborne: They need to do that. In fact, I said four years ago in the Financial Times that there was a remorseless logic that was driving them in this direction. And Britain wants the single currency to be a success. It is massively in our interests that we have a stable financial system on our doorstep. So this integration is the logical consequence of having a single currency, but Britain doesn’t want to be part of it. The problem is the treaties as currently written, the European Union as currently devised, did not really envisage this situation where 19 members, potentially more, were integrating whilst you had member states including the United Kingdom who didn’t want to be part of this ever-closer union and wanted to preserve the integrity of the single market at 28. And that is causing all sorts of tension. You have the example of the European Central Bank saying that a derivatives clearing house cannot be physically located in the UK. Well that seems to me incompatible with the free movement of business and capital, one of the fundamental principles of the EU. We have taken them to the European Court of Justice, we won that case, but we should not be having to deal with these on an individual basis. Equally, earlier this summer, the Eurozone decided when we weren’t in the room to attempt to raid the European Financial Stabilisation Mechanism that exists for all 28 members and which Britain is a big contributor to. Now, again, we made sure that couldn’t happen and received protections for the UK, but again it’s just a sign of the direction things are heading in. So establishing proper economic governance that allows the Eurozone to undertake the integration it needs whilst protecting the interests of the single market for all 28, the rights of member states who are not in the Euro—including of course the UK—is really important for the future of the European Union. Britain should not be forced to make a choice between joining the single currency and leaving the EU, because if we’re forced to make that choice we would leave the EU. I think there is a better way forward, which is reform in Europe, and that’s what we are fighting to achieve.
Bagehot: And we should expect a precise ask along those lines at the December summit?
George Osborne: Well I set out at the Ecofin council last weekend some of the principles that we would want applied around non-discrimination, around the fact that British taxpayers should not bear the costs of problems in the Eurozone, around transparency—so we know what’s being discussed—and set out that there were various mechanisms to enforce those principles, so we’ve started that conversation but we haven’t concluded it yet. But in the room there was a positive response from every single member state whose representative spoke.
Bagehot: Back to globalisation, who are the thinkers or experts—the people whom you read or whose advice you seek—about the way the world is changing, particularly economically?
George Osborne: Two particularly interesting thinkers at the moment are Ken Rogoff—his prognosis of what happens when you have financially interconnected systems and of the consequences of financial crashes is very compelling (I should say with his colleague, Carmen Reinhart)—and I think Paul Collier is one of the most interesting thinkers around development and he’s been very influential on the thinking of the government. But you could do worse than go and read John Stuart Mill.
Bagehot: Anything in particular? “On Liberty”?
George Osborne: “On Representative Government” is not bad either. I don’t know if he ever wrote for The Economist.
Bagehot: He knew our founder.
George Osborne: Mr Wilson. I think he contributed to the Edinburgh Review, which was probably a rival publication at the time. But there’s no Edinburgh Review “app” these days.
[Laughter]
Bagehot: Chancellor, many thanks.
George Osborne: Thank you.
