As Biden puts the kibosh on US anti-China rhetoric – by reversing Trump’s actions against TikTok and WeChat, for example – our team anticipates that a far more fundamental systemic rivalry will soon become evident: that between the UK and China. And make no mistake: the forces at play are far less unbalanced than they appear. Britain is currently the most central historical power in a complex geopolitical edifice made of a transatlantic alliance just dusted off by Biden and Johnson (Atlantic Charter), of the one and only “Empire on which the sun never set” in full reanimation (Commonwealth), and a geographical bloc the United Kingdom still belongs to and on which it has certainly not said its last word (EU).
China-UK: Systemic rivalry
The GEAB team is here to challenge the obvious and this article aims to demonstrate that, more than the US, it is the UK that is China’s real systemic rival. In fact there is nothing very original in pointing out that the City of London, for example, is the most international financial centre in the world (thanks to the famous “Big Bang” of 1986), or that the Queen of England is the one and only head of state of 16 different countries. Let us imagine for a moment what these two realities imply in terms of British-centric networks of influence across the world…
While the City has lost a lot of influence between the 2008 crisis and the Brexit, and the British crown is approaching a major crisis of legitimacy, Britain’s global DNA remains a historical fact that the London establishment decided to reactivate at the very moment that China began to express its international aims (some ten years ago).
Both countries are in a similar cycle of global expansionism and profound transformation of their systems. Even though other countries are also pursuing this ambition, few are as advanced and as well based:
. The US is retreating and the “America first” rhetoric remains in place under Biden, who will be responsible for channeling the huge cash flow decided during the pandemic into building a modern country in terms of infrastructure and social services.
. The EU is knowingly a geopolitical dwarf and, even if it is currently trying to wake up, will remain so until it finds a way to resolutely change its methods and transform its profoundly “anti-power” DNA.
. On the one hand, Russia’s current ambitions are not really global but rather regional, but above all they have been resolutely restrained since 2014, no matter what they say.
. Who else?…
China and England therefore find themselves hunting on the same lands… using different rules. Moreover, they share a common history, stemming from another era of British expansionism, one painful and made of betrayals, the memory of which is about to resurface (Opium War, Boxer Rebellion, Hong Kong,…). China has a revenge to take on England, and England is returning to the global scene based on an immense international influence that it is currently reactivating.
Let us not be fooled by these two players’ size: although very different, both are geopolitical giants.
Direct competitors in strategic sectors
They are also commercial giants and their financial centres, precisely because of their common history, are much more intertwined than the American and Chinese ones, which have kept a more respectful distance.
In 2012, one of the flagships of British international finance, the London Metal Exchange (LME), was taken over by the Hong Kong Stock Exchange. In 2019, the London Stock Exchange and the Shanghai Stock Exchange set up a Stock Connect to facilitate IPOs for international investors in China and for Chinese investors internationally. But in the context of growing tensions between the West and China, these developments are increasingly problematic, being seen – rightly so – as the highways used by the Chinese to “colonise” the West and in need of urgent control.
In commodities, we saw last month the ongoing three-way game between Shanghai, London and Canberra over the control and price of iron ore fought over by the LME and SHFE. In fact, Shanghai has just succeeded in calming the surge in iron ore prices… thus hampering the profits made on its back by London and Canberra.
On the strategic copper market, too, China has been making its mark internationally since 2020: with its position as purchaser of 50% of the world’s copper production, it launched futures contracts on the red metal in November 2020.
Fig. 1 – Copper prices and arbitrage. Source: LME-SHFE 2020
China is now directly threatening London’s quasi-monopolistic position in global commodity markets. It is therefore certain that the UK is doing its utmost to maintain/regain its pre-eminent position in commodities, taking advantage of the major infrastructure plans launched by the US and Europe during the pandemic that could somewhat rebalance flows to the West.
From Brexit to the resurrection of the Commonwealth… or the other way around
We will not repeat the details of the UK’s Commonwealth strategy, which we deciphered at length in our anticipation of the success of the Brexit in March 2018 or in our analysis of the “British Trafalgar coup” in October 2019. But it is time for a little update on this future-bearer trend. In fact, our team is wondering whether the Brexit is not exclusively linked to this double anticipation/awareness on the part of the British Establishment:
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