When you have a friend like Cameron, who needs enemies?

By Sonny Leong, Chair, Chinese for Labour

As we usher in the new lunar year, the Year of the Rabbit, Chinese families everywhere will be gathering for their reunion dinner to forgive each other and pay respect to our elders.

Will China forgive Cameron for his foolish rant about ‘authoritarian capitalism’?

In his recent speech in Davos, David Cameron launched an extraordinary attack on ‘authoritarian capitalism’ as he warned businesses investing in those countries at their peril. Though he did not refer to China and Russia directly, observers were left in little doubt which countries he was referring to in his attack on ‘authoritarian capitalism’.

“If you’re looking to set up a headquarters abroad, are you going to invest where your premises can be taken away from you? Where contracts are routinely dishonoured? Where there’s the threat of political upheaval? Or are you going to invest where there are property rights, the rule of law, democratic accountability?”

Is this a case of sour grapes? China attracted record levels of foreign capital in 2010. The country’s Ministry of Commerce revealed inward investment totalled 6 billion (£66 billion) last year, an increase of 17.4% on 2009. In December alone, foreign direct investment (FDI) into China stood at more than billion.

Writing in the Wall Street Journal on his trip to China last October, Cameron said:

“[The trip will] provide a further step forward in UK-China relations, adding momentum to our commercial relationship and cementing an economic and political partnership that can help to deliver strong and sustainable growth and greater security for us all in the years ahead.”

“On this visit alone, Britain is set to sign new contracts worth billions of dollars involving companies across the UK and cities all over China.”

Apparatchiks in Beijing will not take lightly to Cameron’s Davos statement. On one hand he wants to do business with China, coupled with warm words encourage Chinese businesses to invest in Britain and with the other slaps China in her face. There is a well known Confucius saying, “If you drink with a friend, a thousand cups are too few; if you argue with a man, half a sentence is too much”. China must be feeling so.

A former US national security adviser Zbigniew Brzezinski said Western countries should be coming to terms with China, “(A) drift into escalating reciprocal demonisation” would be the worst outcome for Asia’s long-term stability as well as for the China’s relationship with developed economies

China has done more than any other economy to pull the world out of recession, and may remain an important engine of global growth for some years to come. According to the 12th Five-Year Plan (2011-2015), China will shift from export-led and investment-driven growth to a more balanced pattern of economic development. As a result, China’s growth rate may be significantly lower, but more sustainable.

At the same time, the rest of the world can expect China to play a more active role in areas such as fighting climate change, poverty alleviation, global infrastructure development, and reform of the international monetary system.

The essence of liberal capitalism is its propensity towards universalism. In the pursuit of profit, capitalism pushes beyond local boundaries, whether village, town, region or country. The rise of modern capitalism in the late nineteenth century erupted into the international conflict that dominated much of the twentieth century.

Capitalist development has a long history in China. Prior to the early modern period China’s embryonic capitalism was far more developed than that of Europe. China’s capitalist development took place within the context of a powerful state that, in periods when the system functioned well, shaped the pattern of capitalist development in numerous ways to meet common social interests. This was the foundation of its hugely impressive long-run economic and social development. Confucianism nurtured a deeply developed concept of ‘duty’ which was the foundation of collective action and social prosperity.

Confucianism was a complete philosophy. It combined a carefully thought out system of morality for rulers, bureaucrats and ordinary people with a comprehensive analysis of concrete ways of both stimulating and controlling the market. When the system worked well the government attempted in a non-ideological, pragmatic fashion to solve practical problems that the market could not solve.

The need for ‘constructive engagement’ is more profound now than ever. ‘Destructive engagement’ will lead to disaster. Has the global financial crisis hastened the ending of globalised capitalism?

In the search for solutions to the multiple threats there is no alternative other than to work together across national frontiers, cultures and levels of development, to find a pragmatic, non-ideological, cooperative way to overcome these threats.

Cameron might come to regret his words when China holds back on buying any future UK gilts, or worse, starts selling UK government bonds. As this is a period for forgiveness, let’s hope China treats his silly comments as coming from a silly boy…