China’s president Xi Jinping is getting a reception fit for an emperor on his first state visit to the UK. For four days from today, David Cameron will be kowtowing all the way down the red carpet, as the government bends over backwards to persuade the Middle Kingdom to invest in Britain.
Slightly inconvenient, then, that official data out today showed the Chinese economy grew 6.9% in the third quarter of this year, the slowest rate since the start of 2009 and a touch below the government’s target of 7% for 2015.
Not to mention the fact that numerous Chinese economy watchers are highly sceptical about the validity of the official numbers, given the turmoil in its stock markets this summer and numerous non-official data indicating a serious slowdown. Citigroup chief economist Willem Buiter and consultancy Capital Economics both think GDP growth will really be just 4% this year. Fathom Consulting is predicting as low as 3%.
That doesn’t seem to matter to Cameron and co, who are desperate for China to invest in British infrastructure so they don’t have to. Chancellor George Osborne was even praised by Chinese state newspaper The Global Times for being ‘the first Western official in recent years who focused on business potential rather than raising a magnifying glass to the '"human rights issue",’ during his visit last month.
On that visit Osborne announced the UK government would guarantee £2bn of loans for the delayed Hinkley Point nuclear reactor. It’s expected Xi’s visit will be the stage for Chinese investment in the £24.5bn project to be unveiled, despite western diplomats expressing off-the-record concerns about the national security implications of Chinese control of British nuclear power.
Other projects the government is hoping to win investment for include a £3bn plan to build 10,000 homes in Manchester, as part of the much-hyped ‘Northern Powerhouse’, and the controversial High Speed 2 railway, which hasn’t even been approved by Parliament yet.
Cameron, meanwhile, has labelled the ties between the two countries a ‘very special relationship’. Talk of a ‘golden era’ abounds. But with China’s economy in the midst of what many are calling a ‘hard landing’, the prime minister should be wary of kowtowing into deals just as the shine comes off the dragon.