‘Global’ Britain’s pretensions of relevance in Asia pale amid China’s rise

The problem with Britain’s desire to be ‘deeply engaged’ in Asia is that it fails to acknowledge just how much its influence has declined
Across every metric – whether political, economic, financial or social – the UK is now nothing more than a minor player in the region

William Bratton

Published: 9:15am, 10 May 2021

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In a few months, a large Royal Navy flotilla will enter the South China Sea. Led by one of its new aircraft carriers, the tour is meant to demonstrate Britain’s commitment to the region, coming soon after it became an Association of Southeast Asian Nations dialogue partner and applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

These actions are presented as evidence of the UK’s renewed focus on the Indo-Pacific after its European Union exit; a geographic shift which reflects its desire to forge a broader political and economic destiny outside the EU.

The argument is that the UK, now free of the shackles of the EU’s inward-looking nature and centralised foreign policy, can return to its old tendencies, revitalise long-neglected relationships and pivot to new wealth-generating opportunities.

It is therefore no surprise that Britain wants, as outlined in its recent foreign policy review, to be “deeply engaged” in Asia, given the changing global economy. It wants to leverage its historic ties to be the most active and influential European power within the region.

As such, it intends to contribute to Asia’s security, strengthen relationships with strategic partners and play a bigger role in trade.

The problem with this narrative is that it does not acknowledge just how much the UK’s influence across Asia has declined. It is true that this trend is not specific to Britain as China’s growth and Asia’s regionalisation have resulted in the large-scale displacement of more distant external powers.

But across every metric – whether political, economic, financial or social – the UK is now nothing more than a minor player within the region. This is seen in its waning importance as a trade partner.

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In the late 1980s, for example, it accounted for 8 per cent of India’s merchandise trade but less than 2 per cent in 2020. This trend is not unique to India. The UK’s share of total Asian trade has nearly halved during the past four decades, from 3.5 per cent in 1986 to 1.8 per cent in 2020, according to IMF data.

If China – which accounts for more than 40 per cent of the UK’s total Asian trade – is excluded, just 1.6 per cent of the region’s flows now involve Britain. For Indonesia, Malaysia, South Korea and Taiwan, its share is less than 1 per cent.

Even for trade in services, in which the UK remains internationally competitive, it has become less relevant as the region tilts towards China. It might still have a role as a provider of business and education services, but in the context of Asia, these will be relatively small.

This is reflected by its shrinking share of Singapore’s service imports, from 8 per cent in 2005 to 4 per cent in 2019, as it was displaced by the city state’s surging ties with China and other Asian countries.

The UK is also losing financial influence. Its share of international bank lending to Asian countries has fallen from 17 per cent in 2010 to 11 per cent today, according to the Bank for International Settlements.

This is not just a relative decline – in markets including India, Indonesia, Malaysia and South Korea, British banks have reduced their lending exposure in the past decade.

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Furthermore, its banking activity in Asia is dominated by HSBC and Standard Chartered. Without these two banks, the UK’s involvement in the region’s financial markets would be significantly diminished.

Neither is it clear what Britain offers in military terms. It might want to contribute to Asia’s security, but its capabilities are but a fraction of what they once were after years of cutbacks.

It might still be one of only two European countries capable of sustaining a military presence in the region – the other being France – but it can now only do so on a scale which is almost meaningless in the real world of hard power.

Asian countries looking to the UK to contribute to their security, including its long-standing Five Power Defence Arrangement partners, are almost certainly overestimating its capabilities.

Once again, the UK is not alone in this loss of Asian influence. All the European powers have been gradually displaced, first as the result of US hegemony and more recently by China’s rise. Asia has changed dramatically since the last substantive British presence – Hong Kong – was returned to China.

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The UK’s pretensions that it can reverse history and regain some of its former relevance are misplaced, particularly given its diminished stature. The respective balances of power have now been reversed, with the UK needing Asia much more than Asia needs the UK.

This is demonstrated by asymmetric trade flows. While Britain is a minor trading partner for Asia, the region accounts for nearly a quarter and a fifth of its merchandise imports and exports, respectively.

So it is understandable that the UK wants to access Asia’s new wealth through greater trade. However, its efforts to strengthen ties in Asia will be constrained by its relative capabilities, resources and geography – not just because of the distances involved but also the regionalisation of Asian economics, finance and politics.

This trend means other external partners, apart from the United States, are increasingly irrelevant. As such, despite the UK’s aspirations to be “deeply engaged” in the region, it will be a marginal player with a limited role. To suggest otherwise is to deny the geopolitical and geoeconomic reality of the Asia-centric new world order.

William Bratton is author of “China’s Rise, Asia’s Decline”. He was previously head of equity research, Asia-Pacific, at HSBC