Balancing Business and Morality

Updated: Aug 13, 2021

Western relations with China are reaching an inflection point. In the week beginning 22 March, the US, UK, and EU imposed sanctions on China in response to reports of persecution of the Uyghur Muslim minority group in Xinjiang province. Antony Blinken, US Secretary of State, described these sanctions as a demonstration of “our ongoing commitment to working multilaterally to advance respect for human rights”. These sanctions specifically target officials and a security organisation connected with internment camps in Xinjiang, and include travel bans and asset freezes.

Secretary Blinken’s words reflect that recent sanctions from the West towards Chinese officials are rooted in morality - not business. Indeed, the UK and Europe are notably pursuing investment from and trade ties with China. According to Eurostat (via the Financial Times), China provides significant FDI to the EU: in 2017 alone, FDI from China to the EU reached upwards of 60 billion euros. The report also notes that China is an important investment destination as European brands from retailers to carmakers are popular there.

More recently, the EU has been working towards the EU-China Comprehensive Agreement on Investment (CAI) - an investment deal which is now in jeopardy due to escalating diplomatic tensions as of March 2021. Across the Channel, the UK’s Conservative party is facing internal conflict with some party members opposing its premier’s decision to seek “deeper trade links” with China as part of its post-Brexit ‘Global Britain’ trade strategy.

These business ties may well be in jeopardy in light of China’s retaliation to new Western sanctions. The People’s Republic has acted rapidly and with force - including a willingness to inflict economic damage. It has placed travel and business sanctions on academic and political individuals and bodies from the EU, including a statement which strongly condemns the EU's actions and reasoning. It asks that the EU reverse these decisions, and states that if this does not happen, "China will resolutely make further reactions". The UK has been dealt a similar riposte, with academics, lawyers, and politicians sanctioned for their criticisms.

In the words of the Wall Street Journal, the UK and EU are "trying to maintain a delicate—and frequently divisive—balance by confronting China on human rights and other issues while pursuing trade and investment." Multiple other international media outlets (including Reuters, Politico, and Bloomberg) acknowledge both the importance the West places on trade with China, and China's willingness to respond to Western sanctions with rapid, frank retaliation and potentially significant economic consequences. To date, it appears that both the UK and EU will not be pursuing trade at any cost. How far they are willing to stand by this approach remains to be seen; this is likely to be tested in the coming weeks and months.

This article is from our March J7 Bulletin – read the full issue here.