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The good growth blog: Year of the Tiger

The good growth blog is written by BGF’s Executive Chair, Stephen Welton.


The Chinese Lunar New Year begins today, 1 February. We are leaving the Year of the Ox and entering the Year of the Tiger. William Blake’s tiger – or “tyger” as he had it – was “burning bright”; my impression of this powerful, majestic beast is of a patient hunter with its keen eye on the prize – a fitting metaphor for the year ahead. If you are observing the Chinese Spring Festival, allow me to wish you a happy and prosperous year.

China has been on my mind after attending a dinner last week in which the former Conservative minister Sir Oliver Letwin shared insights from his recently published book, ‘China vs America: A Warning’. He has a careful and, I believe, persuasive argument that the developing power struggle between these two powers risks leading to disastrous conflict, possibly even war – a chilling prospect as geopolitics currently highlight. He argues that what we in the US and UK should do instead is strive for “peaceful competition” with China, while maintaining and indeed deepening our economic ties. History shows the emergence, and fall, of great empires, from the Romans to the Tudors, the Incas to the Ottomans. It is a long, evolving list, so perhaps like the tiger, we should be patient and play the long game.

Letwin’s argument makes a great deal of sense. China’s economic power is only going in one direction: to grow, on account of the country’s huge population of 1.4 billion. GDP per head may lag behind the US for some time, but in absolute terms, China is on a course to become the world’s largest economy – some predict it will happen as soon as 2028. A similar logic applies to India. Put more simply, the law of large numbers has an inexorable logic. This will dramatically change the world order.

So, how therefore do we in the western world engage peacefully and competitively with China?

In the UK during the Cameron years, it seemed as though relations with China were growing ever closer. Chinese companies were free to invest in British nuclear power plants, the stock exchanges of London and Shanghai were being linked, and the UK was the first G7 member to sign up to the Asian Infrastructure Bank – seen as a competitor to the World Bank. In 2015, chancellor George Osborne predicted that relations between the UK and China were about to undergo a “golden decade”.

Things have changed since then. Some say relations have gone from golden era to “deep freeze”. There are many factors contributing to discord between the UK and China – authoritarianism in Hong Kong, distrust of Chinese telecoms companies such as Huawei, which was banned from participating in Britain’s 5G networks, and suspicion that alleged Chinese agents are infiltrating Parliament, to name just three issues.

Looking back, we could perhaps say that some of the ‘golden era’ thinking about China was naïve given the relative size of the two parties. As much as the UK can profit from engaging with China, it must not do so at the expense of sovereignty and security. In politics and in business, you don’t want to become too reliant on just one partner. You don’t want undue dependence; you want mutually reinforcing alliances. That means playing to your strengths, understanding your counterparty, and having clear objectives.

On this basis, I personally would like to see the pendulum swing back some of the way so that the UK and China are once again talking about how they can engage with one another for mutual benefit. We live in an interconnected world. Post-Brexit Britain cannot afford to become isolationist or we will lose the ability to grow quickly on a global stage. We need stronger and deeper relationships on the global stage.

And here is where the lesson from business comes in. Anyone involved in manufacturing knows that even relatively simple items depend on supply chains, and when the items involved are as complex as a smartphone, the supply chains can become dazzlingly complex. China and Taiwan are essential in the production of mobile phones, not only because they are world’s leading manufacturers of key components, notably semiconductor chips, but because China is a major controlling source of the rare metals needed to make them. Complex supply chains work because all the actors in the chain are incentivised to do their bit, on time and at the market price. Different actors work together in harmony, not because they share the same overarching ambitions, but because it is mutually beneficial for them to do so. This is well understood in business and in free trade. We must not lose sight of that.

Here is the key point. I believe that in all large economies – and China is among the largest – innovation and growth must be underpinned by small businesses and entrepreneurs. As China’s economy matures, its entrepreneurs are flourishing, and that’s a good thing, because the more that small and mid-sized businesses in China interact with businesses in the UK and Ireland, and elsewhere, the more we become interconnected, and the closer we move towards harmony and away from conflict. Business can tie the world together.

I was recently asked to speak at the 2021 Annual Conference of Financial Street Forum, held in Beijing. Delegates were interested to hear about the BGF model of supporting small and mid-sized businesses with growth capital. For me, it was another sign that China is embracing entrepreneurship in a way that will catapult its growth to the next stage; a stage in which Chinese innovation – and its vast spending on research and development – will merit comparison with the best that Silicon Valley, or Britain’s Golden Triangle, has to offer. The days of China as the sweatshop of the world are long gone, rather we should see China as the leading laboratory of the world in the future.

China’s step-up in research and innovation may threaten some industries in the US and Europe. There will inevitably be a need for political bargaining concerning sensitive sectors, such as the defence industry, cybersecurity and artificial intelligence. But ultimately, we must find a way to do business together, and not go to war. And let’s remember that we have one common goal, increasing in importance and urgency, which is to tackle climate change. That is a challenge that knows no boundaries and requires collaboration not confrontation.

They say people born in the Year of the Tiger are brave, competitive, unpredictable and confident. To me, that description sounds very much like an entrepreneur. This is a year to harness the power of global capital with the power of innovators and disruptors. Just as the tiger has had to adapt to a changing world and shrinking environment to survive, so must we.

BGF Insights 02.01.2022
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Stephen Welton, executive chair, BGF
Stephen Welton Executive Chair

Before taking on the role of executive chairman, Stephen was the founder CEO of BGF between 2011 and 2020.