UK needs to recognise reality and engage more with China, says Burnham adviser

A senior economic adviser to Andy Burnham has argued for deeper engagement with China and other Asian countries, and that countries such as the UK need to “get real” and adapt to the eastwards shift in the balance of economic power.

Speaking to The Observer, Jim O’Neill, former Goldman Sachs economist and adviser to the incoming prime minister, dismissed proponents of the economic benefits of trade deals with “the developed part of the ex-British Empire” as “living in a dream world”.

“The places that are going to make a difference to our trade and investment performance are China, India and Indonesia… places which have a large number of people, which are growing fast, and which are taking a growing share of global GDP. Somewhere along the line, you’ve got to recognise that reality,” he said.

O’Neill, a former Treasury minister, warned that the UK has got itself into a “ridiculous situation”, where it has “become even more like the 51st state [of the US], but petrified of its own shadow and petrified of Washington about China”. Added to that, by leaving the EU, the UK has “seriously damaged itself in terms of trade and investment,” he said.

“The UK leadership has got to adapt to get anywhere on the global stage,” he said.

He points to analysis from Gavyn Davies, executive chairman of Fulcrum Asset Management, which illustrates how far the world’s economic centre of gravity has shifted in recent decades. In 1980, it was just off the western coast of Morocco. By 2000, it had shifted to the northern coast of Libya. By 2010, it was just east of Egypt. By 2020, continually dragged eastwards by the continued growth of China and India, the centre of gravity had reached Pakistan.

In a 2001 paper for Goldman Sachs, O’Neill coined the acronym Bric – for Brazil, Russia, India, China – and argued that their economic rise ought to be reflected in global governance arrangements. Now, a quarter of a century on, he has co-founded BRICS+ Thinking, a not-for-profit organisation aiming to promote fresh thinking and better cooperation on international issues. Initial policy work will focus on topics such as infectious disease control, AI governance, cross-border payment systems and climate change.

The four original Bric countries founded a political grouping in 2009, which became Brics following the addition of South Africa in 2010. Egypt, Ethiopia, Iran, the United Arab Emirates and Indonesia have since joined.

One key objective of the group is to reduce reliance on the US dollar through alternative financial arrangements – an objective that has been made more urgent by recent US sanctions against Iran and Russia, and potentially more achievable by recent technological developments.

This is being pursued through initiatives such as Project mBridge, a cross-border digital currency system aiming to eventually allow participating countries (which includes China) to completely bypass US-supervised payment infrastructure when purchasing oil and gas from Saudi Arabia and the UAE. The US sees it as an existential threat to global demand for the dollar and to its economic leverage. The Basel-based Bank for International Settlements was originally involved in the project’s development, but has withdrawn “for fear of being caught in the geopolitical crossfire”, according to former business secretary Vince Cable.

An additional geopolitical challenge for the UK is that a growing role for countries such as China and India in global governance shrinks British influence. Trump’s White House is reported to have considered a “Core 5” as an alternative to the G7, consisting of the US, China, Russia, India and Japan.

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