The UK is China’s new bezzie pal… or is that the other way around? What do we need from China and what do they want in return? Time for some explaining;
This year the UK government signed up for the Asian Infrastructure Investment Bank (AIIB).
This is a proposed investment bank which will focus on developing infrastructure in Asia. Think: roads, railways, airports.
The UK was the first non-Asian country to join the AIIB, followed rapidly by other European countries.
By backing the bank, we won a place in China’s good books.
Now the Chinese President Xi Jinping makes the first state visit to the UK in 10 years. Our prime minister David Cameron says the UK can be “China’s best partner in the west”.
So why are we suddenly being all friendly?
China has the second largest economy in the world, after the USA. Unlike Western countries, China’s economy is growing fast. For the past few years China’s economy has grown at a rate of 10% per year. Compare that to the UK’s economy, which is growing at around 0.7% per year.
Academic Martin Jacques mentions that the last time a Chinese President visited the UK, our economy was bigger than China’s. So there. Now the tables have turned, and some predict China will be bigger than the USA in a few years. So it makes sense for us to cosy up to the world’s new superpower.
Put simply: China’s economic worth is going up and the UK wants in.
The UK wants a slice of the Chinese pie as China’s wealth means it can invest in UK projects. China is interested in backing investing in UK nuclear power, the high-speed HS2 railway and the “Northern Powerhouse”.
FYI the Northern Powerhouse is the Conservatives’ idea to invest in the north of England to boost the economy of the area, focusing on the cities of Manchester, Liverpool, Leeds and Sheffield.
Ummm, not exactly.
Some economists were skeptical when the government started schmoozing China. You see, although China’s economy is still growing, it’s growth rate is slowing down. We explained it for you in a neat video;
This year China’s growth rate slowed to around 6.8%. The Chinese Stock Market suffered some major drops in value. All signs that the country’s economic model may not work in the long-term.
In simple English: China’s economy might be in trouble; UK investment might be a bit of a gamble.
Part of the reason the Chinese economy was doing so well in recent years is because it exports products to other countries.
The downside is that these cheap exports are threatening British jobs. As the Chinese President arrived the Tata Steel company announced that 1,200 UK jobs will be cut in Scotland and the North.
They blame cheap Chinese exports for lowering the price of steel. So much for the Northern powerhouse.
Joining the Asian Investment Bank didn’t do much for UK relations with the USA. The Americans see the new bank as a threat to the International Monetary Fund (IMF), the international organisation set up to ensure the stability of the world’s economy. They also aren’t happy about the Chinese building massive sea bases in the South China Sea.
The Communist Party is China’s single political party and asserts strong control over its people.
Officially the country’s constitution allows freedom of speech, however the government uses media regulations to censor what information is released.
Anti-government bloggers and activists are often jailed and prisoners are reportedly beaten and electrocuted. China has the death penalty and last year China handed out the highest number of death sentences in the world.
Earlier this year students in the Chinese territory of Hong Kong protested against the Chinese government, claiming that new rules made it easy for the Communist party to screen out candidates they don’t approve of.
In the UK protests over human rights abuses are expected throughout President Xi’s visit. Labour leader Jeremy Corbyn was warned by the Chinese ambassador not to make a fuss about China’s human rights.
However, it’s worth saying that life in China today is a whole lot better than it once was. Martin Jacques notes that the country has lifted 600 million people out of poverty, “arguably the single biggest global contribution to human rights over the last three decades.” Fair enough.
The Chinese Ambassador to the UK acknowledges that “China and the UK differ very much because we have different history, different culture, we are in different stage of development”.
He added “it’s natural we have differences, even in regard to human rights. In China we care more about rights to better life, to better jobs, to better housing.”
The UK has been criticised in the past for doing business with countries which have questionable human rights. The excuse often given is – it’s not our country; we shouldn’t interfere. Yet if we’re not doing business with a country, does that mean we’re quicker to point the finger over human rights abuses?
Is teaming up with the Chinese a smart move by the government? Should we ignore China’s human rights record?
New laws mean you can now access your pension at any point. Know nothing about pension? Time to #GetDecoded…
Pension means the government signs me off as too old to work, too young to die right?
There are three types of pension:
1. State Pension = regular moneys from the government going to people who are above the official retirement age (61 and 68 depending on when you were born and what gender you are) and who have paid national insurance (taken automatically from your pay check).
Decoded: £115.95 per week and it’s going up next year!
2. Workplace/Private Pension=
Private: It’s all about what YOU put in. You pay in over the years and when you retire you can invest the end amount into a pension scheme by a pension company. What you get back depends on how the investment goes. Some schemes move the money into lower risk investments as you get older.
Workplace: a percentage of your salary automatically goes into a pension pot, which is matched by your employer (in most cases). Same as with a private pension, at the end you can invest in a pension scheme to grow your money.By 2018, a law will be implemented stating that your employer must automatically enrol you in a pension pot scheme if you’re over 22, under State Pension age and earn more than £10,000 a year.
Decoded: Pay in now to receive an eternal salary. (Like that’s easy to justify)
3. Defined Benefit Pension = an employer promises to pay you a specific amount per year as a pension when you retire. The amount is calculated depending on the number of years you work and the salary you earned.
Decoded: E.g. If you worked for 20 years for a company on £30,000 per year salary and your employer has agreed your accrual (adjustment) rate at 1/50th:
(20 x 30,000) divided by 50 = £12,000 a year in pension
SO WHAT ARE THESE CHANGES THEN?
– From the age of 55 you will now be able to take out ALL the money in your pension pot as a lump sum and spend it how you wish. Or you can take it out in a series of smaller amounts.
-The first 25% you take out will be tax free; the other 75% will be taxed as if it were normal income. No such thing as a free lunch I guess…
-There is now no need to buy an annuity. This is an annual retirement income and in the past you HAD to buy one.
How it works: you pay a lump sum to an annuity provider or insurance company and they give you an annuity income for the rest of your life.
The company usually invests the money in government bonds so what you get in return is affected by the interest they can get from that investment. Complicated? Even more so when different companies offer different rates – and what they offer you will be affected by your health, age and what’s going on in the financial market. So if you’re going for one of these, it’s wise to shop around for the best deal.
– It’s up to you if you want to invest the money in a pension scheme or just keep it as cash.
– Changes apply to those in workplace/private scheme. If you are in a defined benefit scheme you have to transfer across to a private scheme take advantage.
Pensions Decoded: a lot more choice about what you do with your money. No-where near pension age? Don’t worry: at least you have plenty of time to go through your options…