THE BLOG
23/10/2015 12:37 BST | Updated 22/10/2016 06:12 BST

The Chinese Northern Powerhouse

On the final leg of his State Visit to the UK, President Xi of China took a trip to Manchester to visit the Northern Powerhouse, in what is undoubtedly a coup for the city.

Moreover, Xi's visit neatly summarises two of the current priorities of the Conservative Government, in particular Chancellor George Osborne: China and the Northern Powerhouse.

Since May's general election, there has been a constant stream of government announcements on the Northern Powerhouse, the idea of boosting economic activity in Northern cities.

As I've written before, a current challenge for Osborne is finding the finance to make his dream a reality, especially under tight fiscal conditions, made even harder with the new Charter for Budget Responsibility, which commits Osborne to running a budget surplus in 2019-20.

For Osborne, China offers a potential solution. During his trip to China last month, Osborne presented Chinese investors with a book of infrastructure projects that he hoped would appeal to the Chinese. A new wave of deals were announced too, including a £730m investment by a Chinese company to build over 2,000 homes in Greater Manchester.

Osborne's trip was in part about laying the ground work for the State Visit, and his message was clear: the Northern Powerhouse is an important economic project for the UK.

In the run up to Xi's visit to Manchester, it was reported that Osborne lobbied to ensure Xi visited the city as part of his trip. Given the complexities and amount of discussions that go into planning such diplomatic visits, it was a big win for Osborne. Taking Xi to visit the Northern Powerhouse is powerful symbolism, the same as when Osborne became the first British minister to visit the Xinjiang province in China last month.

Xi's visit isn't just about symbolism though. While in Manchester the first direct flight between Manchester Airport and Beijing was announced. This increased connectivity could be worth up to £50m per year to the Manchester economy, according to estimates.

Xi's visit to the Manchester City football academy also highlights the global reach the city has when it comes to football. A city which has two successful teams also has millions of supporters across the world and in China.

For Osborne, he has invested a lot of energy into developing the UK's diplomatic and economic ties with China, much to the criticism of campaign groups for human rights, who point to Osborne ignoring China's record.

Osborne has also put a bet on the direction of travel for the Chinese economy, which is undoubtedly experiencing a slow down as it makes structural adjustments required for the next stage of its development. Speaking in Shanghai last month, Osborne said Britain would "stick together" with China despite the summer's financial woes.

Domestically, Osborne has staked a great deal of his own credibility on the Northern Powerhouse. If the project ends up failing, he will be heavily exposed to attacks from Labour.

By taking Xi to Manchester, Osborne is blending two of his own pet projects.

This makes sense in one respect, since Osborne needs willing investors to develop the existing pipeline of infrastructure projects. On the other hand, if the Chinese economy starts to experience a period of turbulence or anything like a hard landing, questions will quickly arise about how forthcoming investment from China will be. At this point, critics will not only be calling into question Osborne's strategy for developing the Northern Powerhouse, but also why he was so keen to link the UK economy so closely with China.