Key takeaways:
UK-China Relations: The UK’s diplomatic and economic interactions with China are marked by ongoing tension between economic interests and national security.
Labour's Stance: Labour’s approach to China is expected to mirror the Conservatives', focusing on economic gains while managing security risks.
Green Technology Focus: The new UK government is likely to pursue closer ties with China in green technology to advance its environmental goals.
Economic Vulnerabilities: Dependence on China makes the UK susceptible to geopolitical and economic disruptions, particularly in the South China Sea.
Impact on Taiwan: The UK’s ambiguous stance towards China may embolden Beijing in its ambitions regarding Taiwan and the South China Sea.
Background:
On August 23rd, the UK Prime Minister Keir Starmer and Chinese President Xi Jinping had their first ever phone conversation. Before Starmer, the last UK PM to hold an individual conversation with the Chinese President was Boris Johnson in 2022, as Rishi Sunak’s plans to have a direct diplomatic exchange with the Chinese leader did not materialise during his almost 2-year long premiership. UK economic relations with China have been turbulent since 2015 under David Cameron’s “golden era” for UK-China business ties. Since then, economic and diplomatic relations have worsened under subsequent leaders. Crucial moments included the decision of May’s administration to block Huawei‘s role in the UK’s 5G infrastructure, Liz Truss’ short lived desire to designate China a “threat” and Sunak openly declaring China a “state-based threat” to the UK’s economic security and interests. Since 2015 particularly, an internal debate has existed in London regarding the importance of the economic relationship to UK interests, and the growing significance of a perceived national security threat from China.
The ‘economic versus national security tension’ is reflected through the official press releases of the recent call between Kier Starmer and Xi Jinping. Downing Street’s press statement notes the importance of cooperation, trade, the economy and education. Finally, the importance of a “stable and consistent” Sino-UK relationship was emphasised, something echoed in China’s press release also. However, a mention to the “areas of disagreement” on Russia, Hong Kong and the respect of human rights notes outstanding tensions.
While a call may seem ordinary diplomacy between two world leaders, it takes particular importance in the context of the Labour’s open-ended stance on relations towards China. In April 2024, the now foreign secretary David Lammy began the articulation of this stance. He simultaneously recognised China as a systemic challenge to British interests but also recognised the importance of the Chinese economy for the achievement of sustainable growth for the UK. This is not different to the approach taken by the Conservatives since ~2021.
Forward Look:
KSG assesses that Labour’s approach to China is unlikely to differ from the Conservatives, by which economic opportunity will be prioritised, while reluctantly voiding prosperity/growth goals when national security threats are deemed too severe. This makes businesses operating with a dependency on China-UK relations at risk of a sudden change in UK policy towards Chinese access into its economy, and authorisation of UK businesses to operate in (or with) China.
Alongside Labour’s emphasis on economic growth, a major pledge has been renewed effort in investing in green technology, including zero-carbon electricity by 2030. In this context, the UK’s new Government appears to be aligning its foreign policy to foster greater cooperation with China, particularly in the fields of economic growth and green initiatives. Greater UK-China cooperation on green energy may offer UK businesses the chance to absorb technological innovation from China, which at the moment stands as the global leader in the field.
Over the next year, especially if Trump is elected and the current EU & US strict sanctioning of Chinese imports persist, the UK could plausibly be perceived in Beijing as the economic partner of choice. However, KSG proposes it more likely that China will appreciate that the UK will yield to pressure from Washington and Brussels should both demand the UK take a harder stance on China. In addition, the UK has proven itself a significant leader in raising awareness of the Chinese threat amongst NATO Allies. Thus, China is unlikely to pursue economic co-operation with the UK without a contingency for a sudden UK decoupling from China.
KSG assesses that this policy ambiguity and coupling with China undermines the deterrence of Chinese ambitions in Taiwan. If China perceives that it can pressure US Allies like the UK into staying out of cross-straits tensions, it is more likely to proactively push its goals in the South China Sea.
Continuing to have a dependent economic relationship with China will make the UK increasingly susceptible to instability in the South China Sea. However, these sea lines of communication are an unavoidable dependency for the UK economy, and even a decoupled UK would be drastically affected by major disruptions in the sea. Regardless, KSG recommends the UK Government should be seeking alternatives to China for its prosperity goals.
It could be proposed that the UK keeping a strong economic relationship with China will give London the ability to effect Chinese policy in some way, given diplomatic access. KSG assesses that the UK will have little to no ability to change China’s geopolitical strategy – especially any decision to ‘reintegrate’ Taiwan.