During the visit, Wang and Lammy co-chaired the 10th China-UK Strategic Dialogue, where discussions covered economic cooperation, security, and geopolitical issues.

During the visit, Wang made the following points:

• Communication: China and the UK should strengthen dialogue and mutual trust.
• Cooperation: The recent China-UK Financial Dialogue yielded positive results, demonstrating the benefits of practical engagement.
• Global responsibility: As major countries, China and the UK should act responsibly on international issues.

The Prime Minister, who briefly joined Wang’s meeting with Powell, emphasised the following:

• Stability: The UK seeks a “consistent and respectful” relationship with China.
• Engagement: Britain will engage frankly on areas of disagreement while maintaining regular dialogue.
• Collaboration: Areas ripe for further UK-China collaboration include trade, investment, AI, clean energy, and climate change.

Lammy stated that he raised concerns over Ukraine, the Middle East, Hong Kong’s pro-democracy movement, and sanctions on British MPs. In response, Wang outlined China’s position on Ukraine, calling for no escalation and supporting peace talks.

Following the meetings, China’s Foreign Ministry outlined key agreements from the dialogue:

• Energy dialogue: The UK’s Secretary of State for Energy Security and Net Zero will visit China for energy talks.
• Science and innovation: The UK’s Secretary of State for Science, Innovation and Technology will visit China for bilateral cooperation discussions.
• Education: The UK’s Secretary of State for Education will hold ministerial talks in China.
• Trade and industry: Both sides will accelerate preparations for economic, health, and industrial cooperation forums.
• Financial and AI cooperation: The UK and China will deepen collaboration on financial services, clean energy, and AI.
• Global challenges: The two sides will expand cooperation on climate change, cybersecurity, and global governance.

Wang’s visit is just the latest sign pointing towards increased UK-China engagement under the current Labour government, a development welcomed by businesses with ties to both countries.

The Prime Minister met with President Xi Jinping in November 2024 on the sidelines of the G20 Summit in Brazil, at which he emphasised the importance of a “strong UK-China relationship”. Then, in January of this year, the Chancellor of the Exchequer Rachel Reeves visited Beijing for the UK-China Economic and Financial Dialogue, during which agreements worth £600 million were announced, focusing on areas such as financial services, trade facilitation, and climate-focused initiatives.

Image sourced from the Foreign, Commonwealth & Development Office on Flickr

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The historical context of UK-China economic relations

The UK-China economic relationship is grounded in a history of trade and investment. Key milestones in recent years include the establishment of the UK-China Economic and Financial Dialogue (EFD) in 2008, which provided a framework for discussing shared economic priorities. Over the years, this dialogue has fostered greater cooperation, helping to align mutual interests in trade, investment, and innovation.

However, the hiatus in EFD meetings, which spanned six years, reflects the complexities within which the potential role of China in the UK’s growth agenda operates. However, the resumption of the EFD during UK Chancellor of the Exchequer Rachel Reeves’ visit to Beijing in January 2025 signals a renewed commitment to finding common ground. The agreements secured during this visit – including new licences and quota allocations for UK financial firms such as HSBC, Schroders, abrdn and Aspect Capital and commitments to address market access in China for law firms, engineers, and accountancy qualifications, among many others – highlight the potential for a more collaborative and prosperous partnership.

Commenting on the resumption of the EFD, CBBC President Lord Sassoon said: “UK-China economic and financial dialogues have had a significant impact on generating investment, jobs and profitable business for the UK over many years. The resumption of the EFD is welcomed by our members, both in financial and professional services, but also across the wider economy.”

Current economic ties and investment landscape

China is currently the UK’s fourth-largest trading partner, with bilateral trade amounting to over £100 billion annually. British exports to China span a wide range of sectors, including automotive, pharmaceuticals, and financial services, collectively supporting hundreds of thousands of UK jobs – over 129,000 jobs according to a 2020 Cambridge Econometrics report. Chinese investments in the UK have been similarly diverse, covering infrastructure, renewable energy, and advanced manufacturing.

During Chancellor Reeves’ January 2025 visit, agreements worth £600 million were announced, focusing on areas such as financial services, trade facilitation, and climate-focused initiatives. These deals underscore the breadth of opportunities available for both countries to enhance economic cooperation. Indeed, a recent survey of over 120 CBBC member companies revealed that nearly 70% feel optimistic about their organisations’ business prospects in China over the next 5 to 10 years.

The role of Chinese investment in the UK growth agenda

Chinese investments have proven to be a significant driver of growth in various sectors critical to the UK’s economy.

In the renewable energy sector, Chinese companies have played a pivotal role in developing solar and wind energy projects, aligning with the UK’s priorities of reducing carbon emissions and transitioning to a sustainable energy future.

In 2017, China Resources National Corporation acquired a 30% stake in the Dudgeon offshore wind farm off the Norfolk coast for £600 million. This investment not only provided capital for the UK’s renewable energy infrastructure but also facilitated knowledge exchange in offshore wind technologies. Chinese companies Mingyang Smart Energy and Orient Cable are in discussions to establish factories in Scotland, focusing on offshore wind farm components. These initiatives align with the UK’s net-zero targets by enhancing domestic manufacturing capabilities in the renewable energy sector.

The technology sector has also benefited from Chinese partnerships, with investments enabling advancements in areas such as artificial intelligence (AI), telecommunications and fintech. For example, Ping An Insurance, a major Chinese financial services company, has been a significant investor in 10x Future Technologies Ltd, a London-based fintech firm. In 2021, Ping An participated in a $187 million Series C funding round, supporting the development of advanced banking technologies.

Opportunities for collaboration

Emerging industries present promising avenues for deeper UK-China collaboration. Green energy remains a key area of focus, with both nations investing heavily in wind, solar and hydrogen technologies. The financial services sector also holds potential for expanded partnerships, particularly in areas like fintech, insurance and green finance, where China’s expertise can complement UK initiatives.

Furthermore, the UK’s education sector continues to benefit from strong ties with China. With thousands of Chinese students enrolled in UK universities, there are opportunities to strengthen academic and research partnerships. Collaborative projects in science and technology could further enhance the innovation ecosystem, driving growth in both nations.

Efforts to improve trade facilitation, such as reducing barriers to market access and enhancing regulatory alignment, are also underway. These initiatives aim to create a more conducive environment for businesses in both countries to thrive.

Navigating challenges

Despite the evident benefits of Chinese investment, challenges remain. Concerns over national security have led to increased scrutiny of Chinese involvement in critical sectors, such as telecommunications and nuclear energy. Policymakers have sought to balance economic openness with the need to safeguard sensitive infrastructure and technology.

Human rights concerns have also influenced the discourse around UK-China relations, with some calling for a more cautious approach to engagement. The UK government must navigate these complexities carefully, ensuring that economic collaboration does not compromise ethical and strategic considerations.

Additionally, geopolitical tensions, such as those related to the ongoing US-China trade war, have implications for the UK’s approach. Maintaining a pragmatic stance will be essential for fostering a stable and mutually beneficial partnership with China, as Chancellor Rachel Reeves emphasised during her recent visit to China: “…pragmatic cooperation between the world’s largest economies can help us boost economic growth for the benefit of working people – a priority of our Plan for Change,” the Chancellor said. “More widely, today is a platform for respectful and consistent future relations with China. One where we can be frank and open on areas where we disagree, protecting our values and security interests, and finding opportunities for safe trade and investment.”

Conclusion

China’s role as a strategic investment partner is crucial to the UK’s economic growth agenda. From renewable energy to technology and financial services, Chinese investments have the potential to drive innovation, create jobs, and enhance the UK’s global competitiveness. While challenges persist, a balanced and pragmatic approach can ensure that this partnership delivers mutual benefits.

The 2025 UK-China Business Forum is a full-day conference focused on the theme of UK-China partnerships and the opportunities for growth in both markets through export and investment.

During the morning session, the Forum will explore how to develop these opportunities, analysing both the benefits and challenges from a practical point of view, with senior businesspeople sharing their valuable insights through real-life case studies.

In the afternoon, the Forum will examine four key areas:

• Ageing populations require a different approach to healthcare, with more focus on prevention rather than cure, there is huge scope for UK-China academic and business collaboration.
• The Chinese consumer, amongst which there is undoubted interest in UK brands, where engagement is built on cultural relevance and emotional connection.
• Smart transport solutions, which have the potential for tremendous benefits, both for the UK as a whole, as well as for businesses and their employees.
• Green transition, an area where China and the UK are both looking for wins, and where there is potential for cooperation and growth in both markets.

The event will be followed by CBBC’s Spring Reception.

Click here for more information and to register for the UK-China Business Forum

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Reeves’ visit follows the dialogue opened last year between Prime Minister Keir Starmer and President Xi Jinping at the G20 Summit in November 2024, the first between the two countries’ leaders in six years. At that meeting, Starmer emphasised the importance of a “strong UK-China relationship” for the benefit of both nations, underscoring the need for China and the UK to foster economic cooperation.

Joining the Chancellor on her visit – the first by a UK Chancellor in nearly a decade – to China were the Governor of the Bank of England, Andrew Bailey, and the Chief Executive of the Financial Conduct Authority, Nikhil Rathi. A senior business delegation also joined the Chancellor, including CBBC President, Lord Sassoon, as well as senior representatives from abrdn, Fidelity, HSBC, London Stock Exchange Group, Prudential, Schroders, and Standard Chartered.

The central focus of the Chancellor’s visit was the 11th UK-China Economic & Financial Dialogue (EFD), the first since 2019. Co-chaired by Chinese Vice Premier He Lifeng and the Chancellor, the EFD is a key mechanism for government-to-government bilateral exchange and communication and is expected to result in significant outcomes for British business.

Following the EFD on Saturday, 11 January 2025, a series of substantial outcomes were announced, covering a wide range of sectors and initiatives. We summarise below some of the key messages:

• Pragmatic cooperation with China will result in agreements worth £600 million to the UK economy over the next five years and sets a course to deliver up to £1 billion of value for the UK economy.
  
• New licences and quota allocations for UK financial firms such as HSBC, Schroders, abrdn and Aspect Capital have been granted, as well as initiatives to improve capital market connectivity, pensions (including the establishment of a UK-China Pensions Symposium on a regular basis), insurance and sustainable finance cooperation.
  
• A range of initiatives have been announced to cover better capital markets connectivity (including bond issues in the UK market), greater offshore RMB trading and hedging.
  
• In services, there are a range of commitments to address market access in China for law firms, engineers, and accountancy qualifications.
   
• There are also a number of commitments to improve people to people exchanges, including a new UK-China Chevening Financial Fellowship programme.
  
• The Ministry of Commerce (MOFCOM) and the Department for Business and Trade (DBT) agreed to convene the 14th UK-China Joint Economic and Trade Commission.

CBBC will ensure that it is central to these activities, offering its members the opportunity to be part of these vital exchanges.

“The agreements we’ve reached show that pragmatic cooperation between the world’s largest economies can help us boost economic growth for the benefit of working people – a priority of our Plan for Change,” the Chancellor said. “More widely, today is a platform for respectful and consistent future relations with China. One where we can be frank and open on areas where we disagree, protecting our values and security interests, and finding opportunities for safe trade and investment.”

CBBC President, Lord Sassoon, said: “UK-China Economic and Financial Dialogues have had a significant impact on generating investment, jobs and profitable business for the UK over many years. The resumption of the EFD is welcomed by our members, both in financial and professional services, but also across the wider economy.”

CBBC played a central role in the visit, including organising a roundtable for the Chancellor to meet with leading British companies in China and co-hosting a reception, bringing together UK and Chinese business representatives.

The government is explicit in its desire to build a platform for a long-term relationship with China that works squarely in our national interest – ensuring our economy has the broad base and resilient foundations for the growth that makes working people in every corner of Britain better off.

Commenting on Reeves’ visit to China, CBBC Chief Executive Peter Burnett said, “CBBC is delighted to see the 11th EFD underway after a break of some six years. Economic and business growth is a central mission for both the United Kingdom and China. We are confident that this dialogue will herald the start of a more stable and practical relationship between both countries and will build confidence for exports, investment, financial engagement and growth.”

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Over the past year, we have seen a gradual rapprochement of Western relations with China, including the UK, after a few years of tense relations and largely constructive introspection. This was particularly the case over the last four months with James Cleverly’s visit to Beijing and the Biden-Xi meeting in San Francisco. And March’s Integrated Review refresh helped to provide some much-needed structure to the UK government’s approach to relations with China.

The volume and seniority of inward visits coming to China has been high and sustained throughout the year, with global executives, state leaders and the trade delegations making their way here. The last quarter of 2023 felt much like 2019 in terms of business programming and traffic flow in China.

Meanwhile, the landscape remains mixed for British businesses operating in China, with three distinct investor profiles emerging:

1. Confident and investing: This group consists primarily of the largest UK investors in China as well as those with significant market share or revenue exposure. In most cases, this group operates local business units that have grown over multiple decades. A sizable number of SMEs with strong market fit also fall into this category. Larger investments by this group that CBBC has supported in 2023 range from $100 million (£78.4 million) to upwards of $1 billion (£784 million) and more announcements are anticipated for 2024.

2. Hesitant but growing: The largest of the three groups and consisting of a wide body of sectors and company sizes. The hesitancy tends to be concentrated at the HQ level rather than local and is due to a combination of geopolitics, sluggish domestic and international economic outlook, or commercial considerations (competition, pressure on margins, regulation, etc.). Add also the fact that British companies tend to lean more conservative than our comparators, such as those from the US.

3. Recovering revenue or struggling for growth: Companies in this group are often facing strong headwinds from competition and regulatory barriers, economic challenges such as the real estate crisis and/or weak demand, or are still working to recover revenues from the impact of Covid restrictions. This group is generally not considering leaving China and is instead reorienting its strategic approach to return to a growth trajectory. In a very small number of cases, companies have decided to exit – although this is not uncommon in any given year due to mostly commercial failure. However, in one case, a company (Graphcore) did opt to exit China this year due to US semiconductor controls in a rare case of a UK company getting caught directly in the crossfire of geopolitics.

As we head into 2024, talk will continue to focus on the performance of the Chinese economy and potential risks (real estate, local Government debt levels, domestic demand, oversupply) in addition to recovering investor confidence among both domestic and foreign investors. This was also the focus at the beginning of 2023, when I wrote an article reflecting on the long-term challenges the current mix of headwinds present for China.

The Chinese Government will continue to take steps to reassure investors of their commitment to supporting the economy and, in particular, the private sector. This will have a positive effect; however, any shift in sentiment is likely to be gradual due to continued uncertainty around geopolitics and the macroeconomy.

Regardless, foreign MNCs with significant traction in China will continue to invest into their operations in the pursuit of growth. R&D and M&A will be a major focus as a way to counter the increasing fronts of competition with domestic companies. Localisation will remain a major theme. MNCs will also turn to more creative ways of financing investments in China, including through local banks (see BASF’s recent RMB 40 billion syndicated bank loan as a leading example) motivated by comparatively cheaper rates and the need to commit cash to other key markets.

China will remain a critical front for the future of many MNCs as a focal point for facing up to competition, innovating technology and services, and maintaining or growing global market share.

I also expect we will see an uptick in investment activity into the UK from China, both by State-owned and private investors. This investment will be aimed towards renewables, batteries and EVs — all areas the UK Government is actively promoting — but also consumer and niche segments of healthcare, manufacturing and technology. This is despite continued concerns among Chinese investors regarding the degree to which their investment is still welcome. More work is required to shift this perception, and CBBC will continue to play a central role on this front.

Meanwhile, trade between the UK and China will continue to perform strongly in 2024 and likely set new records, both in terms of exports and imports. UK exports to China had a bumper 12 months up to the end of September, growing by +10.6% to £138.6 billion (inc HK) — the highest 12 months on record. UK exports grew a staggering 71% to £44.4 billion in this period.

Nevertheless, despite the overall positive outlook for growth of UK-China trade, export controls will remain a challenge for many UK exporters. Clearly, more work needs to be done to improve the process. Again, this will form a core focus for CBBC’s work to support our members next year.

It’s been a productive year for CBBC across China and the UK. As a bilateral trade and investment organisation, we thrive on engagement, so 2023 was like taking a big dose of medicine. I look forward to continuing to build upon this momentum into 2024, my seventeenth year in China, and beyond.

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In the summer of 2022, Lord McDonald of Salford’s intervention in the Chris Pincher affair – accusing then Prime Minister Boris Johnson of being less than honest about his knowledge of Deputy Chief Whip’s sexual misconduct – sent shockwaves through the political establishment. But it also demonstrated his skill in delivering blunt yet necessary messages for maximum impact in the service of the public good.

So it should come as no surprise that McDonald’s first book, Leadership: Lessons from A Life in Diplomacy, should be described by English historian Peter Hennessy as “a book full of riches – a despatch from deep inside the British state about how it really operates and how it could be run better.

“In places”, he adds, “Simon McDonald wields his fluent pen like a blowtorch. His candour burns the page. Some of the most eminent in the land will rush to the index. Some will be right to tremble if they find their name.”

I recently sat down with Lord Simon McDonald in Cambridge, where he is currently Master of Christ’s College and working on a second book about foreign policy recommendations for the British government. During his stint as Permanent Undersecretary, McDonald played a key role in ushering in the “Golden Age” of relations with China in the Cameron era, only for Theresa May to hit the brakes. According to McDonald, this necessitated “a lot of explaining”, which, in diplomatic terms, was akin to smoothing out a crumpled map.

Drawing on experience ranging from serving under four permanent under-secretaries and a dozen senior ambassadors before becoming permanent under-secretary himself, McDonald believes the UK should pursue a more independent policy towards China, one that Brussels or Washington do not dictate. Such a policy would better serve the UK’s interests, allowing it to navigate its unique position within an increasingly complex web of international relations. The potential benefits of this approach include fostering stronger trade and investment ties, as well as deepening cooperation in areas such as science and technology. Historically, the UK’s China policy has been influenced by its alliances with the European Union and the United States, potentially constraining its ability to respond to China’s rise in a manner tailored to its own national priorities. If the UK does not pursue a more independent policy, he believes, it risks missing opportunities for growth and collaboration with the world’s second-largest economy, and could continue to be swayed by the interests of external powers in its relationship with China.

McDonald points to the Huawei 5G controversy as an example of the UK’s changeable policy towards China. Initially, the UK government granted Huawei a role in building its 5G network, a decision that prioritised economic considerations and technological advancements. However, due to mounting pressure from the United States, including a “policy disruption mission” by a White House delegation to London in 2019, which included a five-hour meeting with senior officials from GCHQ as revealed in Richard Kerbaj’s The Secret History of the Five Eyes, the UK reversed its decision and banned Huawei from participating in its 5G infrastructure. The flip-flop highlights the challenges the UK faces in developing an independent policy towards China, and precisely why this remains a fraught but important topic that requires candour and a commitment to the public good to address.

McDonald also notes that the China-UK relationship exhibits a degree of maturity in that political disputes do not impact trade, investment and business activity. This maturity presents a significant advantage for British businesses operating in China. Despite political disagreements, business activities remain largely unaffected, providing a sense of stability and reliability for British companies. This enables them to capitalise on economic opportunities, build long-term relationships and navigate the Chinese market with confidence. As a result, British businesses can focus on growth and expansion rather than being preoccupied with the uncertainties that may arise from shifting political landscapes, ultimately strengthening their presence in the world’s second-largest economy.

In terms of practical and on-the-ground advice, McDonald emphasises that personal knowledge of and contacts in China are indispensable and cannot simply be outsourced. He adds that liaising with the embassy and consulates in China can be invaluable, as they can provide a treasure trove of granular information and insights based on their deep experience and commitment to a positive relationship with China. And while they cannot make business decisions, they have played a key role in helping British businesses avoid costly mistakes.

Looking ahead, McDonald notes that British businesses have generally enjoyed a good run in China, particularly luxury automotive brands such as Rolls Royce, Bentley and Jaguar Range Rover. This trend will likely continue. In terms of new areas for growth, he sees collaboration in third countries, most notably in sub-Saharan Africa, and deeper cooperation in science and technology, especially in areas such as climate change, as especially promising.

McDonald has always been comfortable ruffling a few feathers by declaring uncomfortable truths at decisive moments, and in this instance, it’s the UK’s need to pursue a more independent China policy. Yet in doing so, he also offers actionable guidance for British businesses seeking to make their mark in the Chinese market. By understanding the importance of personal relationships, tapping into embassy and consulate resources, and embracing an independent policy, British businesses can navigate the peculiarities and opportunities that China presents.

Entering China is a key decision for businesses of all sizes. Call +44 (0)20 7802 2000 or email enquiries@cbbc.org now to find out how CBBC can provide you with the platform to unlock your potential.

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From the Integrated Review to IR2023

The IR is the preeminent guiding document on the way the UK sees relations with China at a time of global instability and when relations between China and the West are at their lowest ebb in decades. The refreshed IR, IR2023, frames the UK’s policy towards China in terms of protecting national interests, aligning with others to protect collective values, and engaging with China where possible. Versions of this framing are now almost standard for Western countries and the EU as they rethink their relations with China.

Much has changed since 2021, and the government has refined its approach to the country. We have seen, for instance, increased sensitivity to Chinese engagement in critical national infrastructure and cyber security; growing concerns regarding supply chain resilience and critical minerals; and increased scrutiny of academia and its relations with People’s Republic of China (PRC) entities. The Australia, United Kingdom, United States (AUKUS) defence partnership to counter China in the South China Seas has deepened.

IR23 reflects this changing thinking, with a more substantive and detailed discussion of China. Critically, that includes an increased emphasis on diplomacy, dialogue and engagement.

The publication itself says that “IR2023 also includes a clear articulation of the principles that will underpin the UK’s approach to bilateral relations with China, in which the importance of dialogue and diplomacy is emphasised. Ultimately, the UK seeks to re-establish a stable, constructive and frank relationship that can both create better conditions for cooperation and underpin the kind of strategic dialogue required to prevent miscalculation and misunderstanding.”

This is an important step in recognising the multifaceted and complex relationship the UK needs with China in the coming years. Developing an effective approach to engagement and cooperation now requires an action plan, clear priorities, strengthened capacities, and resources.

The need for constructive engagement on global challenges

This is in an era of ‘polycrisis’ and interconnected global challenges which require collective action.

All but the most ardent China hawks recognise the need for cooperation with China on global problems, and IR2023 namechecks climate change and global health. But these issues get much less air-time than the security issues outlined above. What are the UK’s priorities? How should we build effective forms of engagement around them?

Forging a new kind of relationship with China that mainstreams serious global challenges will not be straightforward, but is necessary. We ask what is needed to re-centre such challenges in our thinking as we navigate the choppy waters ahead.

Foreign Secretary James Cleverly meets Wang Yi, China’s Foreign Minister, as he attends the Munich Security Conference. Photo: Simon Dawson/No 10 Downing Street via UK Government on Flickr)

Rationales for engagement

In discussions of China strategy, engagement and cooperation are generally an afterthought, summarised as something like ‘climate change and pandemics’, as in IR2023. But this ignores the complexity of a major set of issues where China is an important factor, and which need to be thought through.

China is vital to many significant global challenges, given its size, systemic importance, regional presence, and technological advancement. Examples include health and development challenges such as antimicrobial resistance (AMR), food insecurity, plastic pollution, and developing country debt relief; governing frontier spaces such as digital tech, the arctic, and space; and stability issues, including financial stability, peace and security, and fragile states. Over the coming weeks, the IDS China Centre at the Institute of Development Studies (IDS) will publish blogs exploring some of these key issues.

For countries reappraising their relations with China, thinking in terms of three kinds of challenges can help clarify what we are trying to achieve.

• Issues where China is system-critical, where progress cannot be made, or will be substantially diminished without China’s contribution. Examples include reducing greenhouse gas emissions, AMR, and biodiversity loss.
• Issues where China is a part of the solution to challenges facing developing countries. Examples include debt restructuring, investment in LMICs, and technologies developing countries need to respond to climate change, including solar or drought-resistant crops.
• Issues where it is in the enlightened self-interest of countries to have functioning relations. Examples include, nuclear proliferation, financial stability, peace and security, and regulation of new technologies.

Engaging with China as if the world matters

Geopolitical tensions should not trump effective coordination on global challenges that threaten humanity or the biosphere. And developing countries cannot be asked to choose between China and the West.

The world is becoming increasingly multipolar. China has expanded its role in the multilateral system, though not uniformly. It has also promoted new institutions and visions outside the existing system, most recently the Global Development Initiative. While these provoke wariness, dismissing them is shortsighted.

China was critical to the Paris Agreement and the recent successful negotiation of the Kunming-Montreal Global Biodiversity Framework. It will inevitably also be important in shaping the successor agreements to the Sustainable Development Goals. Informed, grounded engagement on the kinds of global challenges outlined above is vital to make this a constructive process and to build consensus around viable responses to the crises humanity and the biosphere face.

Where now?

Relations between China and most developed countries are at a decades-long low. There are no easy fixes, and there are fault lines that risk destabilising relations further. What can be done?

There is a need in most Western capitals to articulate a clearer case for informed, strategic engagement, backed by clear priorities and strategy. This is not naïveté or accommodating China: as Jessica Chen Weiss says: “we have to try”.

The UK has many strengths. It is respected in development policy and practice, and in science, including biomedicine and climate sciences. It has a history of engaging China in international development, including through trilateral cooperation in third countries. This provides a foundation, and a basis of trust, but one that will erode if neglected for too long.

Jurisdictions such as the European Union and Australia are strengthening research and study of China. It is now time to seriously invest, recognising that China’s global impacts affect almost all areas of policy, and that UK capacity to engage must keep pace.

The IR2023 plan to double spending on China capabilities within government, including language training, is welcome. But capacities needed to support effective engagement are not limited to government. More is needed, including:

• Funding for engagement on global challenges where China is a significant factor, including strengthening relationships with China, with third countries – and where possible with China in third countries – to contribute to the delivery of key global public goods.
• A jointly-funded China research programme delivered through UKRI, building on previous successful collaborations, and supporting research on global challenges that need to be addressed with China.
• A strategy to improve China knowledge and language training in schools and higher education institutions, including China-focused modules in a range of degree courses.

As the UK does this, aligning with other countries and actors with progressive approaches to engagement will be important.

IR2023 identifies China as an ‘epoch-defining challenge’. This is the moment to step up to the unavoidable but neglected challenge of appropriate cooperation with China, clarifying the benefits of doing so, mitigating risks, identifying clear priorities and entry points, and investing in capacities to deliver.

Images from UK Government via Flickr (see original sources here and here)

This article was first published as “Engaging China on global challenges: Responding to the Integrated Review 2023” by the Institute of Development Studies

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Tackling climate change will probably be the most important issue facing the world’s diplomatic and business communities this century. A global response is urgently needed, for according to the Sixth Assessment Report by the Intergovernmental Panel on Climate Change (IPCC), without a reduction in greenhouse gas emissions, global warming could reach the critical tipping point of 1.5°C above temperatures in the pre-industrial period by the early 2030s – with catastrophic consequences for the world as we know it.

In September 2020, Chinese President Xi Jinping announced that China aims to see its CO2 emissions peak before 2030 and achieve carbon neutrality before 2060. President Xi reiterated the commitment earlier this year at the Leaders’ Summit on Climate, adding that China would begin phasing out its polluting coal-fired plants from 2025 and has subsequently announced an immediate end to the funding of new coal-fired plants in third countries.

At a time of geo-political tensions, there seems to be common interest in including China in international efforts to address climate change. In April 2021, US Special Presidential Envoy for Climate, John Kerry, met his Chinese counterpart Xie Zhenhua. In their joint statement, both sides vowed to intensify their cooperation in the fields of renewable energy, industrial decarbonisation, and low-carbon transportation, among others.

China is the world’s largest emitter of CO2, accounting for 30% of global emissions; more than double that of the United States. By contrast, the United Kingdom accounts for less than 1%, producing per capita emissions of 5.45 tonnes of CO2 per person compared to 7.1 tonnes for China. However, whereas the UK managed to reduce its emissions by 38% compared to 1990 levels, outpacing the 25.1% reduction across EU member states, China’s carbon dioxide output has soared by 380% in the same period.

Britain’s impressive efforts will have limited impact without a global shift in policy – and China’s role in this is crucial, both in its own carbon reduction efforts and in its investment in green technologies and renewable energy. Already facing environmental problems of its own, such as desertification and water shortages, China also has a strong self-interest in effective global action.

EU-China cooperation on Climate Change has also deepened. In 2018, European and Chinese leaders issued a statement expressing their mutual commitment to intensify political, technical, economic, and scientific cooperation on climate change and clean energy. Both sides also signed a memorandum of cooperation on emission trading and indicated that they would align their standards for green investment.

UK-China cooperation on climate change

As the UK charts a new course outside the EU, international cooperation on climate change will be one of the main foreign policy areas where it can put the vision of ‘Global Britain’ into practice. The 2021 Integrated Review, which outlines Britain’s strategic priorities in the next decade and beyond, lists climate change and biodiversity loss as major strategic concerns and the UK’s international priority through COP26 and beyond.

The Integrated Review not only calls for more investment in domestic green technologies, such as offshore wind farms and hydrogen power projects, but also for action to help accelerate the global transition to net zero. Cooperation with other major economies, especially those which are already heavily investing in green technologies, is therefore only logical.

Here collaboration with China plays a key role. The country is already the largest market for renewable energy. Last year alone, China increased its wind energy capacity by 60%, enough to power three times the number of homes in the UK. By 2030, global offshore wind power capacities are expected to have grown sevenfold, with China accounting for 25% of the increase. The UK is expected to add the second-largest amount, adding 16%, followed by the US with 11%, according to research by Global Data.

While there is a longstanding and fruitful collaboration between businesses and researchers in both countries, coordination at the political level provides a vital policy context for this. The UK-China joint statement on climate change – which was released during Chinese Premier Li Keqiang’s visit to the UK in 2014 – is one of the earliest and most ambitious bilateral documents in this area. A year later, both governments signed an agreement for a Clean Energy Partnership, vowing to support each other during the transition to a low carbon economy.

Recent government-level meetings between the UK and China – like the 10th Economic and Financial Dialogue in 2019 – have confirmed these goals and reiterated their mutual commitment to work together at the ministerial level to enhance cooperation on key green technologies. Furthermore, both countries’ central banks, the Bank of England and People’s Bank of China, agreed to collaborate on green finance standards and regulatory frameworks for climate-friendly financing. In September, President for COP26 Alok Sharma met China’s Special Representative Xie Zhenhua in Tianjin to discuss China’s crucial role in global climate diplomacy. Both agreed that more needs to be done and that all sides should accelerate their efforts to keep global temperatures from rising above 1.5 °C. Finally, in October, Zhang Jianhua, the head of China’s chief energy regulator, held a video conference with Kwasi Kwarteng, UK Secretary for Business, Energy and Industrial Strategy to discuss both country’s cooperation in the field of civil nuclear energy, offshore wind power generation and energy market reform.

While many of these initiatives were interrupted by the Covid-19 pandemic, the increased frequency of extreme weather events like the torrential floods in Zhengzhou make the joint combat against climate change an even more pressing task. COP26 now offers an opportunity for leaders in both countries to re-join hands and enhance the positive examples of joint action that are already taking place.

The role of business

Businesses from the UK and China will be central players in the low carbon transition, through their investment, their technologies and their services, and it’s this that CBBC’s upcoming Targeting Net Zero report aims to highlight.

KPMG, in the report’s thought-provoking introduction, draws upon recent analysis to outline what it sees as the main opportunities that will emerge for companies from what is proving a difficult and challenging transition from a fossil fuel-driven economy towards a sustainable and carbon-neutral one. They are at once plentiful and diverse, and several play into proven synergies between the UK and China.

Following the five key themes outlined at the start of the UK’s Presidency of COP26, each of the five chapter sponsors then goes on to share their own reflections on the challenges and technological advancements within their respective areas of expertise. Each chapter is then complimented with a set of four case studies, which serve to illustrate the wealth of solutions that British and Chinese firms are working on in support of our countries’ ambitious climate targets.

The entrepreneurial spirit and technical ingenuity demonstrated herein will be a major contributing factor in helping our nations reverse the destructive trends of the past in Targeting Net Zero for the future.

Click here to read CBBC’s Targeting Net Zero: The Role of UK-China Business Report

The post How will COP26 affect UK-China relations? appeared first on Focus - China Britain Business Council.

The UK formally applied to join the Comprehensive & Progress Agreement for Trans-Pacific Partnership (CPTPP) on 2 February, a move that made headlines across the UK media. China then followed suit in September.

It was Beijing’s application, in particular, that caught analysts by surprise: The bloc finds its origins in having been conceptualised by the Obama administration leadership as a way of countering China’s increasing economic might in the Asia-Pacific region. President Donald Trump subsequently pulled the US out of what was then known as the Trans-Pacific Partnership (TPP) agreement, but the 11 remaining member states continued negotiations and sought to create a framework that would bring 13.4% of global GDP under one set of rules. They were successful, and the renamed CPTPP is now routinely held up by trade policy analysts as some of the most liberal and forward-thinking trade policy on offer. 

As a result, membership of the CPTPP has become so attractive that even China is throwing its hat into the ring. Analysts have mostly put Beijing’s motivation for wanting to join the bloc down to the fact that its accession requirements could provide fresh impetus for economic reform at home, rather than its desire to control the bloc’s apparent anti-China or anti-state capitalism sentiment from the inside.

The primary motivation for the CPTPP’s existing members for joining has typically been either that membership can raise their profile as proponents of free trade; or that pressure brought by the thresholds for accession will inspire domestic reform in areas such as labour rights, environmental protection, intellectual property protection, and enabling more tariff-free trade. The UK and China find themselves at opposite ends of that scale.

Background

The CPTPP’s policies include gold standard provisions regulating the extent to which member states can support state-owned enterprises (SOEs), the most detailed provisions for IP protection to be found in any FTA, and Rules of Origin and mobility provisions that could see the Asia-Pacific rim become one of the busiest areas in the world in terms of the movement of goods and people.

Beyond its impact on regional trade, at the treaty’s core is the idea that it should be a forward-thinking and progressive agreement, encompassing countries whose collective economic heft means that even ideologically opposed economies will have little choice but to engage with CPTPP members on their terms.

By extension, it’s clear that the CPTPP represents a challenge to China from many of its regional trade partners to either get on board or face being encircled by a bloc that has both substantial economic power and with a more attractive vision for the future governance of the global economy.

How does the CPTPP compare to membership of the EU? And how does the EU bring China into the mix?

The Department for International Trade has been at pains to point out how joining the CPTPP — a large trade bloc that is governed by a multi-state commission — would differ from being a member of the EU and its Single Market. The rights and obligations of member states under the CPTPP fall into two categories — rules setting and market access — with both resulting in power remaining with the member state.

1. Rules Setting: For example, setting a common set of rules on the regulations that should be in place to facilitate the safe transfer of data.
2. Market Access: How far each CPTPP member will cut tariffs, open its services markets, and liberalise business travel, etc.

Furthermore, each member state retains the ability to determine its own tariff schedule: While the CPTPP provides for almost complete tariff liberalisation among participants, its terms allow states to opt to retain tariffs in highly sensitive areas, such as rice in the case of Japan or the dairy sector in the case of Canada. The UK will likely have to do this too when negotiating its accession, for some of the measures it has agreed with the EU in the Withdrawal Agreement and with Japan in the UK-Japan Closer Economic Partnership Agreement (CEPA) go beyond the terms of the CPTPP.

Does it matter if China joins the CPTPP?

The more pressing question is how Beijing would behave were it to join the CPTPP. While Beijing has agreed the CAI with Brussels, been vocal about its commitment to tackling climate change and taken steps to open its economy further, it has also said that it wants to “overtake by changing lanes” in several areas in which the CPTPP is seeking to emerge as the world’s leader.

It is therefore unsurprising that analysts are questioning whether Beijing is serious about aligning its values with the EU’s — or those of the CPTPP — or whether it is seeking to use its own economic might to barge its way into the Single Market or the CPTPP to ‘gut’ it from the inside.

The UK’s potential to push the CPTPP and Asia-Pacific regional trade in the direction it wants depends on it delivering on its apparent pivot to Asia to its fullest extent

How does the UK fit in?

The UK is diving deep into this soup of trade agreements and geo-politicking for two potential reasons. Firstly, the government is clearly keen to demonstrate it is set on a new path now that the UK has left the EU. Secondly, the application to join the CPTPP fits a pattern of looking to join with like-minded states to put pressure on China over its trade practices. In a similar vein, the UK’s recent negotiations over trade agreements with Japan and the U.S. include provisions that cover not just the usual areas of a trade agreement, but also areas such as support for SOEs, a common bugbear for critics of China’s economic model.

Of the CPTPP’s current member states, the UK has already negotiated an original FTA or a roll-over deal with five markets (Canada, Chile, Japan, Singapore and Vietnam), and is in the process of negotiating FTAs with Australia and New Zealand. The UK has also secured a roll-over deal with South Korea, which sits outside the CPTPP but is a key regional trade partner.

The UK has already found a useful ally in Japan in terms of putting its trade agenda forward. As the current chair of the CPTPP commission, Japan has been one of the most vocal supporters of the UK joining the bloc: During negotiations over the UK-Japan CEPA, Tokyo was keen to present a UK-Japan FTA as a steppingstone on the way to CPTPP membership.

Both Japan and the UK would reportedly like to see several of the CPTPP’s provisions beefed up. Indeed, this partly explains why during the CEPA negotiations, the UK and Japan agreed on provisions to e-commerce and IP protection that are basically CPTPP+. As a result, when the UK comes to negotiate with the current crop of CPTPP member states, they will likely either have to green-light the UK/Japan’s new provisions or grant the UK an exemption. For its part, Japan is effectively using the UK’s application to join the CPTPP to reopen negotiations over its provisions with its fellow member states.

The CBBC View

The UK’s post-Brexit experiences in trade negotiation to date suggest the country has the potential to push the CPTPP and Asia-Pacific regional trade in a direction that might create headaches for China. Of course, this would depend on the UK delivering on its apparent pivot to Asia to its fullest extent. A UK ambition to become a leading force in the setting of trade provisions and confronting China’s trade practices is also becoming apparent.

As a result, the UK’s application to join the CPTPP should be viewed alongside its ambition to become less reliant on China — through initiatives such as ‘Project Defend’ — and as part of an emerging strategy of growing trade with countries that surround China, rather than directly with the world’s second-largest economy.

The post Why do China and the UK want to join the CPTPP? appeared first on Focus - China Britain Business Council.

Lord James Sassoon is the Chairman of the China Britain Business Council and executive director of Jardine Matheson & Co. He explains that the UK-China relationship will only strengthen

At CBBC, throughout our 65 years supporting UK-China trade and investment, we have described our work as ‘helping UK companies enter the China market’. Of course, this is still at the core of what we do. But the reality of the UK-China relationship today is so much more sophisticated than just this. These days at CBBC, we talk about ‘helping UK and Chinese organisations cooperate in the UK, China and third markets around the world’.  This shift in our thinking sums up both China’s development over the last 40 years and the relationship between the UK and China.

After 40 years of prudent opening up, China is now ‘opening out’. The domestic economy is increasingly intertwined with the global economy. Overseas investors, sovereign and private, while a little more reserved since the tighter regulations of 2016, are increasing their footprint around the world – with the UK as the leading destination in Europe for a number of projects. Ripples in Chinese financial markets, good and bad, are increasingly felt internationally. And the Belt and Road Initiative, combined with the establishment of the Asian Infrastructure Investment Bank, is perhaps the clearest embodiment of China’s new place in the economic world order.

And the UK can be at the centre of this ‘opening out’, as our expertise in global financial and professional services, advanced manufacturing and healthcare, to name just a few sectors, complement China’s requirements. While other countries may have had a more relevant skillset to meet China’s needs in the first 40 years of opening up, the future plays to the UK’s strengths in education, professional services, high technology, healthcare and the creative industries.

At the heart of the UK-China relationship has been a mutual respect, strengthened by regular strategic dialogues

What is even more meaningful is that China’s development has also shifted the focus of global trade. In 1980, the EU economy accounted for 34 percent of the world economy and the US 26 percent, with East Asia at 16 percent. However, in 2017, East Asia accounted for 27 percent of the world economy, the US 24 percent and the EU 21 percent. Much of this shift has been driven by China.

At the heart of the UK-China relationship has been a mutual respect, strengthened by regular strategic dialogues on a wide range of bilateral and global issues covering culture, business, finance and security. I have participated in a number of these dialogues over the last fifteen years.  In her foreword to a publication celebrating 45 years of diplomatic relations after they were established in 1972, UK Ambassador, Dame Barbara Woodward, talks about the three pillars of ‘government to government’, ‘business to business’ and ‘people to people’ as the three legs of a ‘Ding’ Chinese pot. “The three legs provide stability… the UK and China have those now,” the Ambassador said.

Visits and dialogues at the very highest levels have continued at pace this year. The Prime Minister visited China in January, followed by the Chancellor in May and the new Foreign Secretary in July. The Secretary of State for International Trade has made five visits this year, most recently in November at the China International Import Expo. These visits have been instrumental in maintaining the momentum of commercial exchanges, further opening the Chinese market for UK goods and services and setting the scene for a possible trade deal after Brexit.

In 1980, Germany’s GDP was almost three times that of China. However, in 2017, China’s GDP was 3.3 times Germany’s. It is a truly remarkable economic story. The UK has been an active participant in this story over the last 40 years, and what is most exciting is that the most mutually beneficial parts of the UK-China story will be written over the coming years.

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Rock star, composer and judge on Voice of China, Wang Feng stands on stage at the premiere of Existence – a feature-length documentary about China’s biggest rock star and his long and turbulent rise to fame. Standing beside this Chinese icons, struggling to see past the sea of microphones and cameras, are two blond-haired brothers from Britain.

Brothers Max and Tom Sanderson from Yorkshire directed and produced the film that broke records for a music documentary with over a million views in the first day of its launch. But for the British entrepreneurs, their road to success was long and winding.

Nine years ago Max and Tom would not have believed they would be sharing a stage with China’s biggest stars at the centre of a media frenzy. They arrived in the southern city of Shenzhen with little more than a bag of belongings. After a spell working in product design for a British company making flight cases, in 2009, the brothers decided to remain in China and start their own events and film company, SLA Studios in neighbouring Guangzhou.

Max and Tom Sanderson of SLA Studios at the premiere of their film

The music industry was one they knew well. They had previously taken British musicians on a tour of Chinese underground music venues and had their fair share of ups and downs with local promoters, investors and backers. But it was through that first musical journey that they encountered the challenges – and opportunities – of running a business in China.

It needed to be international quality, Netflix quality and nothing less

It turns out music promotion was not for them but the videos they created around the tour piqued the interest of partners and investors, and before long they were filming all the major music festivals around China. They worked with established record labels, promoters and music technology companies and soon built a reputation as the go to team for live music videos.

The business model was very much created out of trial and error. Having a large full time team in Guangzhou, and with additional freelance teams in Beijing and Shanghai, meant that overheads were high, and staff turnover was even higher, as the often younger staff moved on to better paid roles after they had been through the rigorous training the British brothers provided. “We had to get low price people and train them up to be better,” explains Tom Sanderson. “The income we were getting was just going on salary and not going into our business or our pockets so we changed the business model.”

The team was stripped back, enabling SLA Studios to be more particular about their projects, commanding higher fees and outsourcing the rest. This freed up the team to work on more exciting projects and, in turn, led to the Wang Feng project.

“We were friends with the biggest distributors of music audio equipment in China,” says Sanderson. “He said they were doing an event in the Bird’s Nest Stadium in Beijing for Wang Feng and they wanted a documentary about the equipment used in the show.”

The SLA team with Wang Feng at the Premiere in Guangzhou

The brothers took on the project and when it was complete the audio equipment distributor passed the film on to the stage manager, who passed it on to Wang Feng. As Sanderson continues, “Within three hours of receiving that video Wang Feng called our customer, asked who had made it and said that he wanted us to do his next documentary.”

Max and Tom flew to Beijing to meet with Wang Feng who said that although he had worked with many film crews in the past, the SLA team had that certain X factor that he wanted. He commissioned them to create his next tour documentary. However, after a couple of concerts, Max the director, suggested to Wang Feng that they dig deeper into his personal story and Wang Feng gave SLA the creative freedom to take that direction.

What happened next went beyond even their own expectations as they documented every detail of Wang Feng’s life. The project took up nearly all of Max’s time during this period as he delved into the personal relationship between this musician who went against his parents’ wishes to become a rock star, the parents he defied and his now wife, the film star Zhang Ziyi, until finally, after three years, the project was ready for completion.

Within three hours of receiving that video Wang Feng called our customer, asked who had made it and said that he wanted us to do his next documentary

Onsight insight

With the project in the can, SLA Studios reached out to Tom Simpson, Creative Industries sector lead at CBBC and Simpson suggested getting in touch with Onsight – a London based post-production house with over 20 years’ experience working with everyone from the BBC to Hollywood.

“I first met Onsight CEO, Simon Craddock, in Qingdao on his first trip to China,” says CBBC’s Tom Simpson. “Onsight later went on to become a Launchpad client with the CBBC and began developing links and contacts in China. At the same time, Tom and Max were shooting with Wang Feng and they got to the point where the project was nearing completion and they wanted to give it the added edge of BBC quality and so I introduced them to Simon.”

Simon Craddock of production company Onsight

“It was clear we needed someone who could handle this. It needed to be international quality, Netflix quality and nothing less, so we needed someone, like Onsight, who could handle that pressure as well as, ideally, understand music,” says Sanderson. “For us they were really nice people, they had a great facility and they clearly had the experience and capability.”

“We could have done the postproduction for thirty or forty percent cheaper in China and we would have had a load more money in our back pocket,” Sanderson says. “But we wanted to create ties with the UK. We want to do film work in China and connect on an international global level.”

Four years ago, Simon Craddock, CEO of Onsight, was invited by the then UKTI (now the DIT) on an innovators’ trip to Qingdao where China’s largest film studio complex was being built. Onsight is a leading pioneer when it comes to film technology and innovation and so Craddock was invited to investigate what a technology company like his could do in China.

“On that trip, I discovered the massive potential an innovative technology business like ours had in China,” says Craddock. “They are building 14 cinemas every day and, of course, if you are building a cinema in 2017 you are building it with the latest technology. Essentially in America and Britain we aren’t building any cinemas and we aren’t really upgrading them but in China they are building them every single day.”

However, although China is developing the hardware and buying the technology, the UK has developed the expertise in utilising it. “Anybody can buy equipment – it’s about understanding the technology and how to use it,” says Craddock. “And that is a skill that comes over a period of time with the right people. It’s not something you can buy instantly unless you buy our company and all the infrastructure that goes with it.”

Zhang Ziyi and Wang Feng in the film Existence

Onsight’s entry into China in 2013 started off slowly. “There was a lot of interest and a lot of people engaging with us but not a lot of business that came out of it,” he says, explaining the situation by saying that this was down to the market being still relatively immature. However, over the last four or five years the market has grown and this year Onsight has received a flurry of work from China.

After a British director was appointed to work on a 4K opera from Chongqing, the producer sought out Onsight for postproduction. “The producer felt that what the west had to offer in terms of production values was different to China and she wanted to give it more of an international feel,” says Craddock. “The director then reached out to us because of our Chinese connections but also because central London post-production facilities are arguably the best in the world.” He continues, “We worked on ‘Earth: One Amazing Day’, which was the first production to utilize the UK-China film treaty and was produced by BBC Earth Films & The Shanghai Media Group”.

Then of course, the Wang Feng documentary came along. “The SLA boys absolutely understand the Chinese culture but they also saw that having western postproduction would add value.”

Craddock says that there were some questions about why the project should go to London to do the postproduction when the cost of doing it in China would be less. “Of course they have the technology to do it but would the film have looked the same?” asks Craddock. “Because when they came to the UK, a British film editor cut the film to give it more of an international feel. I think they were very pleased with the production and Wang Feng certainly was.”

The film was released via China’s largest video on-demand channel, iQiyi in August and has been viewed by over 2.5 million paid subscribers. The premier in Beijing was a major success and there are now plans to show the film internationally at festivals.

These two British companies, half a world apart, have played a major role in showcasing not only the best of China’s creative talent but the best of British too.

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