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

The post China as a strategic partner in the UK’s growth agenda appeared first on Focus - China Britain Business Council.

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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Although the year was challenging for both countries – China’s economy did not “rebound” as expected following the lifting of pandemic restrictions in late 2022, and the UK’s GDP grew by just 0.4% amidst lingering inflation and high interest rates – UK goods exports to China rose 0.9% to £22.4 billion (according to ONS data), reversing the decline seen in 2022. It’s worth noting that HRMC, which calculates differently, showed goods exports falling 1.6% to £21 billion. Imports fell by 11.1%, resulting in an £8 billion cut to the UK-China goods trade deficit.

Overall, China remained the UK’s third-largest trading partner, with total two-way trade in goods and services amounting to over £105 billion.

The tracker shows trade with China has the potential to be a key driver of regional growth in the UK. According to HMRC data, UK goods exports to China generated £16.5 billion in wealth for regional economies outside of London.

Notably, the Midlands emerged as a trade powerhouse in 2023. The East Midlands’ and West Midlands’ trade exports to China generated £6.7 billion over the year, growing faster than any other UK region individually dethroning London to become the UK’s top exporters. The other two regions that saw positive growth in their exports to China were the South West and Northern Ireland.

In terms of goods categories, “Power Generating Machinery & Equipment” rocketed 48% to £4.45 billion, surpassing the previous number one category “Road Vehicles”, which grew from £3.7 billion to £3.8 billion.

“These numbers highlight China’s vast potential as a market for UK goods,” says Rob Ismay, Interim Chief Executive at the China-Britain Business Council. “With a land area 39 times that of the UK, 160 cities with populations exceeding one million, and as the home of 20% of the world’s middle class, China continues to be an attractive export destination for British products.”

The China Trade Tracker was launched by the China-Britain Business Council (CBBC) in 2021 as a reference tool providing the facts and figures about UK-China trade, and how Britain’s regional economies are impacted by their trade with the world’s biggest market. It is updated on a half-yearly basis.

Issue Nine of the Tracker provides an overview of goods trade between 12 UK regions and China in 2023. Unless stated otherwise, references to China in this report include Hong Kong.

Click here to read Issue 9 of the China Trade Tracker

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It’s also an extremely useful overview of the up-and-down vicissitudes of trading with contemporary China. From the faltering, uncertain beginnings of trade in the 1970s through the period of opening up and reform, to the go-go years around the new century and the problems of retrenchment since then. Paul French spoke with Elizabeth O’Brien Ingleson about the rocky ride of the last 50 years and where things stand at present.

Made in China is a fascinating history of American (and, by extension the UK and Western European) trade with China from the 1970s. Usually, we just think Maoism equalled no trade and seclusion before the Nixon visit and then Deng Xiaoping opened things up. However, you frame it slightly differently and suggest Mao had started a process of encouraging trade even during the Cultural Revolution?

Yes, I was surprised to find that it was during the latter years of the Cultural Revolution – from the late 1960s and into the 1970s – that China’s foreign trade began to change substantially both in terms of the volume of trade and its geographic partners. Throughout the 1950s and 1960s, China maintained small levels of trade with foreign nations, especially the Soviet Union and the Global South. From the late 1950s, China also began to trade with some capitalist nations, such as Britain, Japan and West Germany. But it was only during the 1970s that Mao began to increase China’s overall levels of trade for the first time since the Communists’ victory in 1949, and it was China’s engagement with advanced capitalist democracies – not members of the socialist world – that drove this growing trade. It was amidst the social and political chaos of the Cultural Revolution that Chinese leaders within and beyond the elite levels of politics experimented with economic reorganisation that laid the groundwork for the reform and opening that Deng Xiaoping would later launch.

You go back to the pre-WW2 period and Carl Crow’s infamous 400 Million Customers. The war ended that dream sadly. But then you discuss ‘the transformation of the China market from 400 million customers to 800 million workers’ during the Cold War – what was going on, in the West and in China, to make that leap attractive to foreign business?

Carl Crow’s best-selling 400 Million Customers crystallised the promise of the Chinese market, which had so driven business interests for centuries. Since first contact in the 18th century, US merchants had understood trade with China to mean expanding their exports. Throughout the United States and Europe, the imagined possibilities of a vast landmass teeming with potential customers compelled businesspeople to trade with China. The British used to quip that if Chinese customers increased the lengths of their coats by one centimetre, it would be enough to fill the requirements of all the mills of Lancashire. When Crow published his book in 1937, his evocative title quickly saw “400 million customers” become a symbol of the potential profits to be made from trade with China. As you say, World War II interrupted China’s foreign trade, and after that, it was Cold War dynamics that shaped much of China’s trade.

By the 1970s when US-China trade resumed, just 30-odd years after Crow published his bestselling book, US businesspeople began to transform the centuries-long vision of a Chinese market filled with 400 million proverbial customers into one of 800 million workers instead.

Exploring how and why this transformation took place is at the heart of my book. I trace the ways that changes happening in US capitalism converged with the experimentations that pragmatists within China were undertaking. Li Xiannian, Chen Yun, Deng Xiaoping and other Chinese pragmatists – all of whom would go on to play important roles in China’s reforms of the 1980s – slowly experimented in the 1970s with ways of using exports to fund industrialisation: selling cotton goods, for example, to pay for fertiliser factories. So too were US corporations, experimenting with their own manufacturing processes. They were increasingly turning to overseas sources of production and raising their imports. This was aided in part by containerisation, which made shipping from abroad faster and cheaper. But was additionally enabled by legislative changes including the end of the Bretton Woods system and the 1974 Trade Act. As US corporations and Chinese pragmatists worked out new ways of engaging with manufacturing and trade, they incorporated each other’s own experiments into their visions. They worked together to create a new idea of the “China market”: one not of US exports but of imports.

You paint a very different picture of inter-governmental and corporate business cooperation in the 1970s that got trade restarted – ‘American capitalists and the Chinese state worked together, with assistance from US diplomats, to alter the very meaning of the China market: from 400 million customers to 800 million workers.’ Do you see any lessons from that period that might be pertinent to how we repair today’s rather fractured US-China trade relationship?

Over the course of doing this research and writing, the history that I chart has felt increasingly distinct to today’s US-China relationship. In the 1970s, US diplomats and government officials worked with the business community to assist them in rebuilding a trade relationship. And the interests of the US business community they worked with began to align more and more with those of Chinese pragmatists. While all three groups came from differing spaces, their interests converged, with the result being a fundamental transformation in the meaning of the China market – from a site of 400 million customers to 800 million workers.

In terms of repairing the relationship today, I think the key thing to consider is that the history I chart is one of unintended consequences. As US policymakers encouraged the business community, they did so from a position that saw the interests of labour as an impediment to that process. When a group of domestic manufacturers launched the first case calling for restrictions on imports from China, due to concerns about the impact it would have on their workers, the State Department and Liaison Office tipped off their Chinese counterparts to ensure the case would not succeed. Today, we are living through a very different kind of trade dynamic, but US policymakers would do well to be wary of the long-term repercussions of some of their decisions.

The history I am telling was not the headline news; it occurred quietly while policymakers devoted their attention elsewhere. But it led, ultimately, to the situation US policymakers face today whereby China is blamed for the impact its economic growth has on workers in the US. Without proper consideration of which interests truly need protecting, a similar kind of unintended consequence is likely to occur again: a quiet structural transformation in the international political economy that occurs while the major headlines focus on US-China competition. I think one of the key ways this might take play is in AI. As the US and China increasingly compete over AI technology, we may find that the actions taken in the name of competition lead to different kinds of unintended consequences for ordinary people in both countries 30 years from now.

As you point out, the term “Made in China” means many things to many people. For much of the time you discuss, Made In China was perceived as a threat by many American politicians, labour organisations and workers. There is obviously still a backlash to globalised manufacturing and branding, but given this process is now 50 years old, how do you feel most Americans react to Made in China labels today?

Today, there are similar emotional responses to the labels, but the trade dynamic underpinning it is more complicated precisely because of the changes that occurred throughout the 1970s. The internationalisation of manufacturing has fundamentally changed the relationship between trade and the nation-state – and, therefore, the meanings of country-of-origin labels. In our post-Covid era we’re all familiar with the centrality of supply chains to global manufacturing and trade. We know that a good labelled “made in China” has been manufactured along chains of supply involving many other nations along the way. But the politics of trade remains remarkably bound by the nation state.

To many Americans today, “Made in China” carries symbolic and emotional meaning. It represents a threat to American manufacturing, and the threat is connected to China itself rather than the corporations making the goods. “Made in America” suggests its effects can be countered, too, by the nation-state. The long history of yellow peril fears combined with the national pride engendered by the ameliorative “Made in America” has long been a winning combination in American politics. This is why the very first executive order President Biden passed in early 2021 was dubbed “Made in America.” It called for more federal agencies to use products produced within the United States. However, the fine print of Biden’s executive order reveals the messiness behind country-of-origin labels today. The standard for his Made in America plan would be met if only 55% of components were manufactured within the United States.

So, the 1970s approach of using trade as a political tool – in today’s context that often means applying tariffs – doesn’t impact China in the way that it would have 50 years ago. Despite today’s tariffs, China-made semiconductors are entering the United States in increasing numbers via Mexico, for example. What this history reveals is that in order to redress the very real problems that American workers are facing, US policymakers need to focus on the factors that led the country to where it is today. Most particularly, a politics that prioritised the interests of capital over labour to such an extreme extent.

Your book focuses on the United States, but I wonder, from your perch at LSE, can you draw any broad comparisons with the way the UK approached trade with China from the 1970s onwards?

Even before the 1970s, the UK took a very different approach towards trade with China despite the Cold War dynamics. During the Korean War, the United Kingdom followed the United States in imposing a trade embargo on China, but by May 1957, it had ended its embargo entirely. This was the start of the UK taking a very different approach towards trade with China. And in so doing, the UK led the way in encouraging other nations to end their embargo too – soon after the UK ended its restrictions, so too did the Netherlands, Japan, West Germany and elsewhere. The decision was driven in part by pressure on Downing Street from the British business community in Hong Kong, which saw expanding opportunities in the Chinese market. But the end result was that by the late 1950s, the United States was the sole nation upholding the economic containment of China.

The major advantage for the UK is that it was able to show leadership in the international system and lead the way for how other nations should engage with China. The major disadvantage for the United States, of course, was that for twenty-odd years it had no trade contact with China despite the economic relations many of its rivals had. By the time the US reopened trade ties in the 1970s, Britain, Japan, West Germany and elsewhere had already established themselves in the China market and US businesspeople were forced to catch up.

Finally, given your position and academic interests, you can’t fail to have noticed recent differences in approach to China between Washington and London. What do you think DC has got right/wrong? And conversely, what has London done right/wrong on China trade relations?

I think London has the opportunity to again show leadership on China policy by navigating a middle path between geopolitical imperatives and economic interests. As in the late 1950s, when Cold War tensions were at their peak, the United Kingdom found a way to move beyond the economic embargo of the Korean War era. By the 1960s, the United States stood alone in upholding its economic embargo on China. Today, as President Biden extends the trade restrictions that President Trump instigated, he is targeting goods such as Chinese electric vehicles. Despite what he says publicly, Biden is doing so not from a place that is protecting American jobs, but rather seeking to protect American corporations. These Chinese EVs are not US products manufactured in China, as had been the case in the 1970s, but rather Chinese-owned products made in China. Imposing tariffs on Chinese goods, such as EVs, is not going to redress the fundamental problems faced by US workers, the vast majority of whom work in the service sector, not manufacturing. Instead, it is an attempt to protect US capital – not labour. In the long-term, imposing tariffs on green energy is not going to help the US move towards a better future, and it’s here that the UK has significant potential to push the United States towards a less punitive approach towards clean energy and in the process, diffuse the narrative that China poses an unambiguous threat to the United States.

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The visit included a range of meetings with senior Chinese Government officials as well as attending events with CBBC members and stakeholders across China.

The first stop on Sir Sherard’s visit to China took him to Qianhai, Shenzhen, where he attended the CBBC Greater Bay Area Working Group Preparatory Meeting. Joining the meeting were Wang Jinxia, Deputy Director of Qianhai Authority, Matt Moody, Consul General of the British Consulate General in Guangzhou, and Tom Simpson, Managing Director, China, CBBC.

Sir Sherard attended the CBBC Greater Bay Area Working Group Preparatory Meeting

Member companies including HSBC, RELX, Swire, Standard Chartered Bank, Thoughtworks and IHG shared their thoughts with the working group, which aims to promote greater collaboration between the UK and the Greater Bay Area across key sectors through advocacy, cooperation with local partners, and sharing the latest research and information on the region.

“The British business community is watching the development of the Greater Bay Area with great interest,” said Sir Sherard. “UK companies consider it to be an important driver for their Greater China operations.”

In Shanghai, the Chair and Chief Executive attended a reception at Harrods Tea Rooms. Speakers at the reception included Zhu Yi, Deputy Director of the Shanghai Municipal Commission of Commerce, Chris Wood , Consul General, British Consulate Shanghai, and CBBC’s Tom Simpson.

“We all know that the past few years have seen tremendous challenges to the context for business relationships, not least in developments in the global economy, but we and our member companies – many of whom have found a welcoming home in Shanghai – nonetheless remain committed to long-term development in and with China,” said Sir Sherard.

The CBBC team met with Shanghai Party Secretary Chen Jining and visited the electric car company NIO to find out more about the company’s international expansion plans.

Sir Sherard met with Chen Jing, Party Secretary of Shanghai Municipal Committee

“CBBC continues to support economic exchange between the UK and China and provide a stable platform for engagement between our members and Shanghai. Shanghai remains a major focal point for British investment in China. We look forward to following up on today’s exchange over the coming months and working together with the Shanghai municipal government to resume engagement both here in China and in the UK,” said Chen

From Shanghai, the delegation moved to Beijing, where a reception was held at Swire’s Opposite House Hotel attended by HM Trade Commissioner John Edwards, Vice Chairman of CCPIT Zhang Shaogang, and Tom Simpson.

“China is existentially important for the United Kingdom. And we too can help China with its quality development,” said Sir Sherard in Beijing. “What we need to do in the weeks and months ahead is rebuild those contacts between ministers, officials, students, tourists, scientists, all the natural connectivity between our two great countries.”

During the Beijing visit, Sir Sherard spoke at a panel during the CCPIT Summit and a dinner event with Dominic Barton, Chair of Rio Tinto, and also met with Yin Li, Secretary of the CPC Beijing Municipal Committee. He was joined by Andrew Seaton, Tom Simpson, and representatives from CBBC member companies, including Clifford Chance, Haleon, Prudential, Rio Tinto, Schroders and WBA.

Sir Sherard shared his view on the topic “Pool the Strengths of Trade Promotion Agencies for Open Development” during the CCPIT’s Global Trade & Investment Promotion Summit

“I hope that CBBC will continue to support multinational companies to expand their investment and business in Beijing, and we will further improve our services to create a first-class business environment for these companies, which is market-oriented, legal and international,” said Yin Li.

“CBBC will further harness our strengths to foster cooperation with Beijing in a wide range of sectors, including trade and investment, green technology, financial and legal services and healthcare, and drive more British companies to develop in Beijing,” said Sir Sherard.

Guangzhou followed Beijing, and a meeting was held between Lin Keqing – Chairman of the Guangdong CPPCC, Member of Standing Committee of CPC Guangdong Provincial Committee, and Guangzhou Party Secretary, with CBBC members including AstraZeneca, BP, Clifford Chance, HSBC, IHG, Standard Chartered Bank, Thoughtworks and Walgreens Boots Alliance.

Sir Sherard and Andrew Seaton attended a meeting with Lin Keqing and others in Guangzhou alongside CBBC members

“I hope that CBBC will continue to engage with the Guangdong government to support British companies in their participation in the development of the Greater Bay Area, while helping Guangdong companies in understanding the regulations of the UK and networking with overseas partners. I also hope CBBC and its member companies will continue to support Guangdong companies investing in the UK, allowing them to better ‘go global’,” said Lin Keqing.

“When I arrived in Shenzhen ten days ago, we signed an MoU between CBBC and Qianhai to promote cooperation between the Greater Bay Area and the UK. Today, returning to Guangdong at the end of this visit has a poetic, commercial, economic, and cultural significance. We look forward to maintaining the Great Bay Area’s force and energy in the future,” said Sir Sherard Cowper-Coles.

At the end of the visit, CBBC’s Chief Executive, Andrew Seaton, said that “it feels like this is something of a reset or relaunch moment, and this visit has brought up the scale of the opportunity in China.” He said that “there is a real sense of wanting to see British companies become involved here and invest here.”

Sir Sherard said that for many of the 500 or so CBBC membership companies, many have been in China for a long time, and what they really need in these times is an “advocate for their relationships when there are political headwinds.

“We need to reconnect our two countries after a difficult few years, so will be encouraging ministers and other senior leaders to visit China from the UK.” Furthermore, he encouraged CBBC members in the UK to come out to China and meet partners and clients face to face.

“CBBC is about human connectivity. About connecting real people, real ideas and real economies so that people’s prosperity, security and happiness benefit from the exchanges between Britain and China,” he said.

The post Recap: CBBC Chair and Chief Executive visit China appeared first on Focus - China Britain Business Council.

Parts of the UK saw a strong recovery in trade with China in the second quarter of 2022 as its economy recovered from severe lockdowns earlier in the year, new analysis from the China-Britain Business Council shows.

Although Chinese exports and imports valued in US dollars grew only 2.1% year-on-year in April – the slowest increase since the height of the pandemic in June 2020 – there were still some signs of success.

Figures show significant year-on-year increases in UK export values for medicinal and pharmaceutical products (up 19% from £275 million to £329 million), professional, scientific and controlling instruments (up 25% from £153 million to £192 million) and manufacture of metal (up 61% from £34 million to £55 million), which all performed better year on year in Q2 2022.

“The UK and China have a long history of trade and diplomatic ties going back over 400 years. With the right guardrails in place, we can enjoy a pragmatic trading relationship that works for the national interest, while standing up for our values,” said Andrew Seaton, CBBC Chief Executive, adding: “This is vital for supporting British jobs and our economy, particularly as we face some of the toughest challenges in a generation.”

While exports to China fell across most regions of the UK, Yorkshire and the Humber saw goods exports increase 41% year-on-year – the biggest rise in the country – fuelled primarily by surging petroleum exports, up nearly 680%.

Other parts of the country, including the wider North of England, also proved relatively resilient, with rises in export values from the North East (+1.4% YoY), the North West (+3.9%) as well as the East Midlands (+3.7%).

Wales – which saw the strongest growth in goods exports to China out of any UK region in Q1 – continued to benefit from Chinese demand for power-generating machinery and specialised machinery, improving its goods exports in Q2 by 36% year-on-year.

The report comes as the spotlight once again turns to UK-China relations, with Prime Minister Rishi Sunak using his recent speech at the Lord Mayor’s Banquet to outline his vision for foreign policy, saying he would focus on “standing up to our competitors, not with grand rhetoric but with robust pragmatism”. The UK would be “stronger in defending our values”, he said, while avoiding “simplistic Cold War rhetoric”.

The day before, Minister for the Indo-Pacific Anne-Marie Trevelyan told Australia’s National Press Club, “We cannot afford to do anything other than focus on this region…In short, this region is critical to the UK – to our economy, our security and to the international rules-based system, that both our countries cherish.”

UK goods exports to China have grown a staggering 495% over the past 15 years, making China the UK’s third largest goods trading partner.

With the UK facing tough economic times, we must use every tool at our disposal to create growth. China presents an extraordinary opportunity in this regard — Andrew Seaton, CBBC Chief Executive

The China Trade Tracker was launched by CBBC in October 2021. Produced every quarter, it acts as an ‘always-on’ reference tool providing the facts and figures about UK-China trade and the impact on the UK economy, including at the regional level, of trade with the world’s second-biggest economy.

Each issue of the China Trade Tracker provides an overview of the impact of Chinese trade and a detailed analysis of each region across the whole of the UK. It draws on Government, HMT, DIT and ONS data, compiled by CBBC’s specialist analysts.

Click here to read Issue 6 of the China Trade Tracker

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The prospect of UK-China trade talks recently caused a furore in Parliament. The notion that the government would want to resume the UK-China Joint Economic and Trade Commission (JETCo) was nothing short of a scandal for some MPs. Fortunately for them, the JETCo has been postponed. A lack of preparation time and concern that both sides would bring less to the table than they’d have hoped is the official explanation for its delay. But a JETCo is a far cry from the trade talks various backbench MPs were bristling over.

It would have been an odd principle to hold on to had this continued, considering that, in reality, a JETCo merely serves to signal that trade matters. And there would have been a long way to go before the UK and China found themselves signing a trade deal. Indeed, that would have been to misunderstand the purpose of a JETCo, which, at the most, exists to display a willingness to talk trade — which is obviously important in a diplomatic context. After all, the UK does maintain a trade relationship with China — adding around £13.5 billion to Britain’s economy every year. 

The prospect of talks on UK-China trade is of interest to Beijing, and they need not be formal trade talks surrounding the feasibility of a UK-China Free Trade Agreement. As China has proven time and again with the EU, the US and other markets, a brief bilateral on a topic as bland as regional indicators would do. But the UK needs to show it is willing to countenance China. The relationship needs to progress. As China’s diplomats understandably continue to point out, their country isn’t going anywhere, and, if that wasn’t enough, it now has more trade partners than any other country — and the UK is just one of them. 

That the UK has not had any high-level trade consultations with China in recent years is beginning to make it a bit of an outlier: France concluded an Economic & Financial Dialogue (EFD) with China just before Christmas; Germany participated in similar bilateral consultations last April; the US has been negotiating with Beijing right through the pandemic; while Japan and South Korea have been meeting with Chinese officials for both trilateral and multilateral trade negotiations for close to a decade.

However, UK-China trade relations appear to have stalled — even if the value of the trade relationship continues to grow. And as David Rennie and Bill Bishop explained so well recently, that makes the UK a target for China’s ‘Wolf Warrior’ diplomats, who, rightly or wrongly, feel that the UK is not buying into China’s rise.

Background 

The UK is an important trade partner to China. Britain is Beijing’s eighth-largest goods export market and fourth by the measure of outbound direct investment. Remove Hong Kong from the equation, and the UK gets its foot on the podium in terms of China’s preferred investment destinations. However, the UK has, at least as far as the trade data is concerned, so far refrained from buying into China’s rise. The UK is not a prominent direct investor into the Mainland, ranking outside of China’s top 10 sources of foreign direct investment (FDI), nor is it a major supplier of goods exports. There clearly is scope for the UK to grow in this regard, for it sits behind analogous markets such as Germany and the Netherlands. But by sitting outside China’s various free trade and investment agreements and the Regional Comprehensive Economic Partnership Agreement (RCEP), the UK is at a disadvantage compared with China’s other trade partners.

The above trade partners can also be grouped according to the following free trade and investment regimes:

Excluding the British Virgin Islands, only Brazil, Canada, India, and the UK are not part of an agreement also containing China. But even in this list, Britain stands out. While relations between Beijing and Canberra and Beijing and New Delhi are on ice, excusing their lack of diplomatic engagement on trade, Brazil has at least held high-level trade talks with China between the present day and the start of the pandemic. The last UKChina high-level economic forum was the EFD that took place in London in 2019. 

The UK is further disadvantaged by the fact that it has not even had the chance to hold discussions aimed at remedying issues in the trading relationship at the side-lines of multilateral meetings which include China. While Australia and China have formally frozen bilateral trade talks concerning their FTA, the pair continued to talk trade at meetings concerning the RCEP’s ratification.

Similarly, despite the Dutch parliament being one of the first European legislatures to apply sanctions on China over Xinjiang, the Netherlands’ trade negotiators retain a line to their Chinese counterparts through the European Commission and their efforts to resuscitate the Comprehensive Agreement on Investment (CAI) with China. Indeed, as the UK is no longer a member of the European Union, where such trade issues are the competence of Brussels, as it is for France, Germany, and the Netherlands, it is now down to Whitehall, so the UK cannot deploy a ‘good cop, bad cop’ strategy with Beijing because it has fewer irons in the fire. 

All of this is to say that considering all China’s major trading partners, only the UK has refrained from giving even a tacit endorsement of China taking on a more prominent role in international political economy by entertaining the notion of closer trade ties, even if those ties are maintained by virtue of mutual membership of a multilateral trade agreement.

What about commercial activity within China? 

Unfortunately, for all the talk of how much UK plc is ‘In China, for China,’ the picture isn’t any prettier by measure of commercial activity within China. 

It is possible to measure this by examining what is known as Mode 3 export data. Drawn from companies operating in China and scaled up at aggregate level, Mode 3 considers services provided by a foreign-invested enterprise as an export. For example, if a London head-quartered accountancy firm uses its commercial presence in Shanghai to audit a Chinese state-owned enterprise and the entire transaction takes place within the Mainland, that transaction counts as a Mode 3 export. However, Mode 3 is still a very experimental way of analysing two countries’ trade relationship, and too often it gives a warped view of the partnership — for example, British Mode 3 exports to China were apparently worth £14.3 billion in 2018, close to trebling the £5.2 billion of other services the UK exported to China which were measured conventionally. 

But the UK’s numbers are hardly exemplary even when Mode 3 exports are included. France, for example, exported £46 billion more in Mode 3 exports to China in 2018 than the UK. Thus, even when factoring in Mode 3, the UK remains a relatively average trade partner at best, joining the Netherlands, Italy, and Sweden with Mode 3 export volumes of around £15 billion per year — far behind the behemoth that is German industry in China, which recorded £164 billion in Mode 3 exports that same year. 

What about cross-border investment from Hong Kong? 

It is widely recognised that Hong Kong distorts the values of bilateral trade flows because it is such a prominent conduit into the China market — Hong Kong’s trade to GDP rate stands around 259%. As a result, it is very difficult to account for the value of British trade and investment traversing Hong Kong on its way into the Mainland. Professor Shaun Breslin of the University of Warwick has tried to disaggregate Chinese trade that passes through Hong Kong in order to work out the real direction of that trade. However, even with the relatively sophisticated data from the Hong Kong Customs Bureau used by Breslin, his research results in a method that provides a loose estimate at best. 

Breslin posits that 84.65% of goods that arrive in Hong Kong are re-routed to the Mainland. Taking the Office for National Statistics 2020 data for goods exports to Hong Kong as a reference, that would add an estimated £6.85 billion to UK goods exports to China — just under half the value of goods exported from the UK to China directly that year. That still leaves the UK far outside the Top 10 of China’s import partners. In terms of trade in services, Mode 3 data reveals that UK companies recorded £36 billion worth of transactions that would count as this form of export to Hong Kong in 2019. However, it is not possible to estimate accurately how much of that was in support of Mainland Chinese corporate entities. Food for thought, though.

The CBBC View 

It seems clear that the UK could be a better trade partner, not least based on how it compares with analogous markets such as Germany. That is not to say that UK companies are not doing well in China. They are — China is the UK’s third-largest export market. However, the UK is falling behind by several measures, chiefly exports, FDI into China, and trade diplomacy. That could bring problems for British exporters in the long run. The Chinese government’s attention might not last forever, and with its trade officials so involved with the representatives of countries that are also members of the RCEP or the EU-China CAI, for example, it is easy to imagine the UK falling down the pecking order — especially considering that Britain is also a less significant bilateral trade partner than many of those states.

Indeed, as the trade data demonstrates, at present, Britain simply isn’t buying into China’s rise. Not even tacitly, as one could present the members of RCEP as doing. In addition, China is aware that its officials are interacting with the government of a country whose Parliament has indicated it will not support deepening trade ties with China. Hence it is our view that the UK government needs a coherent and consistent China strategy. And it needs to have the support of both the government and MPs in the Chamber. The result of its absence is that the UK is losing ground in China in trade and investment. The resumption of the JETCo and an EFD would be a good first step — but what would be better is if these meetings had been held consistently in the first place.

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The October 2021 edition of the report brings together official HM Treasure and the Office for National Statistics data with CBBC expert analysis to highlight key trends and themes of the UK’s trading relationship with China – nationally, across regions and key sectors.

At a time when many UK companies are facing tough trading conditions at home and internationally, the China opportunity is more important than ever for UK businesses and jobs, especially in relation to the UK’s post-Covid recovery. The report highlights the benefits to the UK economy of a healthy trade and investment relationship with China, which is expected to be the world’s largest economy by 2030.

Exports to China grew 3.2% last year – despite the Covid-19 pandemic – while exports to Europe and the US fell. The emergence of China’s middle-class is a primary driver behind a recovery in exports. Looking ahead, China will account for two-thirds of the growth in the global middle class in the next decade, equivalent to around 400 million people, according to recent findings from the DIT. As Andrew Seaton, Chief Executive of CBBC, noted, “It is vital for the health of the UK economy that UK business does not miss out on this.”

The report illustrates a shift in key exports over recent years, highlighting the emergence of new export markets which have shown significant growth since 2015, including consumer goods and trade in services and financial products.

For example, food and drink producers have benefitted from rising demand in China. In the second quarter of 2021, sales of animal fats and vegetable oils to China tripled compared to the same period in 2020. Oils and fats have witnessed an astounding increase in demand from China, with exports rising 7,225% between 2015 and 2020. Animal fats and vegetable oils are generally used for cooking and food processing – two industries which have particularly profited from China’s growing middle class.

It has never been more important to recognise the importance of the trading relationship with China in supporting British businesses,  jobs and livelihoods across all sectors and regions of the UK.
— Andrew Seaton, CBBC Chief Executive

Nevertheless, the growth in oils and fats exports also highlights some important risks for consumer-focused UK-China trade. Food industries, like meat and other animal products, are easily vulnerable to disruptions, be it due to problems in the cool chain or – more frequently – hygienic problems such as animal diseases. Trade is, therefore, more vulnerable and will require increased levels of mutual trust and cooperation at both the business and the government level to ensure that temporary setbacks do not reverse the positive trends of the coming years.

Looking at the top 10 exports for each region, examples include a growth of over 650% of metals in the North East, with a value of over £180 million; and an increase of over 840% of meat and meat preparations in Yorkshire and the Humber, worth almost £68 million.

Click here to read the full report

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Ms Truss has become the UK’s second female foreign secretary, following Labour’s Margaret Beckett 15 years ago. Her appointment means that women now hold the three most senior roles from the British government’s side in UK-China relations; Dame Caroline Wilson is the current British Ambassador in Beijing.

The new Secretary of State has plenty of diplomatic experience under her belt, especially in and around the Asia-Pacific region, having led negotiations with Japan over the UK-Japan Closer Economic Partnership Agreement (CEPA) and in preparing the UK to accede to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). With regard to how she might bring this experience to her new role, The Times is not alone in highlighting Ms Truss’ belief that “economic diplomacy” is the best way for the UK to thrive outside of the European Union.

How her conviction in “economic diplomacy” will find application in China is unclear. When commentating on China’s trade practices as Secretary of State for International Trade, Ms Truss took a hard line on China, telling parliament’s International Trade Committee in May that “[The UK and its allies] have been too soft on China’s unfair trade practices for too long.”

According to reports, Ms Truss has been engaging her counterparts in the G7 on a series of ‘Trade Track’ talks since June’s summit in Cornwall to form a choir within the World Trade Organisation (WTO) that can collectively call out the unfair trade practices that she accuses China of.

It’s unclear whether China will find an ally in the new Secretary of State for International Trade, either. However, some analysts suggest that Mrs Trevelyan will be considered a welcome fresh face by China’s trade officials, who reportedly felt that the UK-China trade relationship had stalled.

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In December 1978, China’s leader Deng Xiaoping, announced that China would start a period of ‘Reform and Opening Up’. This policy sees a de-collectivisation of agriculture, allows foreign investment into the country, and permits entrepreneurs to set up private businesses. By the early 1990s, certain policies and regulations were lifted and state-run businesses were privatised allowing the private sector to boom. The transformation was, as Lord Michael Heseltine says “on a scale without human precedence.”

Year on year, double-digit GDP growth was the norm for much of the 1990s and 2000s and over the last decade, the Chinese economy has tripled in size. Britain has benefitted from China’s growth over this time, with UK-China trade more than doubling from £32 billion in 2008 to £67 billion in 2017.

“The reform and opening up creates huge opportunities for China’s international trading partners and the UK benefits deeply from that,” said the UK’s Ambassador to China, Barbara Woodward.

“The UK economy is very strong in financial services, legal services, education, tourism services and so on. As China opens up in years ahead, that will really help UK-China trade and investment grow even further,” she said. “As the Chinese economy opens to the services sector it will obviously be beneficial to the UK but also for China because it will then be able to develop a more balanced economy and indeed a more cutting edge one.

“As China opens up or relaxes its restrictions on Intellectual Property development, R&D collaboration and demonstrates that it really can protect intellectual property then I think there is more scope for collaboration between UK and China in that area.”

During last month’s British Business Awards, organised by the British Chamber of Commerce in Beijing, a new award was established to celebrate the anniversary of China’s Opening Up.

The winner of the 40 Years of Reform Award was Rolls Royce. The engine maker has been operating in China since 1963 when it was making engines for China’s Vickers Viscount aircraft. Today, China has become the company’s second largest market making up 12 percent of its global revenue.

“Reform and opening-up has connected China to the world in an unimaginable way,” says Julian McCormack director of Rolls-Royce China.

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