Online Commentary

September 10, 2021

The UK and China’s security and trade relationship: A strategic void

Government Lacks Clear strategy on UK-China Trade and Security Relationship

Amidst growing tension between the UK and China, the International and Defence Committee urges the UK Government to publish a clear and consistent strategy setting out its trade and security relationship with China. Following the Committee, a coherent strategy is essential to show how the Government intends to balance its ambitions for increased economic engagement with China with the need to protect the UK's wider interests and values, including security issues, human rights, and labour protection.

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Key conlcusions and recommendations

  • The Government told us that it has made its approach to China clear in public statements and in the Integrated Review, but these statements, and those made to us during this inquiry, have been vague and do not constitute a strategy. We call on the Government to produce a single, coherent China strategy … and a plan for how it will execute that strategy. The strategy should seek to resolve the ambiguities in the current Government’s China policy.
  • Taiwan will be a crucial issue for the US and its allies, including the UK. Even if a military confrontation would be risky for China and perhaps not in its interests … the prospect of miscalculation is always present …. An assessment of risk should consider both the probability and likely consequences of conflict in Taiwan; in this case the UK’s security relationship with the US, its global economic position and the Government’s tilt to the Indo-Pacific region mean that its interests would be directly threatened.
  • Establishment of effective and reliable partnerships is critical if the UK and its allies are to respond to the challenges posed by China. These partnerships can take different forms … but they will need to represent sufficient aggregate political, economic, and scientific power to be able to counter that of China, and to persuade uncommitted nations to align with these groupings.
  • The challenge of climate change cannot be addressed without engagement with China. We call on the Government to explain how it will include considered co-operation with China on climate change as part of its China strategy. This is particularly important given the UK’s leadership role at COP26.
  • Official Development Assistance is a vital aspect of the UK’s soft power, which can be used to address both traditional and non-traditional security challenges. As the UK seeks further engagement in the Indo-Pacific, Official Development Assistance cuts may create a void which may be exploited by China and the UK’s other competitors. We urge the Government to restore Official Development Assistance to 0.7% GNI before significant damage is done to the UK’s capabilities in this region and more widely
  • The issue of how the Government intends to balance economic relations trade concerns with upholding values such as human rights and labour protection should be front and centre of its new China strategy. More generally, the Government should incorporate an atrocity prevention lens in its overall approach to trade. Current atrocity prevention tools and strategies have fallen short, so we ask that the Government outlines how it intends to strengthen them, including the effective use of sanctions.

 

China is the world’s second largest economy and most populous country. It is, in the words of our witnesses, “unignorable”, and will be a prominent player on the global stage over the coming decades. In this inquiry, we set out to understand the security and trade relationship between the UK and China and provide recommendations for the future approach to that relationship.

The UK-China relationship has a long and complex history, encompassing periods of both co-operation and confrontation. Our inquiry looked at the past decade, starting with the so-called ‘golden era’ of the coalition and Cameron governments through to the present day. The focus in the early 2010s was on the economic aspects of the relationship, but in the second half of the decade there was increased concern about the security challenges.

This reflected a change in posture by the Chinese government. Under Xi Jinping the country became more assertive and hardened its stance on its territorial integrity and national sovereignty, reacting strongly to what it perceived to be foreign interference in its domestic politics. We heard that the UK’s decision to leave the EU, and the changing policies of the US, also affected the relationship.

In the past year tensions between the UK and China have increased. In June 2020 China imposed the Hong Kong National Security Law, which the Foreign Secretary called a “clear and serious breach of the joint declaration” between the UK and China on the transfer of the sovereignty of Hong Kong. In July 2020 the Government announced that all Huawei equipment must be removed from the UK’s 5G network by the end of 2027, following a decision by the US to restrict the export of key electronic components to China.

In recent months the relationship has deteriorated further as a result of the response of the UK and its allies to human rights abuses and allegations of genocide in China’s Xinjiang province. In March 2021 the UK and other western countries placed sanctions on Chinese officials “for systematic violations against Uyghurs and other minorities”, to which China responded with retaliatory sanctions. In April 2021 the House of Commons passed a motion declaring that Uyghurs and other ethnic and religious minorities in Xinjiang are suffering crimes against humanity and genocide.

Despite the shift in the nature of the relationship, and the significance of these issues to the UK, the current government has not set out a clear position on China; several witnesses told us that the Government is attempting to “have its cake and eat it”. The recently published Integrated Review refers to China as both a “systemic competitor” and an “important partner”, but provides no detail on how the Government plans to balance the tensions inherent in such a dual characterisation. The evidence we heard from Ministers has failed to convince us that the Government has a strategy for balancing its ambition for increased economic engagement with China with the need to protect the UK’s wider interests and values.

This lack of a China strategy has been raised by other parliamentary inquiries and it is disappointing that the Government has not followed their recommendations to develop one. We therefore again ask the Government to publish a clear China strategy which identifies key objectives and relative priorities. The recommendations in this report suggest a basis for such a strategy, and our final chapter identifies the key themes on which it should focus.

We heard that Taiwan is currently the most important issue in the US-China relationship, and that tensions over the future of the island could lead to war between the two powers. Even if the probability of such an outcome is low, the consequences would be very serious. As a key ally of the US, and with its strategic tilt to the Indo-Pacific region, the UK’s interests would be closely involved. Such a conflict would therefore represent a grave risk to the UK, yet the Integrated Review makes no mention of Taiwan. The Government should correct this omission by reflecting the importance of Taiwan in its China strategy.

China will remain a key global economic player and an important trading partner for the UK. There are increasing opportunities for UK businesses, particularly in the services sector, so maintaining productive economic relations with China would have significant advantages for the UK. It will also be important to cooperate with China on wider challenges, including climate change and global public health. Witnesses were clear that such issues cannot be solved without China’s engagement.

There are, however, divergences between the UK and China on some critical matters. Increased economic co-operation must not be at the cost of upholding the UK’s values, including human rights and labour protection. The Government must not sit on the fence over these issues, and its China strategy should include details on how decisions will be made when economic considerations clash with values. The National Security and Investment Act is a good start towards addressing this, but more clarity is needed on how such legislation will be implemented. The Government must include an atrocity prevention lens in its overall trade policy; current atrocity prevention tools and strategies have fallen short.

The Government must also work towards upholding the UK’s interests on the global stage, including the maintenance of a fair and effective rules-based order, through its involvement in organisations such as the UN and WTO. Such a policy should take priority over trade issues. Whether or not China is seeking to overturn the existing order, we heard strong evidence that it is at least seeking to undermine it and make it more “China-compliant”, particularly in areas of international law that are not yet well regulated, such as in the polar regions and cyberspace. It will also continue to use the Belt and Road Initiative to gain influence in its near neighbourhood and more broadly. To counter the influence of China, the UK must play a leading role in strengthening international organisations such as the WTO, as well as seeking to develop new ones where appropriate.

The UK will only be successful in this if it acts in concert with partners who in aggregate can compete with the political, economic and scientific strength of China. As an outsider to the region, the UK will need to be mindful of the concerns of allies and partners who are close neighbours of China, and for whom the consequences of damaged relations will be more severe. The UK should maintain and develop partnerships based on interests, seeking to work with a broad range of countries and regional actors in support of its own objectives. We heard strong support for the UK’s soft power in the region, including through Official Development Assistance, the BBC, the British Council and universities. The Government should continue to support these methods of engagement as a means of upholding its values and interests.

The UK’s pursuit of its interests and values will inevitably be perceived by China as running counter to its own objectives, at least in part, and the UK should expect it to react accordingly. That reaction could be severe, including the possible weaponisation of trade, investment and the supply of raw materials. The Government must ensure that the UK has sufficient resilience in its infrastructure and economy to weather such periods of stress, including reducing the UK’s dependency on China in critical supply chains.

These policies will require careful diplomacy and a degree of understanding of China that is currently neither as deep nor as widespread as necessary, particularly within Whitehall. An increased knowledge and understanding of China—including its languages—within Government, the civil service, and the public more generally will be crucial for both constructive engagement and managing periods of stress.

Engaging with a country with such a different political system to the UK will always be a challenge, but there is no realistic alternative, so the Government needs to approach the problem in a strategic and co-ordinated way. A policy of deliberate constructive ambiguity can sometimes have advantages, but on such a crucial issue as its trade and security relationship with China the UK needs much more clarity than it has had hitherto. We therefore call upon the Government to publish a clear strategy setting out how it will balance the competing elements of the UK-China relationship.

 

Read the report in full. 

Bibliographic data

This text was first published on September 10, 2021, by the Authority of the House of Lords. The full report can be found here.

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