On March 13th, 2023, the refresh of the UK’s most important foreign policy guiding document, the Integrated Review (IR), was published. The document indicates that the volatility in geopolitics is here to stay “well into the 2030s” and highlights the Indo-Pacific “tilt” that began under the original IR21. China was the third most-mentioned country in the document, behind Ukraine and Russia, with a whole section dedicated to outlining future Government strategy towards China.
The three pillars of UK-China Bilateral Relations
The UK’s future policy towards China is centred around three pillars:
- Protecting national security;
- Aligning goals with allies and strengthening collective security; and
- Engaging China to “create space for open, constructive, predictable and stable relations.”
While the UK stopped short of calling China a ‘threat,’ it referred to it as an “epoch-defining challenge” in “almost every aspect of national life and government policy.”
Protecting national security
The Integrated Review Refresh sets out that future China policy will aim to safeguard critical national infrastructure, supply chains, intellectual property, and cyber-security from potential threats or interference by China. The UK government seeks to mitigate the risks while maintaining a positive trade and investment relationship with China. However, businesses operating in nationally critical sectors such as technology and infrastructure may face operational challenges with greater scrutiny and restrictions on data transfer to China. The 2023 refresh promises to strengthen economic security measures and create a National Protective Security Agency while reviewing measures to protect the higher education sector.
Aligning goals with allies and strengthening collective security
The second pillar of the UK’s China policy is to align goals with allies and strengthen collective security. This involves working closely with traditional allies such as the EU, the Five Eyes intelligence community, India, and Japan, as well as expanding relationships with ASEAN members and smaller Pacific nations. In the document, the UK explicitly recognises its lack of resources and geographic presence in the region, and therefore aims to work with partner countries to ensure no single power dominates. This pillar also emphasises the importance of aligning with allies to ensure collective security in the Indo-Pacific, whilst still engaging in dialogues with China.
The third pillar of the UK’s future China policy is to engage with China to create space for open, constructive, predictable, and stable relations. The UK recognizes that China is an important global player and seeks to engage with China on issues of mutual interest, such as trade and investment. In doing so, the UK will seek to walk a cautious tightrope between protecting national interests and the interests of allied nations on the one hand, and finding areas for common cooperation with China, particularly on issues like climate change, on the other. However, the UK will also likely more closely scrutinise areas such as science and technology, where there may be greater attention on transfer of data to China and investment in the Chinese market. The government will additionally look to engage in constructive dialogue to manage systemic competition.
Implications for British business in China
Overall, the Integrated Review Refresh 2023 signals a more cautious and critical approach to the UK’s relationship with China, reflecting the changing global context and the UK’s evolving national interests. For businesses in nationally critical sectors such as technology and infrastructure, there may be challenges to operations in the coming years. This includes greater scrutiny of the transfer of data to China, sharing of plans, and engaging in greater investment in the Chinese market. For those in the higher education industry, there may be increased challenges surrounding student recruitment and retention, particularly if safeguards around science and technology are introduced.
However, under the Integrated Review Refresh 2023, the government also recognises the benefit that a positive trade and investment relationship between the UK and China can bring to both countries. It will therefore work with industry to ensure trading and investment are safe, reciprocal, and mutually beneficial, balancing working to avoid dependencies in critical supply chains with protecting national security in the process.
In terms of increasing engagement, immediate policy actions include a doubling of funding for the China Capabilities Programme by FY 2024-25, to enhance language and policy analysis capabilities throughout government. This provides opportunities for engagement over ‘soft’ issues such as climate change and health policy, where shared opportunities like education and people-to-people exchanges will also see a boost as part of a renewed focus on China across government. Additionally, a focus on improving China capabilities across the economy will benefit UK-China businesses as these changes trickle down.
The British Chamber of Commerce in China has long called for increased engagement with China across all levels – recognising that, while there will always be red lines for both nations that cannot be crossed, exchanges are crucial to understanding and unlocking the benefits and opportunities that exist from collaborating on areas of mutual interest. We are therefore pleased to note that whilst the Integrated Review Refresh 2023 recognises the challenges that exist in the relationship, it also highlights the need for engagement with China – demonstrating the importance of the UK-China relationship, and the need to ensure that steps are being taken to ensure opportunities that exist therein can materialise in the future.