As UK-China talks pause amidst Conservative leadership battle, a look-back at recent trade relations

Fri 15 Jul 2022
Posted by: Noelle McElhatton
Trade News

UK China Trading Relationship

The government has reportedly halted two sets of trade and economic talks with China this month, which would have been the first since Beijing’s crackdown on protests in Hong Kong in 2019.

Some British businesses are worried by the development, while human rights campaigners are hoping Conservative leadership contenders will keep the talks paused.

A spokesperson for the China-Britain Business Council said it was “regrettable that the dialogues are not taking place”.

At the start of the year, prime minister Boris Johnson was ready to restart trade talks through the UK-China Joint Economic and Trade Commission (JETCO) group, which had not met since 2018, reports Politico.

Recent moves

Johnson’s decision came a year after he had restricted the role of Chinese tech company Huawei in supplying Britain’s 5G telecoms system over security fears, reports the FT.

Former PM David Cameron had sought a “golden era” of enhanced economic ties between the UK and China, but his successor Theresa May was cooler towards Beijing.

Chancellor Rishi Sunak’s had announced in late 2021 that the Treasury would resume the China-UK Economic and Financial Dialogue (EFD) last held in 2019.

Tory leader candidates: China views

Sky reported that officials on both sides had been optimistic about the possibility of a meeting being held. Talks had already been held about issues including sustainable and green finance.

The two governments agreed to postpone the EFD, but Sky reports officials hope that a series of bilateral deals would be unveiled in the coming months.

According to Politico sources, Johnson’s resignation and the contest for a new Tory leader has stalled the sets of talks and is unclear how a new PM will proceed.

Of the five candidates left in the race, foreign secretary and PM candidate Liz Truss is hawkish on China and has called out Beijing for breaking “legally-binding commitments” over Hong Kong, as well as making supportive comments about Taiwan, which China lays territorial claim to.

China recently sounded a warning about British trade talks with Taiwan.

Another candidate, Tom Tugendhat, founded the China Research Group and is a leading voice in parliament against Beijing’s human rights records and security threats, reports Politico.

However, Tugendhat supporter and trade minister Anne-Marie Trevelyan has stressed the benefits of trade dialogue with China.

‘Nuance required’

Rishi Sunak has also urged continued business ties between the two countries in his Mansion House speech last year, reports the FT.

“Too often, the debate on China lacks nuance,” he said, arguing that Britain could speak out against human rights abuses while still deepening economic ties with Beijing. “We need a mature and balanced relationship,” he added.

The views of trade minister Penny Mordaunt and minister of levelling up Kemi Badenoch on China are less well known.

UK-China trade history

Whoever wins the race to become PM, it will be hard to bring UK-China ties back to the age before Brexit, Wang Yiwei, director of the Institute of International Affairs at Renmin University of China, told the Global Times.

He predicted disruption from the US and anti-China sentiment in Europe, would make it hard for the UK to negotiate with China on investment or free trade agreements. 

Yin Zhiguang, a professor at the School of International Relations and Public Affairs under Fudan University, said a new PM would find it difficult to change the direction of the Conservative Party, and “it’s unlikely there will be very significant changes to the current international situation or to UK ties with China and the US”.

Recent milestones

China is set to become the world’s biggest economy and biggest importer in the next 10 years. It is already Britain’s third largest trade partner after the EU and US, worth £93bn in total trade.

Britain is eager to take advantage of Chinese growth but is also wary of its dominance:

As previously covered in the IOE&IT Daily Update, the DIT is due to make a decision on renewing anti-dumping measure against Chinese steel makers

UK tariffs on steel imports have also been extended for a further two years, partly in response to China’s dominance of the global market.

Yahoo Finance reports that China’s exports rose at the fastest pace in five months in June as factories reopened following COVID lockdowns.

However, economists are doubtful that GDP growth will meet the Chinese government’s target of 5.5% this year, unless it relaxes its strict zero-COVID strategy.