China and the UK Economy

Clive Efford Excerpts

Thursday 12th November 2026 Westminster Hall

[Clive Efford (in the Chair)]

I call Liam Byrne.

[Liam Byrne (Birmingham Hodge Hill and Solihull North) (Lab)]

Thank you, Mr Efford. I am grateful to the Backbench Business Committee for making time for today’s statement on the 10th report from my Committee in this Session, examining the UK-China economic relationship. I should probably preface my remarks by confessing a degree of interest in this issue. I have worked on the UK-China relationship for almost 20 years. I was among those who helped to launch the economic and financial dialogue with Lord Darling, God rest his soul. Back at the end of the last Labour Government, I was an active player in the UK-China leadership for the future forum. I sat on the board of the Great Britain-China Centre for many years, started the UK-China young leaders roundtable in my younger days and produced my own book on the UK-China relationship just before it became fashionable. This is a subject in which I have a long-standing interest, and I was grateful that the Committee agreed that it was an essential piece of our work and of the work we do on this nation’s economic security.

The House has within it a number of colleagues who would counsel that we should minimise our dialogue with China. But I am among those who believe, and my Committee agrees, that ostrich diplomacy does not serve the UK national interest especially well. The UK-China relationship will be one of the most consequential relationships for this country in the 21st century, so it was absolutely right that the new Government sought to intensify engagement with China from the moment they were elected to office. However, they undertook their audit of UK-China relationships in secret, and despite the efforts of a number of Select Committees, we have still not seen the results. Nor have we seen any comprehensive UK-China strategy that might sit on top of that new engagement or that audit.

We have what might be fairly summarised not as a strategy but as a punchline—the mantra of compete, collaborate and confront. That is a semi-helpful string of words, but it is not a strategy and not something the business community, in particular, can operationalise to any useful effect. That is important because right now many in the business community do want a deeper relationship with China. On the one hand, they are pulling their punches, pulling investment and pulling their effort; they are not intensifying in the way we might want them to, because, out of an abundance of caution, they simply do not want to put a foot wrong. On the other hand, there is now clear evidence that we are accumulating vulnerabilities in a way that is simply dangerous.

We need only look at two or three different decisions in the past, but also in the not-too-distant future, to see why some coherence and consistency and, crucially, a shared strategy between the state and the private sector are needed. The decision on Ming Yang involved the potential investment of a very significant amount by that Chinese firm in Scotland. We still do not know why that investment was pulled or why Government sent messages that it was not something to be welcomed. Equally, we were all called to this House—the Minister did a brilliant job of helping to lead the debate—to renationalise British Steel when, all of a sudden, its Chinese owners sent the business in the wrong direction.

There is now a lively debate about the sense in allowing Chinese connected tech to proliferate through our economy. We are also having a debate with our European partners about whether we should align on anti-competitive practices by China and introduce tariffs on electric vehicles.

In example after example, sector after sector, and investment after investment, we are now running into the necessity of a clear Government strategy for helping business in particular, but also civil society more widely, to understand where the guardrails are in the relationship with China. What this report seeks to do is to set out both the prize and the peril of a deeper relationship with China, and there are five points that stood out to me, as Chair of the Committee, in the work we did and that I would like to share with the House.

First, we feel there needs to be much clearer demarcation of those economic sectors in which we should encourage trade with China and those in which we should not. In the green zones, where trade should be welcomed, we should go all in. We should do more to encourage a deepening of economic relationships, and mobilising the UK’s soft power more comprehensively than we do today. That is important, not least because it is good for trade, jobs and economic growth. It is crucial for the UK’s long-term influence in China, which will extend well beyond the governance of President Xi and into what we hope will be a more constructive phase of Chinese leadership.

However, as part of that story, there need to be clear red zones. They would be easier to demarcate if the Government listened to our Committee, the Joint Committee on the National Security Strategy and the Defence Committee and set out the sovereign capabilities where trade with China is simply unwise. At the moment, business has to guess what that looks like. When we took evidence, officials and the Minister at the time, my right hon. Friend the Member for Rhondda and Ogmore (Chris Bryant), rightly said that this is very difficult and things might change, but that has not stopped allies like Canada setting out sovereign capabilities or allies like Japan setting out critical components where trade with China is unwise. The Government saying that something is difficult also does not stop other people having to make the difficult decision; it just transfers it to someone else. That transfer of risk to the private sector has a cost. We would like a clear demarcation of those sectors in which Chinese trade should be encouraged and those in which it should not.

Secondly, the new approach needs to be underpinned by very different rules of the game with China. That has to start with a much tougher approach to levelling the playing field. The brilliant work of the OECD makes it clear that in some sectors of the economy China is over-subsidising its industry by six times more than we are in Europe, which is simply unfair. What has become known as China shock 2.0 is costing tens of thousands of jobs across Europe. A weaker European manufacturing industry is simply not in our national interest. The Committee concludes that we should work much harder with our partners in the European Union to develop pro-competition, pro-fairness measures for levelling the playing field with China. If that means readying tariffs, that is exactly what we should do. We should align around the kinds of initiatives taken by President Macron and Chancellor Merz. I hope we see a little more progress on that at the summit with the European Union on 20 November.

The third takeaway is that although we should innovate carefully with China, which is important in fields like life science, we should be much more robust about defending technologically sensitive areas. That is particularly important in connected tech. We think that recent Lords amendments had a lot of virtue and that the Government should have supported them. We should ban Chinese connected tech from our critical national infrastructure and invest in supplying our universities with a much faster response to their inquiries about where research and development with Chinese partners is wise and where it is unwise. The recent revelations from the Security Service underline the necessity of making sure that Universities UK and our universities more widely are equipped with that knowledge.

Fourthly, we need to prepare now for the disruption to supply chains that might come. For example, if someone tries to change the status quo in the straits of Taiwan, that will be an enormous economic shock that will disrupt supply chains across our economy. We should stress-test now supply chains that will be impacted and work harder to diversify suppliers. As the Committee set out in its report on critical minerals last week, we should redouble our efforts, with a new critical minerals finance facility to bring online not just domestic supply and recycling, but a wider diversity of international supply.

Finally, we should act with speed and aggression to ban forced labour from supply chains. I was pleased to see the correspondence from the Secretary of State to my Committee at the end of last week, showing that the Government will move on that. I hope there will be Government amendments to part 5 of the Immigration and Asylum Bill to enshrine a responsibility on businesses to ensure that they are doing the right thing and banning forced labour from our country.

My final point is about the state. We are very lucky in this country to have the great Peter Wilson as our ambassador in Beijing, but in truth we have lost an immense amount of China expertise across Whitehall. It is clear that we do not have a systematic way of integrating threat assessments and benefit analysis to inform decision making in Whitehall and, crucially, regional governments. We will have to do better at building a strategic state to contend with China in the future, and I hope our report is a useful contribution to that debate.

--- Later in debate ---

[Clive Efford (in the Chair)]

In my eagerness to hear from Mr Byrne, I forgot to give him his full title and to read out the title of what we are debating. He is Chair of the Business, Innovation, Science and Trade Committee, and we are discussing the Committee’s 10th report, “China and the UK economy: the case for risk-managed growth”, HC 124.

[Perran Moon (Camborne and Redruth) (Ind)]

Meur ras, Mr Efford. It is an honour to serve under your chairship. I thank the Committee and its chair for this report, which makes for illuminating—if concerning—reading alongside last week’s critical minerals report.

As a Cornish MP and chair of the electric vehicle all-party parliamentary group, I have two separate but related questions. First, the report recommends “targeted interventions” to secure sovereign capabilities and hedge against growing dependence on China. Are Cornwall’s tin, lithium and tungsten projects the sort of sovereign capability the Committee has in mind? Secondly, given the warnings in the report about China shock 2.0, does the Chair of the Committee agree that heavily subsidised Chinese electric vehicles are a far greater threat to UK automotive manufacturers than the UK’s zero emission vehicle mandate?