Britain’s risky re-engagement: Why its China policy could strain the EU-UK reset

British chancellor Rachel Reeves’s visit to Beijing over the weekend shows the Labour government’s willingness to re-engage with China. But this strategy could strain Britain’s relationship with the EU

British Chancellor of the Exchequer Rachel Reeves, second from left, speaks during the 11th China – UK Economy and Finance Dialogue in Beijing, January 11, 2025
Image by picture alliance / ASSOCIATED PRESS | Aaron Favila
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The problem

The British chancellor Rachel Reeves visited China from January 10th to 13th to strengthen economic and financial ties with Beijing as part of the Labour government’s economic growth agenda. Having recently upgraded its climate targets and seeking to become a “clean-energy superpower” by 2030, Britain also aims to expand clean-energy partnerships with China.  

But this re-engagement approach puts the cart before the horse. It comes before the publication of the government’s “China audit”, which was intended to provide a set of clear principles for managing risks as Britain seeks closer ties with Beijing. It also undermines Labour’s efforts to strengthen ties with the EU. Britain’s high-level political signal of openness to Chinese trade and investment stands in sharp contrast to the EU’s more cautious stance. Brussels has introduced policies to curb China’s inroads into the EU, such as a tariff on electric vehicles, an investigation into Chinese subsidies in the wind sector, a review of cyber risks from Chinese software in electric vehicles, and targets to reduce reliance on Chinese dominance in clean energy supply chains. This divergence could jeopardise current UK-EU preferential arrangements, such as tariff-free electric vehicle trade.

The solution

Britain’s climate goals necessitate some level of trade with China in clean technologies. The upcoming China audit should lay out the risks and trade-offs associated with dependency on China. These include cybersecurity vulnerabilities in energy systems and the impact of low-cost Chinese clean technology imports on domestic jobs and industries. The audit could shield the government from accusations that it underestimates the risks of more Chinese investment in the British economy and energy infrastructure.

Britain and the EU should work together to strengthen the resilience of clean technology supply chains. This could include coordinating on industrial policy on clean technologies through the EU-UK Partnership Council, aligning resilience and cybersecurity criteria in renewable energy auctions and establishing joint critical mineral partnerships with third countries.   

The context

The new Labour government committed in its election manifesto to undertake an “audit” of the UK strategy towards China. It pledged to complete the audit in its first 100 days in office, but the report has been delayed and scaled down, even though the chancellor has positioned the economic relationship with China as central to the UK’s growth agenda.

Reeves met her Chinese counterpart, He Lifeng, in Beijing at the UK-China Economic and Finance Dialogue on January 11th. They agreed to strengthen their clean-energy partnership, convene the bilateral Energy Dialogue and establish a new climate dialogue format. Reeves touted that her trip brought in £600m worth of deals to the British economy.

Britain’s energy secretary, Ed Miliband, will lead the energy and climate efforts with a trip to China early this year, which could include new Chinese investment in clean technology manufacturing in the United Kingdom.

The European Council on Foreign Relations does not take collective positions. ECFR publications only represent the views of their individual authors.

Author

Senior Policy Fellow, Asia Programme

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