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Is China our enemy or our ally? Is it an adversary or a partner? The trading relationship is huge, but so are the security risks.
Here is the full lowdown, in this instalment of the Week in Business with City AM Editor-in-Chief Christian May.
#news #economy #politics #china #uknews
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0:00
Is China our enemy or our ally? Is it an
0:03
adversary or a partner? The trading
0:06
relationship is huge, but so are the
0:07
security risks. Welcome to the week in
0:09
business with me, Christian May.
0:15
Here in the city, China means big
0:17
business. Last year, the UK exported 30
0:19
billion pounds worth of goods and
0:21
services to China, while we bought 70
0:23
billion pounds worth from them. But, we
0:26
exported 3 and 1/2 billion pounds less
0:28
to China than we did in 2024, and we
0:31
bought 3 billion pounds more. So, it's a
0:33
big relationship, but it's not a
0:35
balanced one. We sold China nearly 3
0:37
billion pounds worth of financial and
0:39
business services last year, up about
0:41
30% on the year before. So, it's no
0:43
wonder that global business leaders here
0:45
in the square mile want to keep that tap
0:48
turned on.
0:49
But, behind this economic relationship
0:52
lies an uncomfortable and seemingly
0:53
contradictory reality.
0:55
China is hostile to us. The head of MI5
0:59
has warned that China's spying against
1:01
the UK is carried out on an epic scale.
1:04
The UK's top spook, Ken McCallum, says
1:06
Chinese state actors present a national
1:09
security threat to the UK every day,
1:12
including cyber espionage, clandestine
1:14
technology acquisition, and covert
1:16
influence campaigns. China has hacked
1:19
into our electoral commission, deployed
1:21
spies in Parliament, conducted
1:22
widespread industrial espionage, and
1:25
exerted influence over our academic
1:27
institutions. China even runs a network
1:30
of clandestine police stations to deploy
1:32
its unique brand of justice to its own
1:34
citizens here in the UK.
1:36
Now, the UK doesn't turn a blind eye to
1:38
this, but we do hold our nose, and we
1:40
offer platitudes about the important
1:42
partnership and the economic necessity
1:44
of the trading relationship.
1:46
That relationship is significant, of
1:48
course it is. The Bank of England said
1:49
just this week that one of the main
1:51
reasons why inflation will slide back
1:53
down towards its target this year is
1:55
because of cheap imports from China.
1:58
The UK is a major global economy.
2:00
Nothing demonstrates that more than the
2:02
City of London. And we trade with plenty
2:04
of countries whose politics, leaders,
2:06
behavior, or conduct we don't like.
2:08
That's just the way of it. But, China is
2:11
unique in being both a major trading
2:13
partner and a major security threat,
2:16
leading many people to ask whether this
2:17
tension can go on indefinitely.
2:20
It seems that for most of Whitehall and
2:22
governments of any color, the answer is
2:24
yes, it will.
2:26
The proposed new Chinese embassy, just a
2:28
stone's throw from me here on the site
2:30
of the old Royal Mint, is almost
2:32
certainly going to be approved by the
2:33
Prime Minister, perhaps as soon as this
2:35
week. Reports suggest that giving it the
2:37
green light was a condition of the PM
2:39
making a trip to China later this month.
2:41
And boy, does Keir Starmer like his
2:42
foreign trips. If the embassy goes
2:44
ahead, it will be enormous. At more than
2:47
700,000 square feet, it will be the
2:49
biggest diplomatic site in Europe. It
2:51
will contain 200 apartments within its
2:54
secure walls, along with a network of
2:55
secret rooms that China redacted in its
2:58
planning application. But, thanks to the
3:00
Telegraph, we now know that some of
3:02
those underground rooms will be dug out
3:04
and extended, putting the site literally
3:06
within touching distance of some of the
3:08
UK's most sensitive and important fiber
3:10
optic cables, cables carrying everything
3:13
from email traffic to critical financial
3:15
data. One of the rooms closest to the
3:17
cables will, we now know, contain
3:19
state-of-the-art cooling equipment
3:21
designed to remove the hot air generated
3:23
perhaps by a vast bank of computers, or
3:27
perhaps it's just a sauna for all those
3:29
overworked embassy staff. China has
3:31
perfected the art of cyber espionage to
3:34
an extent that makes Russian hackers
3:35
look like bungling fools. So, it's no
3:38
wonder that MPs from across the spectrum
3:40
are alarmed by this. Labour's Sarah
3:42
Champion, who sits on the National
3:44
Security Strategy Committee, said,
3:46
"Multiple government agencies and
3:48
government departments have raised
3:49
concerns about this mega embassy."
3:51
Adding, "Our international partners have
3:53
raised concerns about it." And she says,
3:55
"Every security briefing I've had
3:58
identifies China as a hostile state to
4:00
the UK." Shadow Security Minister,
4:02
Alicia Kearns, said that if China gained
4:05
access to those cables, and they'd
4:06
surely be tempted, it would give the
4:08
Chinese Communist Party a launchpad for
4:11
economic warfare against Britain. And it
4:14
seems to me that, beyond the specific
4:16
threats posed, there's something larger
4:18
at stake here.
4:19
By granting this vast diplomatic
4:22
presence, so big it's effectively a
4:24
Chinese government department on UK
4:26
soil, we're giving away more than real
4:28
estate and risking more than our cyber
4:30
security.
4:32
We would be facilitating China's
4:34
ambitions in a way that almost
4:36
legitimizes them. And we're doing this
4:38
at a time when it's as clear as day that
4:40
the old arguments about trade righting
4:42
all wrongs and trumping all concerns
4:44
just doesn't hold water anymore. The
4:46
world is more dangerous, it's more
4:48
uncertain, it's more hostile.
4:50
And smart countries, smart leaders, are
4:52
adopting more muscular and confident
4:55
positions in response.
4:57
This isn't about protectionism, it's
4:59
about pragmatism.
5:01
We don't have to give the Chinese what
5:02
they want. We can stand up to them, and
5:05
so long as it remains mutually
5:06
beneficial, we can continue to do
5:08
business with them. But, I strongly
5:10
suspect that granting this particular
5:12
embassy will be a mistake, and one that
5:15
we will come to regret.
5:17
That's it for me this week. Do stay
5:19
up-to-date and in the know with the City
5:21
AM app and on cityam.com, and I will see
5:24
you from our new studios next week.
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