Is China friend or foe to the UK? A government audit says: ‘It’s complicated’

Britain needs a better plan to prepare for a world of Chinese dominance. And it must be subjected to public scrutiny.

Expert comment Published 2 July 2025 Updated 3 July 2025 4 minute READ

William Matthews

Senior Research Fellow, Asia-Pacific Programme

In his statement to Parliament on 24 June, UK Foreign Secretary David Lammy said the government’s new ‘China Audit’ is intended to deliver a long-term strategy for the UK’s relationship with China – one that moves ‘beyond cheap rhetoric to a data-driven, cross-government approach’.

That would be a step forward. Reactive, issue-specific decisions have characterized previous governments’ dealings with China for over a decade, from the 2020 decision to ban Huawei from British 5G networks to this year’s rescue of British Steel. 

The government is right to acknowledge the complex risks and opportunities China presents, from economic relations to national security. But the audit has revealed little to the public about how the government intends to navigate that complexity.

Political backlash from both superpowers…has not prevented UK allies such as Germany from publishing far more detailed China strategies. 

It is possible that information has been limited due to fear of how Beijing and Washington could react: the UK Chinese embassy immediately released a statement condemning references to threats from China in Lammy’s parliamentary speech.

However, dealing with political backlash from both superpowers is becoming a fact of life in the changing world order. And it has not prevented UK allies such as Germany from publishing far more detailed China strategies. 

The UK government says the audit informed its National Security Strategy, Modern Industrial Strategy, Trade Strategy, and Strategic Defence Review. The audit will also inform a new online advice hub to help businesses and academia engage China. 

However, these are wide-ranging documents which offer few specifics on China. The most extensive discussion is three paragraphs in the National Security Strategy and four in the Trade Strategy. Neither says much that is new.

The documents state that the UK will seek to manage the trade-offs between national security and economic opportunity. But this amounts to little more than restatement of the problem. 

A more transparent strategy

It is very difficult to judge the merits of the UK strategy without publication of at least some of the China Audit’s specific findings and underlying methodology. Labour MP Emily Thornberry, Chair of the Foreign Affairs Select Committee, speaking at Chatham House on 2 July pointed out that: ‘we’re supposed to have a China audit, but that’s not being shared with Parliament’.

A lack of detail severely limits the potential for democratic scrutiny. Politicians and researchers ought to be able to understand the audit’s findings in some detail to help identify areas where further work is most needed.

This is even more concerning given that Britain’s political debate on China policy – including in Parliament – is unhelpfully polarized. Debate tends to focus on a zero-sum trade-off between either human rights issues and national security or economic opportunities. 

Merely acknowledging that the combination of threat and opportunity is complex, without disclosing the audit’s findings, carries a serious risk of perpetuating disjointed policy along two parallel but contradictory paths – one dovishly pursuing economic opportunity and the other hawkishly focused on national security.

A departure from orthodoxy

Two things are needed if the government is serious about China strategy. First, a joined-up set of policies is needed to specify where and to what extent engagement with China is valuable and where it should be limited or avoided. These basic positions have still yet to be articulated publicly. 

Second, and most important in the long term, the UK needs a clear-eyed view of the magnitude of the challenge. To meet it, the UK needs a departure from the economic and geopolitical orthodoxies of the past four decades. (Both of these issues will be explored in detail in a forthcoming Chatham House paper, What the UK must get right in its China strategy.) 

A serious audit would have assessed China’s footprint in the UK economy sector by sector, from investment and ownership structures to supply chains.

Joined-up policies will inevitably be complex and nuanced – but that does not mean they need to be vague. Consider what the government has outlined on China in its trade strategy: growing the economy while protecting national security, seizing opportunities for growth, and listening to and supporting UK businesses. 

A serious audit would have assessed China’s footprint in the UK economy sector by sector, from investment and ownership structures to supply chains. Serious policy would build on those assessments to consider urgent questions. 

These would include: How much dependency on bilateral trade or upstream supply chains is acceptable for each sector? Should changes in trade volume or composition with China be made at the expense of Chinese investment? What if any manufacturing should be onshored, and in what sectors? And how desirable are measures such as financial support or tariffs to protect UK firms and workers? Wider questions should also be considered, such as the long-term trade-offs inherent in making concessions to the US when it comes to trade with China.

These questions inevitably lead to that second requirement – appreciation of the scale of the challenge. As the Strategic Defence Review notes, China is undergoing ‘rapid economic, military and technological modernisation on a scale unprecedented in world history.’ The government’s strategy documents point to China’s rise eroding the established international order and with it, US influence. A serious UK China strategy would include a contingency plan for how Britain can adapt if China becomes globally dominant.

Practically, this means going much further than the approach advanced in the strategy documents.

In areas where China has already established an economic and technological lead, including renewables, EVs, and rare earth processing, even the US is failing to close the gap. Elsewhere, China’s growing innovation capacity and dominance of global manufacturing and supply chains are allowing it to catch up with Western countries much faster than they can pull ahead.

This has profound implications for the UK’s ability to remain competitive, protect jobs, and access cutting-edge technology. An entire industrial strategy must be developed that prepares the UK to prosper economically in a world where China’s power is even greater than it is now. That means thinking beyond the Trade Strategy’s approach of trying to preserve an open economy and rules-based system. Planning is needed for a world where they are no longer sustainable.

Likewise, when it comes to security, human rights and transnational repression, more is required than the National Security Strategy’s ‘threat driven response’. 

A world of far greater Chinese political influence will demand a long-established and credible zero-tolerance approach to Chinese actions that undermine the basic rights of Britain’s inhabitants, including former residents of Hong Kong. The longer such an approach is lacking, the harder it will become to enforce.

The starting point needs to be a serious, comprehensive audit of China’s footprint in the UK, covering the economic and political activities of Chinese companies and state-linked entities.

To meet these requirements effectively, the starting point needs to be a serious, comprehensive audit of China’s footprint in the UK, covering the economic and political activities of Chinese companies and state-linked entities. In an era of great power competition, this would also serve as a model for dealing with unwelcome dependencies on other powers.

Such an audit should be conducted regularly. Crucially, its findings and methodology must be made available for public scrutiny. Only then will the UK government be able to develop the informed, long-term strategy needed to pursue the nation’s interests – including safeguarding them in a world of far greater Chinese power and influence.