As the UK economy navigates a bumpy road of stubborn inflation and sluggish growth, Chancellor Rachel Reeves is gearing up for a pivotal trade mission to China in January 2025. Her objective: to reignite a stalled economic dialogue and explore avenues for much-needed investment. But the path forward is fraught with geopolitical potholes, from simmering tensions over alleged Chinese espionage to the looming specter of a trade war sparked by returning U.S. President Donald Trump.
Amidst this uncertain terrain, former Conservative Chancellor Philip Hammond is offering Reeves a roadmap. His advice? Welcome Chinese investment in the burgeoning electric vehicle (EV) and renewable energy sectors. Hammond argues that such a pragmatic approach could turbocharge the UK’s twin goals of economic growth and decarbonization, while sidestepping thornier matters of national security.
Powering Up the EV Revolution
The business case for courting Chinese EV investment is compelling. As Hammond notes, China’s technological prowess in this field is formidable:
Chinese advances in electrical vehicle technology and renewable energy technology do actually offer us a route to delivering on our strategic objectives such as electrification.
– Philip Hammond, former UK Chancellor
He envisions a future where Chinese firms establish EV production facilities on British soil, echoing the Japanese auto manufacturing boom of the 1980s. Such investment could jolt the UK’s sputtering car industry back to life, after output plunged 30% year-on-year in 2024.
Jim O’Neill, noted economist and former Treasury minister, shares Hammond’s enthusiasm for Chinese EV investment. He contends that if the UK is serious about stoking economic growth, policymakers must judiciously balance competing priorities around trade, security, and industrial strategy. Pursuing Chinese EV production in Britain, O’Neill argues, threads that needle.
Navigating Geopolitical Speed Bumps
Of course, the road to deeper China-UK business ties is not without obstacles. The recent expulsion of alleged Chinese spy Yang Tenbo, and his links to the royal family, underscore the challenge of compartmentalizing trade and national security concerns.
Hammond, for his part, urges Reeves to engage her Chinese counterparts with clear-eyed pragmatism – and in private. While sensitive subjects like human rights and IP protection should not be papered over, he cautions against the public “lecturing” that doomed an earlier UK charm offensive toward Beijing.
Still, some will undoubtedly view any opening to Chinese investment as a geo-economic Trojan horse. Convincing China hawks who already see Beijing’s fingerprints on everything from 5G networks to TikTok may prove an uphill battle.
Steering Toward Mutual Benefit
As Chancellor Reeves packs her bags for Beijing, she confronts a daunting calculus. With Brexit aftershocks still rippling and a potential global recession brewing, rejuvenating trade with the world’s second-largest economy holds undeniable appeal.
Yet in an era of great power rivalry and supply chain anxiety, swinging Britain’s economic door wide may court backlash. Charting a middle course – welcoming Chinese investment in less sensitive sectors like EVs and clean energy, while safeguarding strategic industries – could offer a pragmatic path forward.
As Hammond suggests, framing any future agreements around “mutually beneficial” cooperation, rather than “golden era” grandiosity, may also help manage expectations on both sides. If deftly executed, Reeves’ China agenda could both propel climate progress and provide a growth spark – steering the UK toward the smoother roads all governments crave.
