Exclusive-Britain pares back secretive China strategy review, seeking closer ties

By Andrew MacAskill and Elizabeth Piper

LONDON (Reuters) - Britain's Labour government has pared back an audit of relations with China, four sources with knowledge of the matter said, preparing the way for a less critical report that could help Prime Minister Keir Starmer focus on improving economic ties.

The Labour Party said before taking power the audit would be Britain's first in-depth, potentially year-long appraisal of relations and supply chains with a country considered by the security services as the nation's biggest long-term threat.

The government is now opting for a quicker and less in-depth approach, which will most probably end up being less critical of China, the sources said. Two of the sources pointed to Starmer's growth agenda and plan to improve relations with an important trading partner for the decision.

Asked about Reuters findings, a British government spokesperson said "the audit process is ongoing".

"We are carrying out a full and comprehensive audit on the breadth of the UK's relationship with China which will bring a consistent, long-term and strategic approach to managing the UK's relations with China," the spokesperson said.

The Chinese embassy in London declined to comment.

Ministers want to ensure that the audit, which began in October, will be finished before the inauguration of the U.S. President next month, but the timeframe might slip, three of the sources said.

Donald Trump's return to the White House could put Britain under pressure to take a tougher approach to China. Trump's nomination of Marco Rubio for Secretary of State has signalled his approach towards Beijing could go beyond tariffs and trade to a more hawkish stance on China as the United States' main strategic rival.

'THREE Cs' STRATEGY

Labour had originally planned for the audit to create a clear, consistent position for government, businesses and universities on how they should deal with the security challenges posed by China, the sources said.

The review was the only mention of relations with Beijing in Labour's manifesto before the election that brought the party to power in July.

But unlike a British government strategic defence review being carried out by a host of experts and led by former NATO Secretary General George Robertson, the launch of the China audit, which began in October, was never formally announced.

Labour officials had said in opposition they wanted the audit to help limit goods entering Britain's supply chain from China's far western Xinjiang region, where human rights groups have documented alleged abuses against the Uyghur population. China denies the accusation.

But Labour has since backed away from its position in opposition to push for international recognition of China's treatment of the Uyghurs, a mainly Muslim ethnic minority, as genocide, the sources said.

Labour had also intended to model the audit on a German review last year, which took a year-and-a-half to complete and involved government officials, members of parliament, businesses, academics and non-government organisations.

Instead, the British audit will now mainly rely on the expertise of government officials, two of the sources said. It is being carried out by the Foreign Office, and some of the main findings will be published.

Reuters was not able to establish who had ordered the government to adopt the scaled back approach.

The published review was likely to largely repeat the government's "three Cs" strategy towards China: challenge, compete and cooperate, the sources said.

The sources asked not to be named due to the sensitivity of the review.

LIMITED FINDINGS

Labour wants to improve ties with China after the previous Conservative government restricted Chinese investment and expressed concern at Beijing's increasing assertiveness.

Several Conservative lawmakers have warned about the security threat posed by China, an issue that was underscored when a Chinese businessman was banned from Britain on national security grounds because he was suspected of being a spy. The businessman was a close associate of Prince Andrew, King Charles' younger brother.

Starmer is hoping an improvement in relations could yield economic benefits and drive the growth he has staked his tenure on.

Last month, Starmer became the first British leader to meet Chinese President Xi Jinping since 2018, when they held talks at the G20 summit in Brazil. A day later, Starmer declined to publicly condemn the sentencing of 45 pro-democracy activists in Hong Kong to prison, when asked at a press conference.

Britain's finance ministry is also working on reviving high-level meetings with China that last took place in 2019, with finance minister Rachel Reeves considering travelling to Beijing next year, Reuters previously reported.

Britain's intelligence agencies have also struck noticeably more conciliatory tones. "The UK-China economic relationship supports UK growth, which underpins our security," Ken McCallum, the head of domestic spy service MI5, said in October.

(Reporting by Andrew MacAskill and Elizabeth Piper; Additional reporting by Michael Holden; Editing by Alex Richardson)