Published by Global Banking & Finance Review®
Posted on October 16, 2025
5 min readLast updated: January 21, 2026
UK seeks stronger ties with China for economic gains, facing backlash over security concerns and limited economic benefits.
By Andrew MacAskill, Kate Holton and Michael Holden
LONDON (Reuters) -British Prime Minister Keir Starmer's attempts to improve ties with China leave him open to criticism at home that he is overlooking the threat to national security, while securing few of the economic gains that he desperately needs.
Prosecutors said last week they had to abandon the trial of two British men charged with spying in parliament for China because the British government had refused to say Beijing was a threat to its national security.
Starmer's government denies ministers interfered in the case to appease Beijing. But political opponents say it was the sixth occasion it has prioritised improving relations with China over security or human rights concerns.
Those opponents also point to the government's refusal to publish a long-awaited audit into relations with Beijing and the omission of China from a list of countries subject to stricter rules under a foreign influence registration scheme.
BRITAIN HAS TARGETED IMPROVED RELATIONS WITH CHINA
Starmer's Labour government has made improved relations with Beijing a key priority as it seeks foreign investment to make good on its election pledge to upgrade infrastructure and grow the economy.
But former senior security experts and trade advisers have warned that is a dangerous path to tread during a global tariff war, and when China has in the past been accused by rivals of deploying economic coercion when threatened.
"We fully recognise that China poses a series of threats to UK national security, yet we must also be alive to the fact that China does present us with opportunities," the security minister Dan Jarvis told parliament this week.
So far, the economic gains have been modest.
China is Britain's fifth-largest trading partner, accounting for 5.5% of trade. But British exports to China fell 12% in the year to end March, the second sharpest fall among Britain's 20 biggest trading partners since Labour won power in July last year, and China accounted for just 0.2% of total inward foreign investment.
With global supply chains threatened by ever-changing tariff levels, Britain has prioritised growing services with China, believing that the sale of wealth and pension products is less problematic than cars and pharmaceuticals. Annual services exports rose 12% to 13.2 billion pounds ($17.6 billion).
BRITAIN WILL NEED TO MANAGE RELATIONSHIP CAREFULLY
One former senior British security official told Reuters that it was possible for British governments to engage robustly with China to protect national security interests while still maintaining trade and investment ties.
But the official, who spoke on the condition of anonymity, said the problem came if Beijing felt Britain was interfering in what it sees as its core issues - such as Taiwan, Hong Kong and the South China Sea.
Britain is closely aligned with the United States and has long sparred with Beijing over its treatment of Hong Kong since its former colony returned to Chinese rule in 1997.
Allie Renison, a former government trade adviser now at consultancy SEC Newgate, said Beijing could curtail investments in British renewable infrastructure if it wanted to send a message.
"China doesn't play silos, the way the UK might want," she said.
CHINESE STRATEGY ALSO CARRIES POLITICAL JEOPARDY
The collapse of the spying trial has been front-page news in Britain for nearly two weeks and the government has had its version of events challenged twice by independent prosecutors.
The evidence detailed how two men - who denied the charges - were accused of passing information about a politician likely to be promoted to the cabinet and the government position on issues such as sanctions against Chinese companies.
The head of Britain's MI5 security service, Ken McCallum, said on Thursday that the government managed the line between seizing opportunities and securing defence, but he added: "I will never back off from confronting threats to the UK."
A former chief national prosecutor himself, Starmer is now at risk of being seen as weak on national security, with one Labour member of parliament telling Reuters that the fiasco could give the impression that the government was "dishonest".
It will also form the backdrop for what is already a politically sensitive decision on whether to approve China's plans to build the largest embassy in Europe in London.
The former senior British security official thought it was now too late to reject the embassy application.
CHINA ADVOCATES SAY RELATIONS MUST IMPROVE
Despite the tensions around Chinese engagement, many trade experts and even former security officials argue that Britain, with a stagnant economy, needs to find a way to work with Beijing, after it became much more cautious in recent years.
At least four cabinet ministers have been to China since Labour was elected, and Starmer is expected to go next year.
"Can Britain - post-Brexit - afford not to have an economic relationship with the second largest economy in the world?" a second former security official asked. "No, it can't."
One former British diplomat who has close ties to British business and who asked not to be named, agreed, saying China had already overtaken the West in many technologies of the future.
"If we want to catch up, we need to get them to invest and share," he said.
(Reporting by Andrew MacAskill, Kate Holton and Michael Holden; Editing by Alex Richardson)
Foreign investment refers to the investment made by individuals or entities in one country into assets or businesses in another country, often to gain a financial return.
National security is the protection of a nation's borders, interests, and citizens from external threats, including military attacks, espionage, and terrorism.
Brexit is the term used to describe the United Kingdom's decision to leave the European Union, which was finalized on January 31, 2020.
Explore more articles in the Finance category
