Opportunity in striking a strategic, pragmatic balance

Life changed after July 4, when a new government was elected in the United Kingdom. Later that month, British Foreign Secretary David Lammy met with Chinese Foreign Minister Wang Yi, followed in August with a call between British Prime Minister Keir Starmer and Chinese President Xi Jinping, which in turn was closely followed by Chancellor of Exchequer Rachel Reeves speaking with Vice-Premier He Lifeng.

More recently, Director General of MI5 Ken McCallum acknowledged that the economic relationship between the United Kingdom and China supports UK's growth, which in turn underpins UK's security. On Oct 14, Secretary of State for Business and Trade Jonathan Reynolds acknowledged that Britain needs "more engagement with China" and that Britain had been "an absolute outlier compared to other G7 countries". Finally, on Oct 19, Lammy met in Beijing with Vice-Premier Ding Xuexiang followed by a meeting with Wang Yi, where he delivered a message that "the UK is to take a stable, consistent and pragmatic approach to China, with engagement vital between two global players".

The seismic shift in the approach toward China will be welcomed by UK businesses as now, the signals for engagement are strong and clear. This tonal change will encourage British companies to readdress the opportunities of China and start a momentum for much needed positive change. Such a change is required as for the 12 months to March 31, value of bilateral trade decreased by £23 billion ($30 billion) to £86 billion.

However, for British businesses to capitalize on the new bilateral environment, they will need confidence that the relationship is set on a consistent course and will want to see that the new relationship is supported by actions rather than words. A significant action would be holding of the Economic and Financial Dialogue which, according to press reports, is due to be held in Beijing in early 2025 and if it happens, will indicate that true engagement has started.

China is leading the world in its use of renewables and according to a recent report, over 50 percent of all renewable energy will originate in China in 2030. Given this expertise and the UK's goal of net zero by 2050, it needs to work in partnership and collaborate with China for a realistic probability of success. Fortunately, over the last few years, both countries have forged a strong working relationship by collaborating in areas such as wind power, electric vehicles, sustainable finance and green bonds. With an ever-increasing imperative to do more, an enhanced UK-China partnership can create a model for others to follow.

On Oct 14, the UK Business Secretary and Chancellor announced steps to deliver long-term growth through a modern Industrial Strategy which will create a pro-business environment and play to the UK's strengths, focusing on growth-driving sectors including advanced manufacturing, clean energy, creative industries, digital technologies, financial services, life sciences and professional and business services.

For the UK to adopt and succeed with its new strategy, businesses must have the confidence that trade, collaboration and partnering with the world's second largest trading country is for the long term. If that is not the case, the success of the industrial strategy will be challenged.

It is generally acknowledged that in the past, the UK-China relationship was based on three key centers of engagement: government to government, people to people and business to business. Over the last few years, it has been business that has mainly kept the relationship open, but as we have seen, even the business relationship has suffered as evidenced by a dramatic drop in trade. If we imagine that these three key centers of engagement are legs on a stool, then for the relationship to grow and prosper, there must be stability through a balanced level of engagement, where all the legs support each other.

It is important to note that for any engagement, there will not be agreement on all matters and each country will have its own approach. It is acceptable to disagree, so long as such matters do not prejudice or adversely impact those areas where agreement does exist. The UK approach will need to be balanced and nuanced between the strategic and the pragmatic in order to determine what is best for itself.

From a practical point of view, the scene is now set for both countries to promote engagement openly with UK businesses visiting China to explore the opportunities, while at the same time, for Chinese companies, the creation of an environment of a healthy and stable UK-China relationship which can offer opportunities for further inward investment and trade.

With a strong focus on growth and a more pragmatic, confident and business engaged approach to China, the scene is now set for the UK economy to accelerate, which in turn will deliver mutual benefits to both countries.

The author is chairman of China UK Business Development Centre, a London-based advisory and service delivery organization.