Britain walks a tightrope in opening trade talks with China

Linda J. Dodson

But Beijing will be wary of importing goods where the UK is dominant – high-tech machinery and equipment, chemical products – as it ramps up advanced manufacturing to prevent relying on imports.

Negotiations also provide a window to rebalance UK exports towards its strength in services. 

“The UK economy is 80pc services and 20pc goods, but our exports to China are 80pc goods and 20pc services, so it’s kind of an exact flip,” says Steven Lynch, managing director of the British Chamber of Commerce in China. ”There’s so much potential growth.”

Britain could promote its creative industries – advertising, film production, architecture – as well as greater access for financial and professional services. 

China, though, has always been very protective of its services industries, wary of allowing foreign players in key areas, such as banking and insurance. It only recently loosened its grip in some sectors, including legal services, construction, environment and entertainment. 

In 2015, China signed a free trade agreement (FTA) with South Korea, opening up some areas for the first time, such as financial services, telecommunications and e-commerce. 

The agreement allowed Korean law firms with branches in the Shanghai free trade zone to incorporate with Chinese law firms, and permitted Korean companies to own up to 49pc of a Chinese entertainment business. 

“The UK should be bold to ask for this,” says Lu, as tailored measures now would set the stage for further liberalisation. “China should be bold to offer as much as it can.” 

China will be keen to promote soft-power exports, such as language and culture, possibly by seeking provisions to allow personnel – martial arts instructors, Chinese chefs, Mandarin tutors, traditional medicine doctors – to move freely across borders, as it did in its 2015 FTA with Australia. 

Beijing may also lobby for smoother investments by suggesting an exemption threshold for assessing tie-ups. Australia, for instance, agreed to review private Chinese investments in some sectors only if they surpassed A$1bn (£534m).

Chinese investment has drawn scrutiny globally because of national security and foreign influence concerns, including in the UK. Two main issues have been Huawei’s role in building 5G networks and a Chinese state-owned energy company’s backing of the Hinkley Point nuclear power plant.

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