China Deal

There is something faintly theatrical about watching people rage about Labour “doing a deal with China” while refreshing the tracking page for their Amazon or eBay parcel, very likely containing goods made in China. The indignation is moral. The parcel is practical.

According to recent ONS data, China supplies around a fifth of our goods imports in most recent years. Goods, not services. And that is just the direct trade. Once you account for components embedded via other countries, the exposure is higher. Even when something is stamped “Made in Britain”, there is a fair chance the circuit board, battery cell, casting or fasteners originated in a Chinese factory. The label reflects final assembly. The supply chain is another story.

This was not an accident, and it was not a lapse in national character.

For decades, Western firms chased lower costs and higher margins. Investors approved. Consumers approved even more loudly. Governments facilitated China’s entry into the WTO, accepted widening trade imbalances and enjoyed the anti-inflation dividend that cheaper imports delivered. China combined state-backed infrastructure, export incentives, currency management and industrial strategy to build scale at speed. Markets responded. So did we.

Cheap imports helped stabilise prices and, for a time, real wages. They kept shelves full and inflation subdued. It is not hard to see why voters and ministers alike found that attractive.

You cannot spend thirty years applauding global sourcing and then recoil when production follows the price signal.

None of this is a love letter to Beijing. China is authoritarian and unapologetic about using state power. The serious question is how to manage exposure without pretending we can dismantle three decades of integration at the flick of a switch.

Now add Brexit.

The EU still accounts for roughly 40 percent of UK trade. Scale matters. A market of 450 million consumers has regulatory weight. When the EU sets standards, global manufacturers adjust because access is too important to ignore. The EU is hardly free of dependence on China either, but acting collectively gives it more bargaining power and more room to diversify supply at the margin. Acting alone, the UK has less leverage. By increasing friction with our largest democratic trading partner, we reduced some of our own practical influence just as supply chain resilience became fashionable.

If the aim is to reduce dependence on China, the path is not symbolic boycotts. It is coordinated de-risking with allies. Joint investment in semiconductor capacity. Subsidies for battery production. Diversification of critical minerals supply. Hardening telecoms infrastructure. These are not slogans. They are expensive, long-term decisions.

Take batteries. The UK has struggled to establish large-scale gigafactory capacity without heavy state backing. Britishvolt collapsed. Other projects have required substantial subsidy to proceed. If we want domestic battery supply rather than imported cells, someone has to absorb that cost. If you oppose subsidy on principle, you need to explain how the factories appear anyway.

And here the circle closes.

Many of the loudest anti-China voices also oppose industrial policy, resist closer EU cooperation and demand lower taxes and a smaller state. Yet they call for rapid reshoring and strategic autonomy. That is not toughness. It is wanting resilience without accepting what it entails.

The same market logic that delivered cheap imports is the one they continue to defend domestically. Price signals did not take a moral break. They followed incentives that we collectively endorsed, in policy choices and at the checkout.

We can move towards greater resilience. We can invest more, cooperate more closely with allies and accept somewhat higher costs in exchange for security. But every step in that direction shows up somewhere tangible, in taxation, borrowing or the weekly shop.

It is easy to shout about sovereignty. It is harder when the price tag arrives and it is attached to your electricity bill or the cost of the family car.