Economy

Can Keir Starmer’s China Strategy Survive? UK Faces Economic Headwinds Amid Security Concerns

UK faces criticism for China ties; spying trial collapse fuels security concerns over economic gains.

October 16, 2025, 10:27 AM

Prime Minister Sir Keir Starmer, wearing a dark suit and glasses, speaks at a podium in front of a vibrant red background.

Prime Minister Sir Keir Starmer addresses the Scottish Labour Annual Conference in Glasgow, Scotland. By Altopix / Shutterstock.com.

Executive Summary

British Prime Minister Keir Starmer’s government faces mounting domestic criticism for prioritizing economic ties with China over national security, highlighted by the collapse of a spying trial due to its refusal to designate Beijing as a threat.

The government’s strategy to cultivate improved relations for economic growth has yielded limited returns, with declining British goods exports and minimal Chinese inward foreign investment, despite a rise in services exports.

Britain is challenged to balance its need for Chinese investment and technology, especially in a post-Brexit economy, with significant national security concerns and domestic political pressures.

The Story So Far

British Prime Minister Keir Starmer’s government is navigating a challenging policy towards China, driven by a post-Brexit imperative to attract foreign investment and stimulate economic growth. This ambition, however, is generating significant domestic criticism and scrutiny from security experts who argue that national security concerns are being sidelined for modest economic gains, as evidenced by the recent collapse of a high-profile spying trial attributed to the government’s reluctance to officially designate Beijing as a national security threat.

Why This Matters

The Starmer government’s strategy of improving ties with China is generating significant domestic criticism and political risk, particularly after the collapse of a spying trial, as opponents argue national security concerns are being sidelined for modest economic gains. This approach, aimed at attracting foreign investment and stimulating growth, is yielding limited economic benefits, with declining goods exports and minimal Chinese inward investment, raising questions about the balance between economic opportunities and the potential compromise of national security.

Who Thinks What?

Keir Starmer’s government aims to balance improving economic ties with China to attract foreign investment and stimulate growth, with acknowledging and confronting national security threats, believing that robust engagement on both fronts is possible.

Political adversaries and critics argue that the Labour government is prioritizing diplomatic relations and modest economic gains over national security and human rights, citing the collapsed spying trial and other policy decisions as evidence.

Many trade experts and some former security officials contend that despite security concerns, Britain cannot afford to disengage from China due to its stagnant post-Brexit economy, and collaboration with Beijing is crucial for investment and technology sharing.

British Prime Minister Keir Starmer’s government is facing mounting criticism at home for its strategy of improving ties with China, with opponents arguing that national security concerns are being sidelined for modest economic gains. The scrutiny intensified recently after the collapse of a high-profile spying trial, which prosecutors attributed to the government’s refusal to officially designate Beijing as a national security threat.

Domestic Scrutiny Over Security Concerns

Last week, prosecutors were forced to abandon the trial of two British men accused of spying for China in parliament, citing the government’s stance. This incident has been highlighted by political adversaries as one of several instances where the Labour government has allegedly prioritized diplomatic relations with Beijing over national security or human rights.

Critics also point to the government’s failure to publish a long-anticipated audit of its relationship with China and the exclusion of China from a list of countries subject to stricter rules under a foreign influence registration scheme. Security Minister Dan Jarvis acknowledged the dual challenge, stating, “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.”

Former senior security experts and trade advisers have cautioned that this path is risky, especially amid a global tariff war and China’s historical use of economic coercion. The head of Britain’s MI5 security service, Ken McCallum, affirmed that the government navigates the balance between opportunities and defense, adding, “I will never back off from confronting threats to the UK.”

Economic Ambitions and Modest Returns

A key priority for Starmer’s Labour government has been to cultivate improved relations with Beijing, aiming to attract foreign investment essential for upgrading infrastructure and stimulating economic growth as pledged during its election campaign. However, the economic benefits accrued so far have been limited.

China stands as Britain’s fifth-largest trading partner, accounting for 5.5% of its total trade. Despite this, British goods exports to China experienced a 12% decline in the year leading up to March, marking the second-sharpest fall among Britain’s top 20 trading partners since Labour took power. Furthermore, Chinese inward foreign investment constituted only 0.2% of the total.

In response to global supply chain volatility and fluctuating tariffs, Britain has strategically focused on expanding its services trade with China. This includes the sale of wealth and pension products, which are perceived as less problematic than traditional goods like cars or pharmaceuticals. Annual services exports to China rose by 12% to 13.2 billion pounds ($17.6 billion).

Navigating a Complex Relationship

Managing the relationship with China requires a delicate balance between safeguarding national security and fostering economic ties. A former senior British security official, speaking anonymously, indicated that robust engagement on security issues is possible alongside trade, provided Britain avoids perceived interference in China’s core issues such as Taiwan, Hong Kong, and the South China Sea.

The fallout from the spying trial has dominated headlines, placing Starmer, a former chief national prosecutor, at risk of being seen as compromised on national security. This controversy also forms the backdrop for a politically sensitive decision regarding China’s proposal to construct Europe’s largest embassy in London.

Despite the tensions, many trade experts and former security officials contend that Britain, grappling with a stagnant economy post-Brexit, cannot afford to disengage from the world’s second-largest economy. They argue that collaboration with Beijing is crucial for investment and technology sharing, especially as China has advanced significantly in many future technologies.

Looking Ahead

The Starmer government faces a formidable challenge in calibrating its China policy, balancing the imperative for economic growth and foreign investment with pressing national security concerns and domestic political pressures. The path forward demands careful diplomatic navigation to maximize opportunities while mitigating risks.