China Audit

With permission, I will make a statement on the China audit.

China’s rise has shaped the geopolitical landscape. Over the past decade, its military expenditure doubled. Its armed forces became the world’s largest. It established dominance over critical mineral supply chains. It pursued relentless innovation in electric vehicles, artificial intelligence and even space travel. Over the same period, China has delivered a third of global economic growth, becoming the world’s second largest economy and, together with Hong Kong, the UK’s third largest trading partner.

Not engaging with China is therefore no choice at all. China’s power is an inescapable fact. After what the Intelligence and Security Committee in 2023 described as a “completely inadequate” approach over the past decade to deal with China’s “size, ambition and capability”, we must now look at the facts. Lord Cameron of Chipping Norton attempted a golden era. Boris Johnson let Huawei into our critical national infrastructure before U-turning. Liz Truss and Rishi Sunak decided that China was a threat but failed to devise any policy response, instead burying their heads in the sand.

This Government conducted an audit of our most complex bilateral relationship to deliver a long-term strategy, moving beyond cheap rhetoric to a data-driven, cross-Government approach. I would like to thank the hundreds who contributed to it, including hon. Members, of course, and experts, businesses, diaspora communities, devolved Governments and close allies. The audit is less a single act than an ongoing exercise that will continue to guide the UK’s approach to China. It informed the Government’s strategic defence review, which assessed that China was a “sophisticated and persistent challenge”. It informed the national security strategy, published today, which sets out China’s impacts on each strategic pillar of UK national security. It has steered our trade and industrial strategies, which analysed where greater engagement is possible, given the important role China can play in delivering UK growth.

Hon. Members will understand that much of the audit was conducted at a high classification and that most of the detail is not disclosable without damaging our national interests. I am therefore providing a broad summary of its recommendations today in a manner consistent with that of our Five Eyes partners. On security, the audit described a full spectrum of threats, from espionage and cyber-attacks to the repression of Hongkongers and attacks on the rules-based order. It made clear that our protections must extend more widely than they currently do—from the security of this House to our critical national infrastructure.

Hon. Members will again recognise that disclosing the detail of the responses to those threats would undermine their effectiveness. However, I can confirm that following the audit we are investing £600 million in our intelligence services; updating our state threats legislation following Jonathan Hall’s review; strengthening our response to transnational repression; introducing training for police and launching more online guidance to support victims; launching, as announced in the industrial strategy, a 12-week consultation on updating the definitions covering the 17 sensitive areas under the National Security and Investment Act 2021; and working bilaterally with China to enhance intelligence flows related to illicit finance specifically, organised immigration crime and scam centres, using new National Crime Agency capabilities.

On global security, the audit underlined the extent of Beijing’s support for the Kremlin. The Government have already tripled the number of Chinese entities sanctioned for equipping Russia’s illegal war, and we will continue to confront that.

The audit reiterated that our approach to China must stay rooted in both international law and deterrence. We will continue to confront China’s dangerous and destabilising activity in the South China sea, which I saw for myself when I visited the Philippines. We will continue to work with our regional partners to support freedom of navigation and call out China’s abuses. We will double down on AUKUS. We will not change our long-standing position on Taiwan, while sustaining unofficial but vibrant ties with Taiwan on trade, education and innovation. We will also never shy away from shining a spotlight on human rights—notably the situations in Xinjiang and Tibet—while on Hong Kong we will insist that China honours its commitments under the Sino-British joint declaration, including by repealing the national security law and releasing Jimmy Lai.

The audit made it clear that our approach will always be guided by the UK’s long-term economic growth priorities. It provided ample evidence of the extent to which our economies are intertwined. China is our third biggest trading partner and our universities’ second largest source of international students. China will continue to play a vital role in supporting the UK’s secure growth, but over the past decade we have not had the structures either to take the opportunities or to protect us from the risks that those deep links demand. Businesses have told us time and again that they have lacked senior political engagement and adequate Government guidance.

We have already begun to develop new structures, including regular economic and financial dialogues with my right hon. Friend the Chancellor, setting us on course to unlock £1 billion of economic value for the UK economy and positioning the UK’s world-leading financial sector to reflect China’s importance to the global economy; joint economic and trade commissions; and joint commission meetings on science. We will also launch a new online hub, bringing together detailed and specific business advice. The forthcoming trade strategy will set out how we will support British firms to enhance links with China’s vast and growing consumer market as well as assess new tools to keep goods made by forced labour anywhere in the world off Britain’s high streets.

The audit recognised that China’s global role does not fit into simple stereotypes. China is the world’s biggest emitter but also the biggest producer of renewables. It offers $80 billion towards development annually. It is also the UK’s second largest research collaborator: 11% of British research output included Chinese authors.

So the audit was clear: the UK must develop new dialogues with China on issues such as climate, development, global health and science, as well as on trade. In doing so, we are driving our long-term interests and creating secure opportunities for UK plc.

We cannot deal with China’s complexity unless we improve our capability to understand it, for our national security and for secure trade and growth. The audit showed that under the last Government there was a profound lack of confidence in how to deal with China and a profound lack of knowledge regarding China’s culture, history and—most importantly—language. Over the past year, I have found that far too few mandarins speak Mandarin. We are already taking action to address that by introducing a new China fast stream in the Foreign, Commonwealth and Development Office, creating an FCDO global China network and training over 1,000 civil servants on China policy in the past year. Enhancing those capabilities still further will be a core focus for the £290 million FCDO transformation fund announced in the national security strategy by my right hon. Friend the Chancellor of the Duchy of Lancaster a short time ago. The new strategy, which proceeds from the audit, will ensure that the Government examine the full spectrum of interests in their decision-making processes and deliver the consistent approach that was so sorely lacking.

Anyone expecting a simple prescription on China is not living in the real world. The audit has painted a complex picture, but it has provided us with a clear way forward. The UK’s approach to China will be founded on progressive realism, taking the world as it is, not as we would wish it to be. Like our closest allies, we will co-operate where we can and challenge where we must. Never compromising on our national security, recognising the complexity of the world as it is, engaging confidently, carefully and pragmatically, and delivering secure growth—those are the hallmarks of grown-up government, acting in the long-term national interest.

I call the shadow Foreign Secretary.

I am grateful to the Foreign Secretary for advance sight of his statement, and I look forward to reading the audit and receiving the detailed briefings that clearly cannot be put in the public domain.

Let us be clear: China thinks that its way is the best and only way, and its leaders are on an international quest for global governance and for its frightening authoritarian model to supersede ours. Ours is one of democracy, openness and standing up for freedom and values.

China has been ramping up its military with alarming conviction, including conventional nuclear and space capabilities, and it is a critical enabler of Russia’s illegal invasion of Ukraine—we saw President Xi standing side by side with Putin in Moscow just weeks ago—so be in no doubt that China and Russia are collaborating across all domains to undermine our very democratic freedoms and the west. Beijing tramples on the Sino-British declaration in Hong Kong, threatens British national overseas passport holders on British soil and has imprisoned Jimmy Lai—a British national—through an awful, politically motivated trial.

Beijing’s unjustified aggression in the South China sea is dangerous, and it unacceptably intimidates and challenges the sovereignty of its neighbours in the Indo-Pacific. It is consistently and constantly threatening the peace-seeking democracy of Taiwan while committing the most appalling human rights abuses in Xinjiang. It also applies hybrid and grey-zone techniques against Britain, including malign cyber-activity directed at our democratic institutions and sanctioning our very own Members of Parliament, all the while exploiting vulnerable countries through its belt and road initiative. China also flagrantly brushes aside economic rules and steals intellectual property. It has developed sophisticated models to acquire strategic assets around the world.

Despite all of that, it has taken the Government a year to produce this audit, which seemingly fails to set out any kind of serious strategic framework. I think it is fair to say that we know why: it is because the Government—in fact, the Foreign Secretary touched on this—have gone cap in hand to China to bail out their terrible handling of the British economy. They are setting up closer economic ties with China while knowing very well that British businesses are struggling not just in competing against China, but to absorb the weight of Labour’s own regulatory costs.

I know that the right hon. Lady can be pretty brazen, but a lecture from her about China policy should make even her blush. The Conservative party oversaw more than a decade of division, inconsistency and complacency towards China. There was no strategy, there was no plan and there was no sense of a national interest. The Intelligence and Security Committee, which was chaired by the right hon. Member for New Forest East (Sir Julian Lewis), from her party, said that the actions on China had left Britain “severely handicapped” in managing our future security. The truth is that the right hon. Lady was at the centre of it.

Where was she during the ill-judged Cameron-Osborne golden age? She was the Minister for the Treasury. Where was she during the humiliating Huawei U-turn? She was Home Secretary. The Tories had their heads in the sand. Under them, Britain’s defences were weakened and our armed services hollowed out. It is a Labour Government who are investing £600 million in our intelligence services to deal with those threats; it is a Labour Government who are investing £290 million extra a year in our diplomatic capabilities in this area; it is a Labour Government who are delivering the biggest increase in defence spending since the cold war; and it is a Labour Government who are making Britain secure at home and strong abroad.

I refer the right hon. Lady to page 28 of the strategic defence review—she clearly has not bothered to read it—which makes it clear that we of course understand that China is a “sophisticated and persistent” threat. She talks about the embassy, but she should know, as a former Home Secretary, that it is a quasi-judicial decision that has been properly made by the Secretary of State for Housing, Communities and Local Government.

The right hon. Lady talks about Jimmy Lai. I met Sebastien Lai last week, and we have been raising the issue on every single occasion. A trial is ongoing, so let us see how it will complete. She raises transnational aggression. We are the ones updating our state threats legislation because the Conservatives left the gaps and did nothing when in power. She raises the situation in Russia and the Chinese supplying Russia with dual-use goods. Who has done the sanctions? There have been five rounds of sanctions under me as Foreign Secretary. What did the Conservatives do? I will take no lectures on this subject from them, who know that, as a Government, they were found wanting on the question of threats from the Chinese.

I call the Chair of the Foreign Affairs Committee.

Our relationship with China is most definitely a difficult one. On the one hand, it is our third biggest trading partner, but on the other hand, the national security strategy, on page 35, says that there is an increase in espionage, China is undermining our economic security and interfering in our democracy, and that has increased over recent years. The Foreign Office needs to hold the ring.

The China audit needs to be wide-ranging. It is an important piece of work. We were looking forward to seeing it published and to the Foreign Secretary coming to talk to us—he said that he would—but instead we are looking through a glass darkly, we do not know and we will not be able to see it. We want to be able to do our job properly and scrutinise this important piece of work. May I therefore suggest that the Foreign Secretary makes available a reading room at the FCDO for Foreign Affairs Committee members and staff before his appearance on 8 July so that we can study the audit properly and hold him to account?

I am grateful to my right hon. Friend for the interest that she has taken with the China audit. I did say that I would update the Committee, and I look forward to appearing before it and taking questions on this subject.

In completing the audit, it has been important to remain consistent with our Five Eyes partners. She will recognise why much of the audit has led to a high level of classification. She will note, when she looks across the G7 and other Five Eyes partners, that many of them have handled their approach to China in the way that I have set out. I refer her to the strategic defence review and its contents on China. I refer her to the national security strategy, which has just been published, and its references to China. I also refer her to the UK’s industrial strategy and its references to China, alongside the statement that I have just made.

I call the Liberal Democrat spokesperson.

I thank the Foreign Secretary for advance sight of his statement. For years, UK Governments have failed to take seriously the challenge posed by China. The Conservatives failed to deliver even the semblance of a coherent approach to dealing with Beijing. Today, after months of waiting for this audit, the Government’s failure to publish a stand-alone document is immensely disappointing. Will the Foreign Secretary set out how Members of this House, including those on the Intelligence and Security Committee and those on the Front Benches with responsibility for foreign affairs, defence and security, can be briefed on the more sensitive elements of the audit?

We on the Liberal Democrat Benches recognise China for what it is: a threat to our values and interests. The Foreign Secretary is right that our approach must confront the facts as they are. They include China’s hostility to the UK’s allies and support for our adversaries, its abuse of human rights in Xinjiang and Hong Kong, the theft of intellectual property and its efforts at transnational repression. Instead of trying to establish warm relations with President Xi, the Government should commit to clear red lines on what they will not accept. For example, we have yet to receive a satisfactory explanation for why my hon. Friend the Member for Bath (Wera Hobhouse) was denied entry to Hong Kong when on a private visit to see her family. Will the Foreign Secretary confirm what steps he will take if Beijing refuses to give an assurance that MPs will not be blocked from visiting Hong Kong or China?

We now hear reports that the Deputy Prime Minister is preparing to wave through Beijing’s application for a proposed mega-embassy in the heart of London. That is not a technical planning matter to be cloaked in the veil of quasi-judicial powers; it is a matter of national security. Opposition has been expressed by the United States and by pro-democracy Chinese and Hong Kong activists living in the UK, who already face Chinese Communist party-sponsored bounties. Has the Foreign Secretary met those activists, and will he formally request that the mega-embassy application be blocked?

As I have said, this was a comprehensive audit of our relations with China, and for reasons that the hon. Gentleman and other hon. Members have raised consistently, there are important sections of that audit that must remain classified. He mentioned the Intelligence and Security Committee; as he would expect, mechanisms are in place to allow that Committee to understand some of the details, and to scrutinise them in the usual way. He mentioned the experience of the hon. Member for Bath (Wera Hobhouse). I want to make it clear that when I recently met the Chinese International Minister and member of the Communist party, Mr Liu Jianchao, I raised that case, and our huge concerns about its implications for the free travel of British citizens and democratically elected Members of Parliament, not just in this country but across the world.

The hon. Gentleman also mentioned the embassy and had questions about security. Those issues are precisely why the Home Secretary and I, advised by our security agencies, wrote a letter on the issue of the embassy, raising the concerns that would need to be addressed if the proposal was to move forward. And yes, of course I have met activists who are campaigning, particularly on the issue of transnational repression, and so has the Under-Secretary of State for Foreign, Commonwealth and Development Affairs, my hon. Friend the Member for Hornsey and Friern Barnet (Catherine West), who deals with this issue and the Indo-Pacific.

As chair of the all-party parliamentary groups on Uyghurs and on Hong Kong, I have lost count of the number of responses I have had from Ministers that have referred to today’s audit. I hope the Foreign Secretary will forgive me if I take today as the start of a conversation, rather than the last word on these matters. He has again used his three Cs mantra: competing and co-operating with China, and challenging it when needed. I wonder if he understands that many Hongkongers, Uyghurs and others who are fighting for freedom from or within the People’s Republic of China worry that the order of that is deliberate, and that the “challenging” part is a lower priority. What reassurance can he give to those groups that commercial interests will not trump the responsibility to protect freedoms and security, particularly of British Hongkongers? Can he confirm that the threats identified in the audit, and the national security challenge, will be fed into the decision making on whether to allow the embassy?

I am grateful to my hon. Friend for his championing on the APPGs, and for pressing these issues. I said in my statement that we will co-operate where we can but challenge where we must. I have consistently raised the situation of the Uyghur Muslims in meetings with counterparts, and I have encouraged them to implement the recommendations on Xinjiang from the Office of the UN High Commissioner for Human Rights. Genocide is a matter for the international courts, but it is something that I and our allies in the G7 take very seriously indeed, and we will press this issue with the Government of China on every single occasion.

First of all, before we go to the political knockabout, let me say that I have spoken critically on this issue no matter who was in government; let us settle that before we go on. I want to give the Foreign Secretary a quick audit of exactly what should have been said. China threatens Taiwan, has invaded the South China seas and is having massive disputes with the Philippines. There is genocide, slave labour, organ harvesting and transnational repression. There have been attacks on Hong Kong dissidents here, and Hong Kong dissidents are constantly under threat. There have been cyber-attacks on the UK. China supports Myanmar’s repressive military regime and Russia’s invasion of Ukraine. It also supports North Korea and Iran. It has trashed the Sino-British treaty on Hong Kong, arrested Jemmy Lai and placed sanctions on UK MPs, and it thieves all the intellectual property from private companies. What a record! And what would we balance against that? Some potential trade?

This question has already been asked, in a way, but it is worth repeating. On the embassy decision, it was said clearly in the media that China would not apply again after the refusal from Tower Hamlets unless it received assurances from the UK Government. Can the Foreign Secretary tell me that China has not received any assurances? Or has it received private assurances from the Government that it will get what it wants, and will get this embassy?

Let me express my respect for the right hon. Gentleman’s expertise on the China threat. I acknowledge that he is subject to sanctions; I have consistently raised that point with China, noting that it recently lifted sanctions against Members of the European Parliament. I pressed it recently to do the same for Members here. Let me assure him that there are no grubby deals on any issues, and certainly not on the embassy; I reject any suggestion to the contrary. He describes the context on China. I refer him to page 28 of the strategic defence review, which summarises the challenge better than he did. It states that China is

“a sophisticated and persistent challenge. China is increasingly leveraging its economic, technological, and military capabilities, seeking to establish dominance in the Indo-Pacific, erode US influence, and put pressure on the rules-based international order.”

We agree.

I thank my right hon. Friend for his statement. I am the first to recognise, along with him, the need for pragmatism on this issue. He speaks of our closest allies. In Washington a couple of weeks ago, I heard about the Americans’ real concerns about the super-embassy in London. They are banning Chinese electric vehicles because of their autonomous and connected nature, which is an extraordinary move to consider making. I recognise that there is an economic need, but there is obviously political pressure as well. Can members of the Joint Committee on the National Security Strategy, which I chair, have access to the confidential documents, so that we can be clear-eyed about what we face?

I am grateful for the work that my hon. Friend does in this area, but I must maintain that there has not been that access under any Government, other than for those on the Intelligence and Security Committee, who have access to high-classification documents, and for Privy Counsellors, who have access to conversations with the Government and officials that they pledge to keep secret. The Government cannot abandon those principles, which have consistently served us well for many years under many Governments.

On page 39, the “National Security Strategy 2025” states:

“Instances of China’s espionage, interference in our democracy and the undermining of our economic security have increased in recent years.”

Just three pages later, it talks about the importance of

“creating the basis for a reciprocal and balanced economic relationship”

with China. Does the Foreign Secretary recognise the inherent conflict between this Government’s desire for closer economic relations, and the Chinese Government’s desire to undermine our economy?