By Jun Du, Centre for Business Prosperity, Aston University. Member of BCC’s Economic Advisory Council (EAC)
The Prime Minister’s visit to China achieved what it needed to: after eight years without a prime ministerial visit, the relationship has been defrosted: £2.2 billion in export deals, whisky tariffs cut from 10% to 5%, and 30-day visa-free access for UK visitors.
But the headline deals understated the real achievements. On 29 January, the UK and China signed four economic and trade outcome documents that establish frameworks across goods trade, services trade, and economic governance simultaneously[1]. The UK became the first country to sign an MOU under China’s “Big Market for All: Export to China” initiative[2]. Most importantly, both sides agreed to launch a joint feasibility study for a UK-China services trade agreement – covering creative industries, professional services, financial services, and healthcare. For a services-surplus economy like Britain, this could prove the single most consequential outcome of the entire trip, yet it received remarkably little attention.
Chinese-language commentary drew a sharp contrast with Canada’s recent visit: where Canada focused on immediate orders, Britain was building institutional architecture designed to outlast any single government. The strengthened Joint Economic and Trade Commission (JETCO)[3], the services partnership, and the feasibility study create mechanisms that give firms confidence to invest for the long term.
Normalisation has been achieved. The question is what comes next.
The context: ground to recover
UK goods exports to China have been declining sharply. In the four quarters to Q3 2025[4], they fell 22.0% to £16.4 billion – the sharpest decline among major partners. The UK’s share of China’s goods imports has fallen to just 0.9%. While UK policy oscillated between enthusiasm and alarm, European competitors were building market-leading partnerships.
Three opportunities the reset should unlock
Energy infrastructure for AI competitiveness. The cost of energy doesn’t only constrain manufacturing – it increasingly constrains AI. Physical AI infrastructure requires energy at scale: data centres, compute capacity, the hardware that underpins the AI economy. All are bottlenecked by energy costs that make Britain uncompetitive. China’s expertise in building energy capacity quickly and at scale is precisely the kind of practical cooperation a “sophisticated relationship” could enable. This is the opportunity that could matter most for UK competitiveness over the next decade.
Supply chains and manufacturing upgrading. The delegation accompanying Starmer was weighted towards large services firms. They’ll benefit from the reset. But the UK’s productivity problem isn’t in services; it’s in making things. China as a source of technology-embedded intermediate imports could help UK manufacturers upgrade – accessing capabilities that often don’t exist domestically.
In December, we participated in Supply Chain Resilience Week organised by the British Chamber of Commerce South China across Shenzhen, Guangzhou, and Shanghai, meeting nearly 100 businesses. The “China+1” arithmetic doesn’t work as boardrooms assume – Vietnam is 10-15% more expensive once you factor in materials sourcing, lead times, and quality control. Speed has become China’s defining competitive edge, with automotive suppliers compressing development cycles from five years to twelve months. And the pain point businesses raised wasn’t tariffs – it was cash flow. That’s solvable with proper policy attention.
SME pathways for diversification. The large services firms on the delegation already have China operations, compliance capacity, and established relationships. The strategic value of this reset should be creating pathways for the firms that don’t yet have alternatives – the SMEs currently over-exposed to increasingly unreliable Western markets and least equipped to navigate a complex new market without support.
From trade to innovation: the next phase
These three opportunities are immediate. But the visit may have opened up something more fundamental: the imagination of what UK-China collaboration can be.
British thinking about China has been trapped between two mindsets. The first sees China as a source of cheap labour – and concludes there is nothing the UK could competitively sell. The second sees China as a large but regulated consumer market – and focuses narrowly on lobbying for access. Both are passive.
The conversations emerging from this visit point to a third model: complementary innovation. The relationship is evolving from making things, to making things together, to innovating together. UK firms are setting up joint R&D centres, co-training doctoral talent, and co-building AI laboratories. JLR is collaborating on autonomous driving. GSK is exploring AI-enabled drug discovery. HSBC is developing intelligent risk management systems. China provides engineering capability and application scenarios at scale; the UK provides foundational research and global education networks. This is not zero-sum competition but mutual reinforcement.
What needs to happen now
As David Bharier of the British Chambers of Commerce argues, businesses can work with clear red lines – they cannot plan around ambiguity[5]. What Starmer achieved was normalisation: not warmth, not alignment, but a predictable framework within which firms can plan. When firms believe the relationship will remain stable, they invest. When they invest, opportunities compound.
Three things would turn this reset into lasting results. First, a dedicated SME pathway for China market entry, building on the institutional frameworks now in place. Second, policy attention to the practical barriers businesses actually face – cash flow, not geopolitics. Third, an energy infrastructure strategy that recognises AI competitiveness depends on it.
The institutional architecture is in place. The firms that move first will benefit most.
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Jun Du is Professor of Economics at Aston Business School and Founding Director of the Centre for Business Prosperity. For analysis of the Greenland tariff episode that shaped the strategic context for this trip, see our research brief.
[1] https://english.news.cn/20260130/c3f49adb74e64feba6af570a3475ebbd/c.html
[2] https://news.cgtn.com/news/2025-11-06/-Big-Market-for-All-Export-to-China-events-launched-in-Shanghai-1I4E41j1hjq/p.html
[3] https://www.gov.uk/government/publications/prime-minister-visit-to-china-trade-and-investment-factsheet/prime-minister-visit-to-china-trade-and-investment-factsheet
[4] https://www.gov.uk/government/publications/trade-and-investment-factsheets-partner-countries/trade-and-investment-factsheet-china
[5] https://www.cityam.com/three-things-business-needs-from-a-uk-china-strategy/