UK-China Trade and Investment: Analysis & 2023 Updates

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Bilateral trade and investment has doubled over the past five years 

By Chris Devonshire-Ellis

The British foreign secretary, James Cleverly, is visiting China – the first by a senior member of the British Government in five years. Cleverly will hold bilateral meetings with China’s Foreign Minister Wang Yi, and Vice-President Han Zheng during his trip to Beijing. UK-China bilateral trade has been growing at 20% per annum over the past five years while mutual investments have more than doubled.

Just prior to his visit, Cleverly stated “It is important we manage our relationship with China across a range of issues. No significant global problem – from climate change to pandemic prevention, from economic instability to nuclear proliferation – can be solved without China. China’s size, history, and global significance mean they cannot be ignored, but that comes with a responsibility on the global stage. That responsibility means China fulfilling its international commitments and obligations.

Cleverly’s initial statement indicates that he will be discussing the usual array of concerns with China, including matters related to Human Rights, Taiwan, and Hong Kong. However, China is also likely to push back and raise concerns about the UK’s lack of use of the World Trade Organisation when unilaterally imposing tariffs and sanctions, the treatment of migrants, and its role in NATO – which has issued statements concerning expanding operations into the South China Sea. Such debates are part and parcel of the usual diplomatic give and take.

However, there are also apparent plans to request a meeting between British Prime Minister Rishi Sunak and Chinese President Xi Jinping during the upcoming G20 summit in New Delhi on September 8th  and 9th. Securing that prize will almost certainly mean Cleverly’s approach to China is likely to be more trade development pragmatic than not.

UK-China Bilateral Trade 2017-2023

However, there are signs that Britain wants to re-engage with China in terms of trade, after several years of fairly hawkish behaviour towards Beijing. That involved Theresa May, at the time Prime Minister – three PM’s ago in February 2018. UK trade with China in the preceding year had reached £44.99 billion, with UK exports to China being slightly more than a third of that with a figure of £17.71 billion.

Fast forward to 2023, and the latest available figures from the UK government show bilateral trade over the past twelve months ending March 2023 had reached £107.5 billion, more than doubling since May’s 2018 visit. Of that, UK exports to China amounted to £38.0 billion again slightly more than doubling. That makes China the UK’s 4th largest trade partner. In return, the UK is China’s 11th largest trading partner, third in a European competitor group that also includes the Netherlands and Germany.

On the face of it, this means that UK-China trade volumes have increased at an average of 20% per annum – not too shabby, despite all the hawkish rhetoric.

UK-China Mutual Investment 2017-23

In turns of mutual investment, the UK received a whopping £13.87 billion in investments from China in 2017, with the UK receiving more inbound money from China than any other European country. Most of that was down to just one deal – the Chinese takeover of the UK warehouse company Logicor which was sold by Blackstone to the China Investment Corporation (CIC) for £11.41 billion. However, that money went into Blackstone’s pockets rather than the UK’s. If we strip that out of the equation and look at the real 2017 investment from China into UK plc, that amounted to £2.46 billion.

In 2021, the last available UK government figures, that had increased to £5.1 billion – another effective doubling. Much of this was conducted via M&A transactions involving a variety of Chinese investments into British businesses – an issue that British hawks wish to clamp down on with the technology sector.

In terms of the UK investing into China, the latest available data shows the UK’s outbound investment into China in 2021 amounting to £10.7 billion – but accounting for 0.6% of the total UK outward FDI stock.

In essence, the UK-China trade and investment position has remained both steady and relatively buoyant over the past five years, even among difficult political ties.

The Overall UK-China Picture

Last year, Beijing and London celebrated 50 years of their diplomatic relations. The People’s Republic of China (PRC) was officially recognized by the UK one year after its foundation, before most other Western nations. That recognition is still held in high regard in Beijing today.

In 2021, China overtook Japan to become the UK’s largest trading partner in Asia. In the same year, more than 800 Chinese-invested companies have created 80,000 jobs in the UK.

London is also home to the biggest offshore RMB clearance center in the world. The Shanghai-London Stock Connect and the currency swap program are two examples of successful financial exchanges between the two countries. Another growth factor for China-UK relations is cooperation in the new energy industry – developing battery capacity, offshore wind energy, electric vehicles, and other green technologies.

Another cornerstone of UK-China relations are the people-to-people exchanges and educational collaboration. The UK surpassed the US in 2020 to take the top spot among countries where Chinese students study abroad. 42% of Chinese students who chose to study abroad made the UK their destination. Despite COVID-19’s negative effects on the flow of international students, 130,000 student visas for the UK were granted to Chinese students in 2021, accounting for one-third of all foreign students enrolled in universities there. As the pandemic continues to ease with China also now fully opened up during 2023, we can anticipate these trends to grow.

The UK and Hong Kong

The UK and Hong Kong continue to have a close bilateral relationship. In the four quarters to the end of Q2 2022, the total value of trade in goods and services (imports plus exports) between the UK and Hong Kong was £23.4 billion.

In addition, Hong Kong represents a significant entrepôt for merchandise trade between the UK and Mainland China. In 2021, around eight percent of Mainland China’s exports to the UK – £5.1 billion – and about 11% of Mainland China’s imports from the UK – £2.1 billion – were routed through Hong Kong.

In 2021, Hong Kong-origin goods exported to the UK accounted for 6.6% of the territories total exports. Major exported products were silver and platinum, jewelry, as well as precious metal ores and concentrates. Meanwhile, goods imported by Hong Kong (which due to tariff and other duty differences with Mainland China is always treated as a separate trade entity) from the UK accounted for 1.2% – or  £5.63 billion of Hong Kong’s total merchandise imports. Major goods included non-electric engines and motors, silver, and platinum, but also works of art and collectors’ pieces and antiques. London remains a global centre of the auctioneering industry with wealthy Chinese now bringing pieces back home.

Then there is the financial services industry. Hong Kong is being positioned by Beijing as an asset management services centre to provide international standards of investment advisory to Mainland China’s estimated US$3.5 trillion of assets that essentially remain under the bed or otherwise unmanaged. There are various ‘connect’ schemes in place to assist with the development of this. While COVID and other issues have delayed this somewhat, the reality is that Hong Kong will re-emerge as an Asian financial services centre once again. Wealth management professionals – and especially those with Mandarin and financial IT skills are being actively sought by China as it wishes to position Hong Kong – as part of South China’s Greater Bay Area – as an asset management powerhouse.

The UK-China Strategic Plan for Financial Services

Because of the Hong Kong – Mainland China opportunity, the London RMB clearing centre and the city’s reputation as being a solid base for asset management, there is unmatched cooperation in financial services between China and the UK. Through the UK-China Strategic Plan for Financial Services, both parties unveiled their vision for bilateral cooperation in the years to come in order to support the continued internationalization of China’s financial markets and currency as well as the UK’s position as the world’s leading financial centre. This is to be accomplished through increased knowledge exchange, expanded market access, and the promotion of competitiveness for both domestic and foreign firms in China and the UK.

The plan includes the creation of a new UK-China Financial Services Summit led by senior leaders from both countries’ financial services sectors. The summit informs the annual UK-China Economic and Financial Dialogue to:

  • Increase opportunities to diversify Chinese investment by allowing greater market access for UK asset managers in China and expand opportunities for Chinese asset managers to establish in the UK and invest in global markets.
  • Establish closer ties between the capital markets of the UK and China, which will improve the efficiency and liquidity of the Chinese capital markets.
  • Promote reciprocal market access to the banking sectors of both nations to aid in boosting diversity, market effectiveness, and financial inclusion. Increase cooperation to assist infrastructure co-financing in the UK, China, and other markets, especially those along the Belt and Road Initiative (now 148 countries).
  • Support the growth of the private pensions sector in China, including the creation of national savings vehicles, and expand the opportunity for UK companies to offer private pensions services.
  • Boost Fintech cooperation to support the entry and growth of Chinese and UK businesses in each other’s markets, as well as to help improve financial infrastructures, expand company access to capital, and advance financial inclusion.
  • Further develop the UK-China Strategic Green Finance Partnership.

These are all solid reasons for British finance professionals to be reconsidering Hong Kong – and Mainland China as a career move and for the UK’s financial services industry to research the opportunities that exist.

The UK-China Bilateral Investment Treaty

The UK and China signed a bilateral investment treaty (BIT) in 1986 to ensure that investors from both contractual nations have their investments in the other contracting country protected.

Investors covered by the BIT include:

  • Citizens of the UK and China;
  • Companies legally established within the territories of the UK and China.

Under the China-UK BIT, “investments” that are protected include (but are not limited to):

  • Movable, immovable property and other property rights such as mortgages and pledges;
  • Shares, stock, and any other kind of participation in companies;
  • Claims to money or to any other performance having an economic value;
  • Copyrights, industrial property rights, know-how, and technological process; and
  • Concessions conferred by law, including concessions to search for or exploit natural resources.

The BIT also guarantees investors from both countries the right to transfer profits derived in the other contracting party’s territory back to their home country. This includes the transfer of profits, dividends, interests, and other income, money from partial liquidation of investment, payables pursuant to loan agreements related to investments, and royalties.

The BIT also includes articles on dispute mechanisms, including litigation in a neutral international tribunal or a tribunal established under a special agreement between both parties. The treaty also ensures that investors from both nations have the right to transfer their investments back to their home countries. Aside from that, it forbids both contracting countries from seizing or expropriating a foreign company’s assets that are under their control, unless there are extreme domestic needs for it, and it is done against fair compensation.

This said, the BIT is now 37 years old and no longer adequately addresses issues related to IT, technology and the move into digital and green technologies. We can expect Cleverly to be discussing this with China. An updated BIT agreement between the UK and China to better reflect contemporary trade and development should not be a surprise should this emerge later in 2024.

Elsewhere in Asia, the UK’s geopolitical thinking and China’s are also beginning to show signs of mutual trade interest as trade opportunities begin to cross paths.

The UK-China CPTPP / RCEP / ASEAN Trade Overlap

There are some signs that the UK wants to make a deeper trade push into Asia. Last month, it signed off its membership of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which doesn’t include China but does position the UK’s trade face towards the Asia-Pacific with Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore, and Vietnam all members of the CPTPP. While that is not expected to add a great deal of trade to the UK’s coffers overall – Britain already has bilateral trade agreements with most of these countries anyway – it does tend to refocus some British attention on Asia.

There is also some UK-China overlap here, as China is a member of the Regional Comprehensive Economic Partnership (RCEP) which is a free trade bloc that also includes CPTPP members Australia, Brunei, Japan, Malaysia, New Zealand, Singapore, and Vietnam.

This means that British businesses based in these countries and receiving tariff benefits from the CPTPP agreement may also find that by dint of being a registered company in one of these nations, they may also access the RCEP agreement and trade benefits – and access the RCEP markets too.

This is part of the pivot by the UK to the Asia-Pacific region, as documented within the UK’s 2021 Integrated Review.

While much of this deals with security issues, it also envisages Britain ‘forging stronger bonds with the Indo-Pacific’, and also points out that the UK has recently become a dialogue partner with the ASEAN free trade bloc. That again has overlap significance for British businesses as ASEAN has a free trade agreement with China (and India, of note as the UK is also negotiating a trade deal with New Delhi) and is China’s largest trade partner. ASEAN includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.  Four of these countries are members of the CPTPP.


Quite how Cleverly wishes to integrate China into the UK’s vision for the Indo-Pacific remains to be seen, but what is obviously apparent that a British ‘Pivot to the Indo-Pacific’ is far more than the security issues the UK-China hawks have become so noisy about.

Within my firm, Dezan Shira & Associates – we have 13 offices in China, including Hong Kong – over the past years we have consistently handled significant UK SME trade and investment volumes into the country. We have on-the-ground experience and see that foreign – and British investment into China has been steady and growing. We have also seen the majority of these investments turn out well and contribute to the HO profits down the line as their China operations move into productivity.

With China having a middle-class consumer base of about 500 million, there are opportunities to reach out to that. There are also opportunities for British companies, by way of China’s own Free Trade Agreements – to reach out to the rest of Asia and take advantage. Foreign-invested companies in China are considered Chinese within China’s legal and trade environment and may often – but not always – take advantage of the same opportunities that Chinese companies do.

Planning for China requires research and a vision. From the current state of affairs between the UK and China, one can see that James Cleverly also has a sound platform to bring the relationship forward. British businesses should expect some positive news from his meetings.

Chris Devonshire-Ellis is the Chairman of Dezan Shira & Associates and has been advising British investors into China since 1992. He can be reached at or connected with via LinkedIn. Our popular 2023 Doing Business in China, and Doing Business In Hong Kong guides are available for complimentary download below.

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China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at

Dezan Shira & Associates has offices in Vietnam, Indonesia, Singapore, United States, Germany, Italy, India, Dubai UAE, and Russia, in addition to our trade research facilities along the Belt & Road Initiative. We also have partner firms assisting foreign investors in The Philippines, Malaysia, Thailand, Bangladesh.