No ‘Binary’ Approach to China, Labour’s Reynolds Says

(Bloomberg) -- A senior Labour Party lawmaker has urged caution against taking a binary approach to China, brushing back political pressure in the UK to clamp down on Beijing.

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Jonathan Reynolds, who speaks on business for the opposition, said there were real concerns in some areas, but that China was one of the country’s biggest trading partners. Polls indicated Labour has a 20-point lead over Prime Minister Rishi Sunak’s Conservatives and is likely to take power next week.

“With China, this will never be able to be an entirely binary thing there,” Reynolds said at the annual conference of the British Chambers of Commerce. There were some areas where trade should be encouraged, he said, while “there are other areas where we will not be able to because China is not like a European country.”

Sunak’s government was proposing national security legislation that would impose restrictions on trading with China. The Conservatives have been split between those who want robust action on China and others who want to protect the bulk of trade with the world’s second-largest economy.

Executives have lobbied ministers not to include China in the strictest risk category, which includes Russia and North Korea. Reynolds signaled Labour will develop a more nuanced policy.

“The position of relations with China is one of the most significant variables of any kind of outlook, not just from a UK global trading position, but actually for the western world,” Reynolds said. “This is a much more complicated situation than we ever would have in relation to a country like North Korea. There are really sensitive issues around Chinese companies and support for Russia, in terms of Ukraine. That’s a national security issue that has to be taken very seriously.”

And he highlighted the UK’s dependence on the Chinese supply chain when it came to electric vehicles. “There’s got to be an alternative to that to work with other like-minded countries,” he said.

“Do we have concern about unfair competition from some Chinese business? Yes we do.”

Electric Cars

The European Union launched an investigation into Chinese electric vehicle imports last year, over claims that car production is unfairly subsidized by Beijing. In response, China accused the EU of protectionism and trade rule breaches, and has started a probe into pork imports from the EU.

“This is what trading looks like when you’re running your own trade policy,” said the UK’s Conservative Business Secretary Kemi Badenoch. “You can’t simply slap tariffs on another country’s products,” she added. “They could also do it in places that are more painful to you.”

Badenoch, speaking at the conference, said that cars from China would be needed if the UK was to hit its net zero targets, and that she is not worried about EVs flooding the market.

“China is the country that is able to supply electric vehicles,” she said. “So if we’re going to have net zero, we’re going to have to get them from countries like China.”

(Updates with quotations from Kemi Badenoch.)

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