We are living in a world made by Xi Jinping – and Britain is desperate to find its place in it

China’s new industrial strategy has proved as much of a shock to British politics as Brexit and the triumph of the SNP.

In the build-up to the 2015 general election, from which David Cameron would emerge victorious, unencumbered by his former Liberal Democrat coalition partners, there was little sense that an era in British politics was reaching its end. Hardly anyone at the top of Labour seemed aware that the party was about to collapse in Scotland, and few took seriously the possibility that Britain would soon vote to leave the EU.

In retrospect, the substance of that 2015 campaign – which party should be trusted with the public finances – also looks extremely parochial. In May, the same month that British voters went to the polls, the Chinese premier Xi Jinping launched Made in China 2025, a ten-year plan to turn the country into the world’s high-tech manufacturing superpower. Since then, this new Chinese industrial strategy has proved as much of a shock to British politics as Brexit and the triumph of the SNP.

The plan caused immediate consternation in Washington. The sectors it identified for growth revolved around the integration of big data and AI into manufacturing supply chains. They also included electric vehicles, the principal geo-economic prize of the transition to clean energy. When China was the world’s low-cost factory, many American politicians chose to ignore the accompanying manufacturing job losses in the US. But Made in China 2025 heralded a future in which China would also compete in the high-tech industries central to the American defence sector, as well as becoming the dominant force in green energy.

In British politics, the implications of China’s turn to the technologies of the “fourth industrial revolution” appeared to go unnoticed. Five months after the May election, Xi came to Britain for a state visit. Prior to leaving Beijing, he said Britain had made “a visionary and strategic choice” to be the Western country most open to China. Meanwhile, Cameron told Chinese state television that Xi’s trip would be “a very important moment for British-Chinese relations, which are in a very good state, something of a golden era in our relationship”. During the visit, Xi was treated to a ride with the Queen in the Diamond Jubilee stagecoach, and the two leaders unveiled an agreement for Chinese investment in a number of British nuclear plants.

The “golden era” was soon in ruins. As president, Donald Trump declared economic war on Made in China 2025, especially on the presence of high-tech Chinese companies in the 5G networks. Throughout 2019, Britain became increasingly isolated in the Five Eyes – the intelligence alliance between the US, Britain, Australia, Canada and New Zealand – over the Chinese firm Huawei’s involvement in its 5G networks. In May 2020, Beijing’s decision effectively to end the 1984 Sino-British agreement guaranteeing Hong Kong’s autonomy until 2047 pushed the British government’s relations with China into crisis, leading Boris Johnson finally to reverse course on Huawei.

A central premise of the Integrated Review of security, defence, development and foreign policy, published on 16 March, is that we now live in the post-2015 world of Made in China 2025. Far from Britain and China “shar[ing] an interest in a stable and ordered world”, as Cameron claimed when he stood with Xi in Downing Street, China now represents “the biggest state-based threat to the UK’s economic security”. This, the report insists, is an age of geo-economic rivalry centred on science and technology in which, as the “tech superpowers” surged ahead, Britain fell behind. Now, it must have an industrial strategy to catch up.

This ambition is far removed from the “long-term economic plan” the Conservative Party offered in 2015 to reduce the budget deficit. For Conservatives who presume that a state-led industrial strategy is what an economically liberal party should oppose, not support, this shift seems bewildering, especially when pandemic borrowing means the party cannot situate itself as the guardian of fiscal probity.

But Johnson’s departure from the Cameron years is just as difficult for Labour to assimilate. In 2015 the party’s pledge was that, as public expenditure was necessarily curtailed, it would do a better job than the Conservatives of prioritising “working people”. Under Jeremy Corbyn in 2019, Labour promised a “green industrial revolution” to simultaneously confront the climate crisis and restore manufacturing employment. Now, the Labour leadership is left forlornly attacking the Conservatives’ interventionist turn as insincere, and floundering as the Tories’ green industrial strategy is directed at offshore wind and hydrogen transport projects in the north-east to support the party’s advance behind the Red Wall.

That the Conservatives have adapted best to the China shock is unsurprising: being in office, they were the ones hit by the geopolitical pressure from Washington and the events in Hong Kong. Questions remain, however, including what to do about Chinese investment in the nuclear power sector. At the macro level, the strategy laid out in the Integrated Review suggests the government is still searching for a way out of hard choices. In stressing the importance of the Indo-Pacific region, it is largely aligned with Washington. By treating Hong Kong and the human rights abuses in Xinjiang as matters in which values are at stake, it also does not want Britain to share the EU’s overt commercial realpolitik. But the government still thinks that, as “a maritime trading nation”, Britain should have a “positive trade and investment relationship with China”. As to how this lingering faith in free trade can be realised in a world where technological change and green energy have become central sites of geopolitical competition, it appears to have no answer.