Written submission from Henry Jackson Society (CHI0032)

Dr. John Hemmings, Director, National Security Centre, HJS

Holland Strang, Research Assistant, HJS

Introduction

This submission starts with the baseline assumption that trade between the United Kingdom and the People’s Republic of China is a net positive for the UK. It welcomes trade with China that is clear-eyed about how China uses trade strategically. It builds on previous Henry Jackson Society research papers from 2017[1], 2019[2], and 2020[3] and notes that other nations are aware of the challenges presented by Chinese investment and trade and have developed their own mechanisms for dealing with these challenges.

The modern age has seen the revival of strategic economic statecraft reminiscent of the early 20th century[4]. Mercantilism, state-driven investment for strategic advantage, dumping, tariffs, intellectual property-harvesting, and state support for national champions are on the rise. The incredible growth of China’s economy, while remarkable, has also been at the expense of many foreign and Western companies who had their business practices, networks, and intellectual harvested. Some – such as Nortel, the Canadian telecommunications giant[5] – did not survive this process.

Whole industries – such as solar, new energy vehicles, and batteries – have been the beneficiaries of a three stage process[6] in which a sanctuary inside China was created for Chinese firms[7] using non-tariff barriers to exclude foreign competitors, subsidizing the “going out” of Chinese “national champions’ into global markets, and using state direction to enable increased Chinese domination of strategic sectors. There are various Chinese strategic documents that bear witness to the deliberate nature of this process, including Made in China: 2025 strategy, which set specific technology goals within 10 key strategic sectors, and the 2019 Outline of the National Innovation-Driven Development Strategy, which lays out even more detail the sectors upon which Beijing is focused.

As this latter document makes clear, China’s leadership sees innovation as the basis of national strength and past examples of Chinese weakness in history (“The 100 Years of Humiliation”) are due to China allowing technological advances to pass it by. Innovation and technology therefore, as part of geoeconomic and geostrategic competition between nations, in which one is either dependent on others (and weak) or self-sufficient (and strong). Better still, that foreign nations should be dependent on China (stronger, still)[8].

Using a combination of Chinese policy documents and Comtrade data, this paper examines the key questions as laid out in the Business and Trade Committee “China and the UK Economy” inquiry call. It puts forward a definition of “strategic dependency” and attempts to assess relationship between the United Kingdom and China, determining whether the UK’s strategic dependency has increased or decreased over the past decade.

Defining Strategic Dependency

This report defines ‘strategic dependency’ as ‘the level of reliance on imports from another country that gives the exporting country the ability to significantly impact the overall domestic availability of that imported good.’[9] A UK’s import from China is constitutes a strategic dependence when the following criteria are all met[10]: 

• The UK is a net importer of the goods[11].
• More than 50% of the UK’s imports originate from China[12].
• China holds more than 30% of the global export market share[13]. 

Together, these criteria indicate a dependence on imports, a reliance on China for those imports, and limited capacity to source alternatives elsewhere[14].

This analysis used the UN Comtrade’s most recently available data from 2015, 2020, and 2025 in making its calculations[15]. These three years were chosen for their correspondence to Beijing’s Made in China 2025 policy (announced in 2015) and to track change over time for the UK’s strategic dependencies on China. It should be noted that 2020 figures may have been impacted by the Covid epidemic. All statistics and figures presented in this report are correct at the time of analysis[16].

Which sectors of the UK economy are most dependent on Chinese suppliers, whether directly or further upstream (including as the source of raw materials)? 

Results

The full tally of goods the UK is strategically dependent on China is recorded in the table below. 

The figures represent the number of strategically dependent goods in a given year within each classification tier HS2, HS4, or HS6 representing industries, sectors, or category of goods respectively[17]. As shown in the bottom row of the table, the total number of commodity groups that the UK was strategically dependent on China for decreased from 331 in 2015 to 315 in 2020. By 2025, however, this number has risen drastically up to 529. In terms of percentage, as of 2025 the UK is dependent on China for 7.88% of the commodity groups it imports, marking a 63.8% increase from in 2020[18]. 

What forms of economic engagement present low or no risk?

The vast majority of commodity groups for which the UK is strategically dependent on China pose little risk to economic and national security. For example, in 2025 the UK was strategically dependent on China for 99% of its toasters, however toasters have practically no bearing on Britain’s strategic interests[19]. Low-risk groups with strategic dependencies include but are not limited to food products, textiles, clothing, furniture, household appliances, and recreational and sporting goods. Despite being strategically dependent on China for commodities in these areas, economic engagement in such sectors are of low risk to Britain’s security. 

How vulnerable is the UK economy to economic coercion by China?

This report has found a drastic spike in strategic dependencies since 2020 within sectors critical to economic stability and national security[20].  See the graph below. 

The number of strategic dependencies in critical sectors remained relatively the same between 2015 and 2020. Strategic dependencies in the health and ICT/Technology sectors actually decreased in 2020. In 2025, however, there is a drastic spike from 42 in 2020 to 102 in 2020. The UK is most exposed in three key areas: 

• Critical Materials
• Health (Bio-Pharma)
• ICT/Technology[21].

Strategic dependencies in these sectors carry greater risk of economic coercion, as supply disruption could have serious economic and strategic consequences. This report highlights three case studies of commodity groups within those three sectors that are vulnerable to economic coercion by China.

• Rare Earth Metals: The UK has become highly strategically dependent on China for rare earth metals, in particular scandium and yttrium. As of 2025, the UK was strategically dependent on China for 88% of its scandium and yttrium rare-earth metal imports. This is a drastic increase from a 57% strategic dependency in 2020 and from no strategic dependency in 2015[22]. This dependency is further exacerbated by China’s roughly 50% market share of scandium and yttrium exports (up from a 20% share in 2015), limiting the UK’s ability to source alternatives for these rare-earth metals in the event of a supply shortage from China. Furthermore, China has previously demonstrated its willingness to use its control over rare-earth metals to manipulate markets[23]. The potential for rare-earth metal extraction is limited in the UK, but by primarily relying on China for its rare-earth imports, the UK is extremely vulnerable to economic coercion[24]. 

• Antibiotics: In the health sector, the UK was strategically dependent on China for half of the commodity groups (HS6) of antibiotics in 2025. For example, the strategic dependency of chloramphenicol was 95% in 2025[25]. The UK was also strategically dependent in 2025 for streptomycins and tetracyclines by 56% and 51% respectively. These antibiotics are just a few examples of China’s growing dominance of the manufacture of antibiotics[26]. Such exposure risks not only economic coercion but creates vulnerabilities to accidents and policy shocks[27]. 

• Semiconductor Devices: Semiconductors are a critical component of the entire ICT/Technology sector. The UK developed a 58% strategic dependency on China for semiconductor devices by 2025 from having no strategic dependency in 2020 and 2015. As an HS4-level dependency, the UK is thus strategically dependent on China for the full semiconductor sector, not just a specific HS6 commodity group. More specifically, as of 2025 the UK was strategically dependent on China for 92% of its photosensitive semiconductor device imports of which China has a 71% export market share. Semiconductors are an essential component of vital technologies from smartphones to fighter jets[28]. Moreover, defence systems depend on semiconductors and the civil economy relies on semiconductors for its daily operations[29]. The rising strategic dependency the UK has on China for semiconductor devices exposes this crucial sector to economic coercion. 

The above case studies highlight strategic dependencies of commodity groups which have vital implications in vital areas particularly relating to critical materials, health, and ICT/technology. Many of these strategic dependencies did not exist ten years ago and have risen in severity in the past five years.

Current UK approach towards investment screening

As a result of a review process led by the Department of Business, Energy, and Industrial Strategy (BEIS)[30], the National security and Investment Bill was introduced in late 2019, becoming law in 2021 as the NSI Act (NSIA).

This established a new statutory regime for the Government to scrutinize investments and acquisitions on national security grounds as well as creating an Investment Security Unit (ISU), which was originally placed under the Secretary of State of BEIS, but then moved into the Cabinet Office in 2023 where it sits under the Chancellor of the Duchy of Lancaster. The ISU assesses “call-in” transactions across 17 sensitive sectors[31]. The ISU publishes annual reports (publishing its third in 2025), which makes the entity, its work, key indicators of efficiency, and potential reforms a matter of public record.

According to these annual reports and to industry-led bodies like TheCityUK[32], the ISU receives significantly more notifications (of potential transactions of interest) than peer jurisdictions in France, Germany, or the United States. The UK government has acknowledged these administrative burdens and a 2025 consultation process, identified several areas where greater precision could reduce unnecessary filings, reduce capturing low-risk notifications, and provide more detailed guidance across the Notifiable Acquisition Regulations (NARs) leading to a more clear-cut and navigable process for commercial entities[33].

How we might strengthen inbound investment screening mechanisms?

As always, it is useful to look at how other countries are improving their screening mechanisms to see which of these might apply to the UK’s context. The following countries have robust institutions and processes well-suited to dealing with Chinese geoeconomic pressure.

Australia: Despite heavy trade sanctions on Australia at various times, Canberra is among the early adapters to the Chinese challenge and is considered successful and managing the security side effects of the trading relationship.

•                                                                                                                                                                                                                                                                                                              Investment security: the Foreign Investment Review Board is quite small but has a rigorous screening process.
•                                                                                                                                                                                                                                                                                                              Trade diversity: Canberra has sought to decrease “strategic dependencies” across strategic sectors and even areas of applied leverage (such as wine exports).
•                                                                                                                                                                                                                                                                                                              Domestic elites: Political parties came together to ban foreign funding to political parties and tend not play domestic politics on the China relationship as the UK.

Japan: Despite a complicated historical relationship and heavy trade dependencies in auto manufacturing with China, Tokyo follows a “Comprehensive Security” framework which is led by the Ministry of Finance.  

•                                                                                                                                                                                                                                                                                                              Country pre-approval: Japan has a list of around 30 countries that require pre-approval for investments in Japan.
•                                                                                                                                                                                                                                                                                                              Negatives list: Much like China, Japan holds a list of industries that require prior approval, such as weapons, aircraft, satellites, nuclear energy, electric power, gas, telecommunications, medical products and security services, agriculture, oil, leatherwear, air transport, and marine transport. It has also designated 1,300 companies that require mandatory pre-closing screening.
•                                                                                                                                                                                                                                                                                                              High risk investors: Certain entities are classified as “high risk” and are treated to higher scrutiny. These entities include investors from China that might fall under the 2017 National Intelligence Law.
•                                                                                                                                                                                                                                                                                                              Investment screening body: As of March 2026, Japan is setting up its own US cross-ministerial panel to prevent the leakage of critical technologies, to include the Ministry of Finance, the Ministry of Economy, Trade, and Industry, and the National Security Secretariat at the Cabinet Office.
•                                                                                                                                                                                                                                                                                                              Indirect acquisition screening: New regulations also target acquisitions where a foreign buyer acquires a foreign parent company of a Japanese firm.
•                                                                                                                                                                                                                                                                                                              Call-in Powers: Authorities can call-in any investments that sit outside designated areas if a security risk has been identified.
•                                                                                                                                                                                                                                                                                                              Retroactive review: The Japanese government can review investments for five years after the closure of a deal.

France: The Ministry of Economy’s Treasury Directorate is responsible for FDI review in France and follows the pattern in other countries in certain sectors (biotech, nuclear technology eco-system, data, and critical raw materials[34]. Compared to other systems, it seems particularly robust.

• Increasingly transparent: This regime has become more transparent, with attempts to publish guidelines to reassure business.
• Broadening scope: new areas such as critical raw materials (minerals) and public health activites have been added since 2025.
• Foreign Investor-focused: the foreign investor is required to file for prior authorization online and must list information about its structure, activities, its French and foreign competitors, as well as information about its target – including that company’s structure, organization, and a list of its intellectual property (patents, trademarks, licenses).
• Government control: The MoE has strong authorities to suspend the investor’s voting rights in the target, suspend or prohibit free disposal of assets related to sneitive activities and even appoint a temporary representative within the company to monitor the situation to report to the MoE.
• 10% Voting Rights: This is the threshold for requiring a review in key sensitive areas.
• Punitive: The MoE can impose financial sanctions of up to twice the value of the investment or 10% of the annual turnover of the target should entities attempt to close the transaction without its authorization.
• Timeline: The French regime is a set at 30 days, but can take up to three months in particularly complicated issues. If there is no determination after 90 days, the application is null and void.

Which examples of international best practice in economic engagement with China could inform the UK Government’s approach?

•                                                                                                                                                                                                                                                                                                              Create a multi-ministerial committee system so that “trade is paramount” does not guide the ISU’s internal culture.
•                                                                                                                                                                                                                                                                                                              Reduce the administrative burden for these repeat investors so that they do not need to resubmit duplicate information if their ownership
•                                                                                                                                                                                                                                                                                                              Create categories of high risk and low risk investors that replicates the approach towards 5G vendors. Link those risks to domestic legal requirements that might impact UK national security (such as requiring the entity to obey China’s 2017 National Intelligence Law).
•                                                                                                                                                                                                                                                                                                              Expand sensitive sectors to new areas, such as critical minerals, real estate with proximity to critical national infrastructure or defence facilities, and new technologies.
•                                                                                                                                                                                                                                                                                                              Develop institutionalized market intelligence at the start-up level in critical technologies or technologies with potential dual-use applications.
•                                                                                                                                                                                                                                                                                                              Review processes for previously approved deals that might raise security concerns; allow for continued monitoring of deals which were approved despite concerns.

How might the UK Government and its allies and partners align their approaches to these risks to maximize their effectiveness?

•                                                                                                                                                                                                                                                                                                              Seek to harmonize categories of strategic goods, technologies, and commodities across the Five Eyes, the G7, and NATO.
•                                                                                                                                                                                                                                                                                                              Seek to harmonize definitions of “strategic dependency” across the Five Eyes, the G7, and NATO.
•                                                                                                                                                                                                                                                                                                              Create “safe lists” for repeat investors with strong compliance records, that reward voluntary pre-filing with the ISU: standardize and share these lists across the Five Eyes, G7, and NATO allies.
•                                                                                                                                                                                                                                                                                                              Create “unsafe lists” of repeat investors from countries with poor compliance records, a record of using investment for IP capture, and penetrating critical national infrastructure; standardize and share such lists across the Five Eyes and other allied groups.
•                                                                                                                                                                                                                                                                                                              Seek to build on Five Eye investment security cooperation and “excepted foreign state (EFS) status” with across the G7 and NATO allies.

What risks do Chinese technologies pose to the security of the security of UK data?

Xi Jinping has been the architect of one of the world’s most comprehensive national technology strategies. Called “Digital China” inside the CCP[35], it is virtually unknown outside of China. Rooted in a combination of Marxist theory, nationalism, and futurism, the Digital China Strategy is meant to be deeply transformative and competitive, enabling it to control internal and external data, usher in an era of Chinese-driven innovation, that brings it great power status across multiple strategic domains and allows it to “win the future”. Because of this hyper-strategic approach towards data, there are risks inherent in Chinese capture of UK data, including the following:

• Influence Operations: China uses the United Front to help it “map” social elites in target countries. Having rich digital data sets allows it and other entities to better understand, penetrate, and exploit social networks. This, in turn, allows for greater influence over policies that suit its preferences.
• Espionage: Access to data, personal, geospatial, corporate, legal, government, and health-related can always be used to build an information picture of a target. Tracking smart watches of military personnel as they jog the perimeter of a base is an example.
• Sabotage: Control or access to data can allow an adversary to change technical plans or even assume control over advanced electronic vehicles. As military use of 3D printers increases, so too will this become a vulnerability.

Conclusion

This submission has sought to draw its conclusions from two sources: raw trade data and Chinese policy documents. The final recommendation is to push HMG to resource Departments of Government to better understand these two points. The first is a current capability, but the second is reliant on Chinese language capabilities and familiarity around Chinese strategic documents. HMG should continue building a cadre of expertise in this area.

April 2026