New industrial strategy, Chinese deflation pressure and Labour’s China tightrope

Welcome to China in 5, from the British Chamber of Commerce in China.

Each week, we bring you up to speed with what’s caught our eye in the China-sphere in five(ish) minutes.?Grab a coffee, take a break, and dive in!

UK announces industrial strategy

What’s the background? On Monday, 14th October, the UK government released a new ten-year industrial strategy (the Green Paper) accompanied at a major investment summit in London. Labour had promised to publish a plan within their first 100 days in office, which is the first formal industrial strategy update since Therese May’s government in 2017. Investment has been a key part of Labour’s "growth” agenda in government, so the new strategy launch attracted some big names in business alongside Prime Minister Sir Keir Starmer and Chancellor Rachel Reeves.

Fact 1: The industrial strategy highlights eight growth sectors: advanced manufacturing; clean energy; creative industries; defence; digital and technologies; financial services; life sciences; and professional and business services.

Fact 2: After publishing the Green Paper, the government launched a public consultation asking for opinions and policy ideas which can be accessed up to 24 November through the following link.

Fact 3: Clare Barclay, the chief executive of Microsoft UK, has been appointed as the head of the Industrial Strategy Advisory Council to assist with the government’s industrial strategy.

The Labour government is seeking a more open business environment and calling out support for progressive growth in UK businesses, in this case through its industrial strategy. This will likely have implications for the government’s dealing with China across each of the eight growth sectors prioritised by the government. The strategy focuses on areas that present the greatest opportunity for output and productivity growth in the long term for the UK, many of which will likely have some reliance on China. For these sectors, such as manufacturing and clean energy, the government will need to balance cooperating with China in some areas whilst protecting UK interests at the same time. Etsuka Tomonaga - Policy Associate British Chamber of Commerce in China (BritCham China)

China’s deflation pressure mounts as investors await stronger stimulus

What’s the background? The Financial Times is reporting that China is facing mounting deflationary pressures. This comes as weaker-than-expected consumer and factory prices in September, which is underlining the need for stronger stimulus measures. The Consumer Price Index (CPI) rose just 0.4% year-on-year, falling short of predictions, while the Producer Price Index (PPI) saw its steepest decline in six months, dropping 2.8%. These figures reflect a broader slowdown in China’s economy, largely driven by a deep property crisis that has significantly dampened consumer demand. Investors are now eagerly awaiting further fiscal measures from Beijing after recent monetary easing efforts failed to provide the necessary boost.

Fact 1: Consumer Price Index (CPI) rose by 0.4% in September, below expectations of 0.6%.

Fact 2: Producer Price Index (PPI) fell by 2.8%, marking the sharpest drop in six months.

Fact 3: China’s third-quarter GDP is expected to fall short of the official 5% growth target.

British businesses are watching these economic developments in China closely, as deflationary pressures could significantly affect market conditions and investment opportunities. Many companies engaging with the Chamber frequently cite concerns over the lack of detailed fiscal plans from Beijing, especially given the weak consumer demand. Harry Bell Policy and Advocacy Manager British Chamber of Commerce in China (BritCham China)

Coffee break read: ?Labour’s new approach to China

Why we like it: This week, the Spectator released a piece detailing the China-sceptic view on potential trade-offs the Labour Party will face when seeking to attract Chinese investment. The piece takes a conservative tone on how to engage economically with China without undermining security interests or political principles. With suggestions that the UK will look to use trade with China to grow the economy, the article considers whether Western allies will apply more pressure for alignment with their policies on China, especially as both the EU and the US recently introduced trade barriers.

Podcast of the Week: America and ... China

Why we like it: The BBC World Service released a piece on the US-China relationship, looking at diplomatic relations over the years between the world’s two largest economies and their impact on the UK. This podcast, hosted by Sumi Somaskanda, BBC business correspondent Michelle Fleury and China, correspondent Laura Bicker, discusses the upcoming US election, how it is unfolding, and what the implications of a victory for either Donald Trump or Kamala Harris might have for bilateral relations.

...and finally...

China continues to improve its public transportation services with the debut of a hydrogen-powered high-speed train. A recent story by MSN News highlights the impressive capabilities of the train. The zero-carbon train - announced at the end of last month - can travel at speeds of up to 200 kilometres per hour and cover roughly 1,200km before needing a recharge. It can also carry more than 1,000 passengers and requires only 15 minutes for refueling.

Thanks for reading China in 5! For more information on the British Chamber's work and to check out our advocacy, knowledge, and community offerings, visit our website at britishchamber.cn.