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As the world's second largest economy (and one of the fastest growing), with a military increasing in size and capability, significant levels of diplomatic engagement and a large digital sector which acts as a force multiplier, China has a significant impact on global affairs. The Government's policy on, and strategy towards, China must take this into account when considering how to tackle the threats China poses to the UK.

At the outset of this Inquiry in 2019, HMG emphasised that, while it recognised that China poses a security threat, it also viewed it as an economic opportunity:

"China is the world’s second largest economy and the UK’s fifth largest trading partner. [The] growing number of Chinese students and tourists bring significant prosperity benefits to the UK, and our trade [with] China is an important source of investment for the UK."

In 2018, Chinese Foreign Direct Investment into the UK (investment which reflects a lasting interest and control by China in an enterprise resident in the UK) was £4.2bn, the highest in Europe. At the time of taking evidence, Department for Business, Energy and Industrial Strategy (BEIS) joint initiatives with China in the Industry and Energy sectors included the following:

In December 2017, BEIS signed the UK–China Joint Strategy for Science, Technology and Innovation Co-operation, which resulted in a programme to develop technology to tackle global challenges resulting from climate change, population growth and environmental pollution.

In June 2019, BEIS signed the UK–China Clean Energy Partnership, which allowed collaboration on transitioning to greener sources of energy.

In March 2020, BEIS supported the sale of British Steel to a Chinese firm, Jingye Group.

The Department for Education (DfE) has similarly been keen to see UK universities benefit financially by attracting students from China: in the academic year 2018/19, more than 120,000 Chinese students were enrolled at UK universities, just under a quarter of the total 485,000 non-UK students. DfE has previously stated that it wants to increase the number of non-UK students studying in the UK to 600,000 by 2030.