UK should not fear trade with China - but a clear red line on security issues is essential

The US is urging countries to agree new trade deals.

- Gerard Lyons

The perceived risk is a bipolar world, where countries must choose between the US and China. What are the implications for the UK?

In all likelihood this choice is avoidable. The global economy is so interconnected, fragmentation is more likely than a bipolar world. Supply chains are complex, and involve many countries. Even as nations look to onshore supply chains, achieving this will be a lengthy and expensive challenge.

Likewise, with financial flows. Bank for International Settlements data shows global cross-border lending is $38tn (£29tn), with foreign banks' credit to China at $826bn. In turn, about one-quarter of the US national debt is held by foreigners, with China holding at least $784bn, second only to Japan.

It is not just economic and financial ties. Geopolitics suggests many countries will adopt a non-aligned approach, which will vary by issue. It is a delicate balancing act for the UK. The government's priority is economic growth, but since the pandemic and war in Ukraine, national security decisions are indivisible from economic prosperity.