The UK is making up policy on China “as it goes along” and risks having its strategy dictated by Washington or Beijing, a parliamentary report has concluded.

An investigation by the Commons business, innovation, science and trade select committee said Labour’s failure to formulate a coherent strategy since 2024 “combined the worst of both worlds” for the UK in relation to China.

Liam Byrne, Labour MP and chair of the committee said the UK’s policy on China meant it was also endangering its business with the EU with the risk of being “cut off” from big manufacuring contracts.

The government could neither deliver commercial opportunities to British businesses nor control the “increasing exposure to unquantified, managed risk” in relations with China, it found.

The report said: “In 2024, the new government promised a strategic, long-term, consistent UK approach to China. It has not delivered on this.

“Britain must shape its own relationship with China or risk having that relationship shaped for us in Washington or Beijing.”The UK’s relationship with China has been marked by a lack of engagement in the last 10 years, with Keir Starmer making the first official visit in January since Theresa May in 2018.

That trip was billed as an effort to end the “diplomatic ice age”, but since 2018 China has benefited from an export boom that is now fuelling fears about deindustrialisation, adding to deep-seated existing concerns about cyber espionage and national security.

The MPs acknowledged the advantages of trading with Beijing in their report, noting that British businesses have profitable operations in China and “are ambitious to grow” and learn from the country’s “world-leading” innovations.

At the same time, consumers benefit from low-cost imports when household incomes are squeezed, with electric vehicles being a case in point. However, Byrne sharply criticised the government’s piecemeal approach.

“Britain’s businesses cannot plan for the future when the government keeps making up its China policy as it goes along.

“Ministers promised clarity and consistency. Instead, we have opportunities missed, risks unmanaged and decisions left until the 11th hour.”The committee cited the decision in March to block the Chinese firm Ming Yang from building a £1.5bn wind energy plant in Scotland after years of negotiation because of unspecified security risks.

Scotland’s first minister, John Swinney, has called on Andy Burnham to reconsider Starmer’s decision.

That decision, along with the emergency takeover of British Steel from its Chinese owners, “has been characterised by reactivity, inconsistency and opacity”, the report said.

Work on a new strategy, the committee said, should be combined with official preparations for new trade remedies to counter unfair competition, including potential tariffs on EVs, something Downing Street has not ruled out.

The report calls for “clear new rules of the game” and recommends the designation of a “red zone” for industries that would be off-limits for Chinese investment and a “green zone”, where trade should be encouraged.

Byrne said a China strategy was an urgent concern as “Europe is changing fast” and “proposing new trade protections as it gets bolder with Beijing and warier of Washington”.

The new laws “may trap Britain outside EU trade walls, cutting us off from our largest market”.

Byrne said the government “should be prepared to consider dynamic alignment” with the EU include tariffs on EVs “as the price of securing British firms a place in the EU’s Made in Europe project” and to help guard against China dominance.

The UK is already under pressure to align with the EU on tariffs on EVs, but the business secretary, Jonathan Reynolds, has said he will make a decision in the best interests of the UK.

The EU has already imposed tariffs on Chinese EVs, capped the number of hybrid cars that can be imported from China and is now considering a Franco-German proposal for a “kill switch” to block imports if China weaponises trade – as it did last year with curbs on exports of rare-earth minerals and chips. “The UK’s partners are moving further and faster,” the report noted.

China is now on track to surpass last year’s record $1.19tn trade surplus with the rest of the world.

Its latest five-year plan, covering 2026 to 2030, gives a glimpse of where China is going next in prioritising the strategic expansion of high-value green exports such as EVs, batteries, wind turbines, hydrogen and solar panels.

A government spokesperson said it did not accept the committee’s verdict. “We recognise the committee’s work on this report, but we disagree with its conclusion.”They added that the government’s approach was “consistent” - it cooperated where it could and challenged where it must.

“Our trade strategy makes clear that we will capitalise on every opportunity to grow our economy while never compromising on our national security, and our increased discussions with China allows us to directly raise concerns where they arise,” the spokesperson said.