Keir Starmer’s foolish China strategy Xi Jinping is thinking decades ahead

Last month’s release of DeepSeek’s latest AI model shattered assumptions about Silicon Valley’s technological exceptionalism. Some have even called it China’s “Sputnik moment”. But China’s rise to the frontier of AI is no accident. It is the product of decades of targeted industrial policy, vast state investment, and calculated acquisition of foreign technology — a strategy which has accelerated Beijing’s high-tech ascendancy and weakened its rivals.

Britain, by contrast, has no comparable strategy. Its absence of long-term vision has made it an easy target for the Chinese Communist Party (CCP), whose strategic ambitions unfold over decades. Nowhere is this clearer than in the sale of Imagination Technologies, a crown jewel of British innovation whose semiconductor designs are powering the next technological era. Since its acquisition by a Chinese state-linked firm in 2017, Imagination’s Graphics Processing Units (GPU) and AI accelerator technology have been absorbed into China’s AI ecosystem, driving the very breakthroughs that now challenge Western dominance.

This was no ordinary corporate acquisition, but a reckless surrender of future-defining technology to a geopolitical competitor — a decision emblematic of Britain’s strategic myopia.

Imagination Technologies specialises in the design and licensing of energy-efficient GPUs. Originally developed for rendering film and video game graphics, GPUs have evolved into critical hardware for artificial intelligence (AI) development, now enabling breakthroughs in applications from productivity software to autonomous vehicles, and in military technologies such as automated weapons targeting, and drones. While Nvidia dominates the market for high-performance GPUs, Imagination’s expertise in mobile and low-power GPU design is strategically significant, enabling the mass deployment of AI across consumer and industrial networks. These technologies support AI integration in smart cities, autonomous systems, and the connected infrastructure of the future.

For years, Apple was Imagination’s largest and most lucrative client. But that all changed in April 2017, when Apple announced it would no longer use Imagination’s technology, triggering a collapse in the firm’s valuation — from £2 billion to just £550 million. Within months, Canyon Bridge, a Delaware-based private equity firm heavily funded by China Reform Holdings — a Chinese state-owned enterprise under direct CCP oversight — moved in to acquire it. China Reform was, theoretically, positioned to exert influence over Canyon Bridge and, by extension, Imagination. Despite this warning sign, the UK Government approved the acquisition, reassured by promises that China Reform would remain a passive investor. This was a terrible miscalculation — and one that betrayed a naivety about how China’s centralised state apparatus executes strategy.

Illusions of China Reform’s “passivity” crumbled in 2020, when it attempted to install four of its own directors onto Imagination’s board. The move ignited a fierce backlash within the company and alarmed Government officials. Under mounting public scrutiny, Global Counsel — a “strategic advisory” firm founded by Lord Mandelson, now British Ambassador to the United States — was hired by Canyon Bridge to “reassure UK stakeholders” about Imagination’s operations.

Just months before this attempted coup, Mandelson, a former UK cabinet minister and then-president of the publicly funded Great Britain China Centre, travelled to China with his aide to discuss “cooperation opportunities” with China Reform’s senior leadership. By his own account, the visit was a success, deepening ties between China Reform and Global Counsel — an advisory firm that soon after (it claims coincidentally) was enlisted to manage the fallout of Imagination’s crisis. Mandelson denies involvement in the Imagination case. The optics, however, are disturbing: corporate — and, perhaps, political — influence diluted scrutiny of a state-linked transaction with lasting implications for Britain’s national security and technological future.

Though Whitehall ultimately blocked the board takeover, Britain had already lost control over Imagination. Company CEO Ron Black was sacked after citing concerns over Chinese government interference, while other senior executives resigned. Testimony uncovered by UK-China Transparency revealed that in 2020 and 2021, Imagination’s intellectual property and key assets were quietly funnelled to Chinese GPU companies through “unusual and undisclosed knowledge-sharing agreements”. Two of the recipients, Moore Threads and Biren Technology, were sanctioned by the US in 2023 for their ties to China’s military-industrial complex. In this way, a key British technological asset was effectively dismantled, its innovations repurposed to advance the ambitions of the CCP. The British Government had either gravely underestimated the strategic intent of Chinese leaders — or it had simply been outmanoeuvred.

This was just another step in the CCP’s broader strategy. In 2014, Beijing released plans to position China’s semiconductor ecosystem as a global leader by 2030, backed by a $150 billion National Integrated Circuit Fund to advance cutting-edge research and cultivate “national champions”. A year later, Made in China 2025 introduced the bold target of producing 70% of semiconductors domestically by 2025. These policies were reinforced in 2016 by the Innovation-driven Development Strategy, which channelled unprecedented governmental resources into research, talent cultivation, and infrastructure for China’s high-tech industrial ecosystem.

By 2017, Beijing’s semiconductor ambitions were already well-advanced — and raising alarm among Britain’s allies. It was becoming clear that China was executing a disciplined whole-of-state strategy to “leapfrog” key stages of semiconductor development, leveraging state funding and systematically extracting technology from foreign companies through acquisitions, joint ventures, and knowledge-transfer agreements. State-linked entities, including China Reform, played a key role in absorbing critical expertise into the country’s domestic ecosystem — securing intellectual property through licensing deals, embedding Chinese engineers into overseas R&D teams, and orchestrating takeovers of foreign semiconductor firms, including Imagination.

Shortly before Imagination Technologies’ sale, the US moved decisively to block Canyon Bridge from acquiring an American semiconductor firm, citing national security risks tied to Beijing’s industrial policy and the need to protect such critical technology. Britain, however, failed to shield Imagination, appearing blind to Washington’s caution. Not only did it ignore the emerging centrality of semiconductors in great power competition, but it overlooked the patterns of logic behind the CCP’s moves.

The CCP’s industrial, technological, and geopolitical goals are all situated within an ideational framework: Xi Jinping’s China Dream. This vision drives the CCP’s pursuit of strategic aims, guiding China’s transformation into a prosperous, technologically sovereign, and globally dominant superpower by 2050. Central to Xi’s Dream is the principle of technological “self-reliance”, aimed at reducing dependence on foreign technology, securing supply chain control, and establishing leadership in critical sectors, including semiconductors. With ideological clarity and strategic patience, China is steadily realising decades-long ambitions for national rejuvenation, exploiting the disarray and short-termist thinking of less cohesive nations.

The failure to shield Imagination is not an anomaly, but a symptom of Britain’s deeper strategic paralysis. The January 2025 Commons debate which followed Rachel Reeves’s visit to Beijing provided a glimpse into Britain’s ongoing dysfunction. It was a performance which, if I were a Chinese strategist tasked with formulating UK policy, I would watch gleefully with my colleagues as we sipped Maotai and munched peanuts. The backdrop of the debate was Labour’s decision to resume economic dialogue with Beijing prior to publishing its promised and long-delayed China audit — a critical step in assessing the range of risks, opportunities and priorities in this complex relationship. Amid Reeves’s incomprehensible celebration of having secured £600 million “of tangible benefit for British businesses” (a figure akin to pennies found down the back of Beijing’s sofa), the debate descended into jeering and partisan mud-slinging, devoid of both cross-party solidarity and a sense of Britain’s long-term national interest.

The fragmentation exposed during the debate reflects an underlying malaise: Britain has yet to establish a coherent hierarchy of values to guide its China policy. Parliament is fractured along ideological, strategic, and even regional lines, and Government departments engaging with China are split too. The Department for Business and Trade prioritises economic ties, while GCHQ and MI5 warn of escalating security threats and the Foreign Office grapples to balance diplomacy with the defence of human rights and rule of law. Such ideological incoherence leads to siloed decision-making and mixed messaging. Whitehall’s fragmentation is further exacerbated by private interests which, in the absence of a clear overarching framework, can sway policy in directions that undermine Britain’s national security. The role of Mandelson’s lobbying firm in the Imagination fiasco illustrates how unreconciled agendas — whether between departments or state and private actors — breed strategic incoherence. China’s geopolitical rise is too important for Britain to proceed divided.

Should economic growth outweigh national security considerations? Can Britain credibly champion universal principles such as human rights and the rule of law while deepening ties with a regime which views them as existential threats to its own survival? Such questions are exceedingly complex and remain unanswered, as the Government has yet to articulate a clear vision for its relationship with Beijing — nor how its China policy will fit within Britain’s broader ambitions in the decades to come.

Keir Starmer is reportedly planning a trip to Beijing later this year, which would make him the first UK prime minister to visit in more than seven years. He has promised a “consistent, durable, respectful” relationship with China. Yet consistency and durability will be impossible in the absence of a unified, supra-partisan national strategy.

Without a long-term vision, the UK will continue to forfeit tools of power and credibility needed to remain influential in the 21st century. The case of Imagination Technologies illustrates the stakes: Britain is ill-prepared to confront a competitor that not only commands vast scale and resources, but which also thinks and plans in decades. In a world increasingly shaped by China’s ambitions, Britain must conjure a unified vision — or else risk continued erosion of its technological advantage and credibility as a global power.

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Elizabeth Lindley is an analyst of politics of the People’s Republic of China, Chinese foreign policy, and cross-strait relations.

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