China's mega-embassy faces its MAGA nemesis

Starmer meets with Xi during a bilateral at the G-20. Photo: Bloomberg

Treading an independent path between two superpowers in a fracturing world was never going to be easy. The Labour government of Keir Starmer hasn't been deflected from its pursuit of better economic relations with China, even after President Donald Trump started a tariff offensive aimed at isolating the US's biggest rival. A two-century-old Georgian building opposite the Tower of London may be where the wheels finally come off Britain's delicate maneuvering.

The White House has warned the British government against allowing a Chinese embassy to be situated at the former Royal Mint, the Sunday Times reported. The newspaper cited a senior US official as saying it was "deeply concerned" about giving China potential access to nearby communications cables that are critical to the UK's financial-services industry. Politicians in the Netherlands have also raised concerns over the potential impact that Chinese interceptions of data traffic could have on the security and integrity of Dutch financial institutions.

China has previously dismissed espionage concerns as groundless and slander.

It's the US intervention that matters. In its eagerness to foster trade and investment links with the world's second-largest economy, Labour has appeared impervious to the many signs that the plan is a bad idea. These include, for one thing, its improbable size: close to 10 times the gross floor area of China's existing embassy in Portland Place to the west. No convincing explanation has been put forward for why the complex needs to be so large — probably because this isn't a planning consideration. But it is a relevant factor for national security, given China's record of hacking critical infrastructure and extra-legal activities such as running unofficial police stations abroad. The site would be the biggest diplomatic compound in Europe, and a third bigger than Beijing's embassy in Washington. No wonder some allies are skittish.

Labour looks to have boxed itself into a corner. Had it wanted to, the government could have washed its hands of this plan. After all, the site was sold to China in 2018 under a previous Conservative government. Instead, it has signaled pretty clearly that it intends to approve the embassy. Beijing made delivery of its new London base the price of a reset in relations, and Labour took the deal. That was evident in Rio de Janeiro in November when Starmer told Chinese President Xi Jinping, in front of the cameras at the G-20 summit, that his government had "called in" the planning application — taking the decision out of local hands and placing it with Deputy Prime Minister Angela Rayner. 

The Royal Mint proposal has drawn opposition from local residents, twice been rejected in unanimous votes at Tower Hamlets council, spurred police objections (subsequently withdrawn, after another intervention from Starmer's ministers), been the focus of protests by Hong Kong emigres and others, and raised misgivings within domestic intelligence agencies. All this could be safely ignored, perhaps. But the stance of Britain's biggest and most powerful (if recently somewhat erratic) ally isn't so easily dismissed.

If the UK needs improved ties with China to meet its mission of kickstarting economic growth, then that's even truer of its relationship with America. More than a fifth of Britain's exports went to the US in 2023, versus 4  percent to China; the US share of British imports was 12.9 percent, close to double the Chinese contribution. After signing a preliminary trade deal with the Trump administration in May, the UK has until 9 July to reach a full agreement or face a 50 percent tariff on steel exports — a threat that, in its requirements for "supply-chain security," is also partially targeted at China. Is Labour really in a position to disregard US warnings on the London mega-embassy?

There are caveats. The statement was from an unidentified US official and followed lobbying by the Inter-Parliamentary Alliance on China, a global cross-party group that has been campaigning against the embassy plan in the UK. It isn't clear whether this represents Trump's thinking — the only voice that ultimately matters — or what the US will do if its warning isn't heeded. These are volatile times and things can change. Coincidentally, US and Chinese officials have been meeting at another Georgian-era mansion across the UK capital near Buckingham Palace. Perhaps they will iron out their trade differences.

But if a transactional president decides to tie in this perceived security issue to wider trade concerns, Britain may face an uncomfortable choice. 

Disclaimer: This article first appeared on Bloomberg and is published by a special syndication arrangement.