China has voiced strong opposition and dissatisfaction following the United Kingdom's decision to nationalise British Steel, a move that risks escalating tensions between the two nations. The UK government announced on Thursday that taking the loss-making firm into public hands was necessary to protect jobs and preserve a critical national capability.

British Steel's operations in Scunthorpe were taken under UK government control last year. However, the company remained under the ownership of China's Jingye Group, which limited the government's capacity to direct its future strategy. The nationalisation allows the government to fully steer the company's direction.

China's Ministry of Commerce stated on Friday that the UK's actions "seriously infringed" upon Jingye Group's legitimate rights and interests. They further asserted that the decision "severely undermined the confidence of Chinese companies investing in the UK" and called on Britain to honour its commitments under the China-UK Bilateral Investment Treaty.

The nationalisation decision arrives as the UK prepares for a change in leadership, with the incoming prime minister set to assume office on Monday. The new premier will face the challenge of balancing diplomatic relations with China against the economic implications of severing ties with the world's second-largest economy.

The China-UK Bilateral Investment Treaty, a legally binding agreement signed in 1986, aims to promote and protect investments between the two countries. China's commerce ministry indicated that Beijing would closely monitor the situation and support Chinese firms in protecting their rights, though specific actions were not detailed.

Legislation passed by Parliament on Wednesday enabled the government to bring the steel industry into public ownership if it met a public interest test. Jingye Group is seeking compensation, having previously reported the business was incurring losses of approximately £700,000 per day. The government has stated an independent valuer will assess compensation claims in the autumn, with the possibility of "nil" compensation.

With British Steel now in public ownership, the government has the autonomy to determine the plant's future and ensure its continued operation. However, it is unlikely the government intends to operate the business long-term, given its substantial daily cost. In March, the National Audit Office reported the Scunthorpe steelworks was costing the government around £1.3 million daily.

Business Secretary Peter Kyle confirmed to the BBC that the government would need to cover the immediate running costs. The Scunthorpe facility directly employs about 2,700 people and supports thousands more jobs within the supply chain. The UK relies on imports for most of its steel, with major suppliers including the EU, US, China, and India. The closure of the plant would leave the UK as the only G7 member not producing virgin steel.