WHY is the Tory government prepared to sacrifice the British steel industry in favour of protecting Chinese commercial interests? Why is a supposedly “patriotic” Conservative like Chancellor George Osborne willing to hand over the future of the British energy industry to big Chinese, state-owned nuclear power companies but unwilling to impose effective tariffs on dumped Chinese steel exports to Europe?

Part of the answer lies in data that emerged last week about the rickety state of the UK economy. The latest figures show that in 2015 Britain ran a current account deficit equivalent to 5.2 per cent of the size of the whole economy, or GDP. That’s the highest deficit since records began in 1948. Simply put, last year the UK had to borrow nearly £100 billion from foreigners to pay for the excess of what we import over what we export.

Why worry? After all, the fact that there were foreign goods in the shops throughout 2015 proves the UK did in fact borrow what was needed to cover import. The difficulty arises from the fact that the current account deficit is not only permanent but getting bigger. In the final three months of last year the deficit shot up to £30.7bn, as stores imported to provide products for the Christmas rush. If we kept that rate up, the current account deficit would shoot up to seven per cent of GDP – every year.

This is where the City bankers start to get worried. And if there is a bunch of folk with not an ounce of patriotism in their red braces, it is the City traders. If the UK is permanently having to borrow so much from abroad to fund its national lifestyle, then something will have to give. That “something” is interest rates. The UK cannot go on borrowing so much from abroad without paying more for the privilege. Otherwise foreign lenders will go elsewhere.

If the current account deficit stays sky high, interest rates will have to rise steeply. Worse, higher interest rates will force up the value of the pound on international markets, making British exports even more expensive and uncompetitive. The combination of higher interest rates and an expensive pound will wreck economic growth.

That’s assuming foreigners are still willing to lend to the UK even at higher interest rates. With Brexit looming, there is a possibility that foreign lenders will decide the UK is a busted flush and refuse to provide us with foreign currency loans. After all, if the UK can’t rebalance its economy towards exporting while it is inside the EU, how will it achieve that feat if it quits Europe?

No wonder Chancellor Osborne is feeling the heat. But he has a cunning plan: make a strategic alliance with the new brand of Chinese state capitalism that has emerged in recent decades. Osborne hopes that by deferring enough to the new Chinese finance capitalism, he can save the City’s bacon. China, Osborne hopes, can be persuaded to bail out ailing British capitalism by providing the foreign currency Britain needs to cover its current account deficit.

But there’s a very big catch. For a time before the great 2008 financial crash, China was actually the largest lender to the United States. Those days are now gone. Instead of actually lending money, neo-capitalist China now prefers to buy physical assets outright in other countries. This still provides currency to needy countries like the UK that require to fund their domestic trade deficits. But the quid pro quo is that China owns more of the debtor states. Welcome to the new Chinese imperialism.

Globally, in the first three months of 2016 China spent £75bn on buying foreign firms. The big target is America. So far in 2016, Chinese firms have bought or bid for the household appliances business of General Electric, the heavy lifting equipment maker Terex Corporation, a Hollywood film studio, and the Chicago stock exchange. Rich Chinese business moguls are also keen on buying luxury properties abroad. In the last three months of 2015, Chinese investors snapped up £900m worth of London properties – that’s what helped pay for Britain’s record current account deficit.

Chancellor Osborne is well aware of all this. In fact he thinks this is the solution to his problem: how to bamboozle enough folk into thinking he has “sorted” the British economy, and so smooth his path into Number 10 when David Cameron quits. To date, our George has convinced the Tory back benches he is an economic wizard but now the truth is slowly dawning. Far from “re-balancing” the economy towards manufacturing, Osborne is presiding over the death of British steel-making. And despite promising to double exports by 2020, our incompetent Chancellor has masterminded the worst trade crisis on record.

So a desperate George Osborne has made a Faustian pact with Chinese state capitalism for the foreign capital inflows he needs to pay the bills. Last year he went to Beijing to sign a deal effectively guaranteeing future control of Britain’s nuclear energy industry to the main Chinese state-owned power companies. And far from defending the UK steel industry, Osborne was behind moves by the UK to actually oppose punitive sanctions on below-cost imports from China.

Why has Osborne sold out UK manufacturing industry? The latter now accounts for less than 10 per cent of the British economy and has little political clout in the ruling bloc of British capitalism, which is dominated by City banking and financial interests whose interests Osborne champions first and foremost. But George Osborne is about to find out that the City discards politicians who fail it.

Even the City realises that Britain’s current account deficit is unsustainable. In 2014, the City opposed Scottish independence first and foremost because it feared the loss of foreign currency earnings from Scots whisky and oil exports. The City worried this loss would precipitate a current account crisis in England and a run on the pound. But that apocalypse is looming anyway – though unfortunately Scotland is trapped inside the decaying UK economy.

A responsible UK Government would nationalise the steel industry as an emergency measure and protect the economy from dumped imports. It would introduce supply-side measures to boost industrial production and productivity. It would boost investment in research and development. To pay for all that, it would remove the tax privileges enjoyed by the City of London. Which is why it won’t happen, of course.

Instead, the City will look to find a replacement for George Osborne – someone tough enough to resolve the trade crisis by curbing imports and thereby lowering standards of living for ordinary people. We will be told it is a “national emergency” and “we” must stick together. Except the City bankers will not be cutting down on their expense accounts or Caribbean holidays. And once again Scotland – which traditionally runs a trade surplus – will have the wrong economic policies imposed upon it, in order to bail out the City fat cats.