Britain’s reliance on Chinese money raises troubling questions for ministers

By Matthew Henderson

Matthew Henderson in the Daily Telegraph

The news that China wants to buy British Steel for the relatively modest price of £70 million fits with a worldwide pattern of assertive Chinese infrastructure and acquisition, referred to by Beijing as the Belt and Road Initiative. No surprise, then, that the offer is reportedly linked to promised loans of £300 million to boost production at the struggling Scunthorpe plant. Such promises clinch deals and generate leverage.

The Chinese Communist Party (CCP), aware of its failure to stimulate domestic economic growth and its strategic reliance on foreign raw materials, has mobilised China’s massive financial reserves (estimated at around $3 trillion) to project economic, political and military influence across much of the world. In response, for years Britain has been rolling out the red carpet for Chinese investment.

Four years ago George Osborne hailed the start of a Golden Era for UK-China economic co-operation. Earlier this year, Downing Street said that £9 billion of business deals would be signed with Beijing during Theresa May’s three-day visit to China. But little or no serious thought and debate has focused on the full spectrum of consequences.

China has no love for Britain. They dismiss our support for what remains of the rules-based world order as outdated delusions of Colonial grandeur. The UK was famously dismissed in a Chinese state-run tabloid as “an old European country fit only for tourism and study”.

While some claim that Britain could not maintain economic competitiveness without Chinese money, it is becoming ever clearer that simply accepting it unquestioningly may threaten our security, integrity and international alliances.

China exploits its economic power to advance a range of CCP agendas, often in direct opposition to British interests.  Beijing regards the international system as unfair and seeks to change it. It resents the rule of law and political freedoms and it pressurises recipients of its largesse to stop criticising and begin praising dubious aspects of China’s domestic and international activity. Self-censorship works even when human or technical surveillance is lacking. Tibet and Xinjiang become taboos.

The same CCTV cameras used to spy on the people of Lhasa and Urumqi have been installed in the UK, reportedly including around UK government facilities. It is not clear whether a default setting in these has been switched off that enables the Chinese manufactures to read the data they collect. Far more importantly, the national security case against using Huawei equipment in Britain’s future 5G system is incontrovertible. Intention plus capability plus exposure equals risk.

Britain excels in innovative science and technology research, and China helps itself to this on a prodigious scale.  The results can be immensely valuable, commercially and for national military capabilities. Despite their role in draining our Intellectual Property and practical knowhow, many Chinese scientists, some military, attend our most important research and development facilities.

The Australian Strategic Policy Institute has reported that on returning to his military unit, a Chinese graduate of the University of Manchester’s National Graphene Institute (NGI) joined two of China’s most important military programmes. XI Jinping visited the NGI during his State Visit in 2015; on the same day Huawei signed a very valuable contract for joint work with the NGI. As well as peaceful uses, graphene has transformational military applications.

Successive UK governments have failed to get to grips with any of this.  Decades of failure to fund and protect UK research and development adequately have left loopholes which Beijing exploits. Our allies are increasingly aware of comparable challenges.

The US and Australian governments now have codes of practice and legislation to address them. A recent report by the Foreign Affairs Select Committee suggests that existing schemes to protect UK academic research and development are insufficiently effective.

The CCP is not constrained by democracy, the rule of law of a host of other international norms. This poses threats to British security, interests, values and alliances, from across the Indo-Pacific to Hong Kong and Manchester; from the political and economic health of Britain’s international partners to the denial of political, religious and cultural freedoms of millions within China’s borders.

What we lack is a coherent, level-headed and consistent China policy that names and addresses all these together.  Without one, we may find that Britain and its interests are divided and conquered.

Matthew Henderson is director of the Asia Studies Centre at the Henry Jackson Society

HJS



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