Richard Ottoway was MP for Croydon South from 1992-2015 and is a former Chairman of the Foreign Affairs Select Committee.
At the risk of sounding unwelcoming to foreign direct investment into the UK, what exactly is the trajectory of Chinese investment here? At times, it is beginning to feel like there are two very different accounts. The first one holds that China is a normal nation, just like any other, and its companies have the right to invest in Britain in the same way that British companies can invest in China. The other story…well, the other story is not so simple and is far more geopolitical in nature…
The recent decision by the Prime Minister to accept the bid by a Chinese consortium to build a nuclear power station at Hinkley Point was swiftly followed by the news that China is already planning a “central role” in new nuclear power plants in Bradwell, Essex and Sizewell, Suffolk. Her original decision to impose some safeguards, such as a controlling stake by the government which will have predominantly foreign-ownership, is unclear.
Indeed, former cabinet minister, Sir Ed Davey – the Lib Dem ex-energy secretary under the Cameron government – still maintains that former-Chancellor George Osborne rejected safeguards the first time around under Chinese pressure. Why would Chinese government-controlled companies reject British requests for safeguards? Certainly, they would not allow such open investment by foreign countries into China’s energy infrastructure, so why insist on such open conditions? The revelation was disturbing.
Some argue that Chinese investment into the UK is taking on an increasingly geostrategic aspect. There may be some truth to this, since Chinese investment companies and sovereign wealth funds often take political direction from the Communist Party. As of writing, there are a number of areas of concern.
First, China is attempting to own larger and larger stakes of Britain’s energy infrastructure. On top of the news on future nuclear power plants, it was announced on 18September that Chinese companies – Fosun and China Gas – are bidding for a 51 per cent stake in Britain’s National Grid’s gas network. Indeed, such is the China’s interest in owning the stake, that its Government-owned China Investment Corporation is also bidding in another consortium, led ostensibly by the Australian bank, Macquarie.
Second, only days after the Ministry of Defence announced its intention to transfer its internet computing to data centers in the UK, Huawei – a company linked by some to the Chinese military – announced its decision to enter the datacenter business in a number of countries, including fellow-NATO member Germany. In addition, Sir Malcolm Rifkind, former head of the Parliamentary Intelligence and Security Committee, has spoken out about a possible £5 billion deal, in which Chinese Daily Tech would attempt to buy Global Switch, Britain’s largest home-grown datacentre business. All in all, it might be time for a cross-government security review process for future investments.
In some ways, security concerns are only the tip of the iceberg. Trade with China is undermined by a number of unfair competition practices. Many Chinese investors are either backed by the central government, or helped by unofficial barriers to foreign competitors into China’s own economy. In other words, there is little fair play in these deals.
So what can we make of Chinese investment into the UK? Overall, it is a good thing, but it is not an unalloyed good. It is becoming increasingly clear that the UK must build a more rigorous review process – for security concerns – of foreign firms linked to authoritarian regimes. Furthermore, it must seek fairer trade practices with China – so that trade goes both ways and benefits both parties.
As China begins a major campaign to pressure the EU into according it Market Economic Status (MES), it has to do the things that actually make it a proper economy. Despite promises to reform the state owned enterprises that dominate certain sectors of the Chinese economy, Beijing has done little to put this in practice, preferring instead to merge them into “national champions”. However, one looks to the future of Chinese investment in the UK, the simple fact is that it must be done with more presence of mind, and a greater awareness of China’s geostrategic goals. It must also protect British exports into China and seek a fairer system of competition.