UK-China relations could be on a bumpy road

London: UK’s security chiefs are on the alert for threats from China; MI5 Director-General Ken McCallum, UK National Security Adviser Sir Stephen Lovegrove, MI6 chief Sir Richard Moore and Director of GCHQ Sir Jeremy Fleming are all warning of covert interference with British democracy, economy and society from an increasingly assertive CCP. They talk of data traps, debt traps, and China bringing all elements of state power to control, influence design, and dominate technology.
In UK Russia seems to be identified as public enemy number one, in that President Putin is regarded as the greatest threat to the UK and much of the EU; but China seems to be UK’s all-round strategic competitor, a position which involves a large dose of strategic ambivalence, in some situations China seems to be UK’s strategic enemy and in others UK’s strategic partner. Post-Covid, mid-Ukraine and in an existential inflation crisis the UK is still open and friendly to investment: in 2021 ByteDance, TenCent, Viridor, Oxford Genetics amongst others, 83% of Chinese investment in UK was focussed on deals in the TMT and life science sectors.
China’s recent economic rise is nothing new, China has millennia of successful economic history spread across the state and private sectors, the BBC dates China’s current global economic dominance to its admission to the World Trade Organization in 2001, others attribute it to Deng Xioaping’s earlier economic liberalisation reforms. Post the 2008 crash and during the nascent Xi era, the world wanted to be in a profitable relationship with China, China’s strategic largess and laisser-faire attitude attracted partners from across the globe. Now the small print in these relationships is under scrutiny and herein lies the strategic dilemma, consumers have got used to cheap stuff, and administrations are in business and industrial binds with the CCP. The task of the government is to keep the strategic enemy as the strategic investor.
In the UK China’s activities feature in daily news and politics, not always favourably but China has friends in high places, including in No 10 Downing Street, Prime Minister Boris Johnson’s team and environment have considerable China expertise and experience. In April, Stanley Johnson, the PM’s father hosted a lunch party for China’s ambassador Zheng Zeguang and his wife Madame Hua Mei at his London home. Mr Johnson and his son Max are planning a documentary travel programme along the original Silk Road.
The Home Office’s National Security Bill passed its first making provision for threats to national security from espionage and persons acting for foreign powers, this bill provides modernised tools for law enforcement and the intelligence agencies to tackle modern threats, from cyber-attacks, sabotage, and spying, and all manner of terrorism, to interference in UK’s economy and democracy. The Bill introduces scrutiny for a threshold of 25% for overseas stakes in sensitive deals, the Foreign Influence Registration Scheme, requires individuals to register certain arrangements with foreign governments, to help combat damaging or hostile influence being exerted by foreign states in the UK, but it does not explicitly cover lobbyists. Although no specific countries are mentioned China’s recent participation in UK universities, and strategic manufacturing presence in UK come to mind. The Biometrics and Surveillance Camera Commissioner has challenged central and local government ministers to clarify their positions on buying surveillance cameras from controversial tech company Hikvision, which is part-owned by the Chinese state, after Health Secretary, Sajid Javid, banned Hikvision for competing for new business in the Department of Health after a procurement review revealed “ethical concerns” about the company. Hikvision have cameras in the NHS, airports and local councils, and are used by the police; Nuctech China’s partially state-owned security inspection products company also has a foothold in the scanners supplied to UK’s land and sea border checks, and prison establishments.
Companies under the scanner of the Competition and Markets Authority at the moment are the Welsh graphene company Perpetuus Group’s anticipated acquisition by Shanghai Kington Technology Ltd., and Welsh semiconductor foundry Newport Water Fab by Nexperia, another company with links to the CCP.
Chinese people have seriously invested in London and Manchester properties, ONS data shows that there are now some 218,975 London properties owned by Chinese/HK buyers, making London property the most popular investment opportunity for the Chinese capital in the world. The real estate firm Winkworth China Desk promotes on their website “Chinese investors can buy as much property as they can afford in the UK. There are no citizenship, visa, or residency requirements.” Chinese investors and companies own London’s tallest edifice The Cheesegrater and the old Royal Mint building (the eventual site of the new PRC Embassy); investments in travel companies, nuclear power plants, airports, fast food chains and pubs, football clubs, UK’s cloud and data storage, oil/gas and water infrastructure are all examples of China’s appetite to be strategically present in the UK.
China was the UK’s 3rd largest trading partner in the four quarters to the end of Q4 2021 accounting for 7.3% of total UK trade. In that time total, UK exports to China amounted to £27.0 billion (an increase of 3.0% or £785 million compared to the end of Q4 2020). Thus UK reported a total trade deficit of £39.1 billion with China, up from £30.9 billion to the end of Q4 2020. In the four quarters to the end of Q4 2021, the UK had a trade-in goods deficit of £44.8 billion with China, up from £36.8 billion to the end of Q4 2020. But to the end of Q4 2021 the UK reported a trade-in services surplus of £5.7 billion with China, compared to a trade-in services surplus of £5.9 billion in the four quarters to the end of Q4 2020.
Foreign Secretary Liz Truss launched UK’s new Strategy for International Development, formerly known as aid, now a central part of UK foreign policy. It was observed the thrust of it may be less trade-tied-aid but straight geopolitical competition: establishing the UK, via the G7, as the alternative infrastructure provider to China’s Belt & Road Initiative. This week Kwasi Kwarteng, Business and Energy Secretary, confirmed his department would bring all overseas aid spending in China to an end, but BEIS will work with China to tackle global challenges. Kwarteng is open for and friendly to business but not at the expense of the personal public and national security. A report for the Henry Jackson Society found that in 2020 the UK was strategically dependent on China for 229 categories of goods, 57 of these had applications in critical national infrastructure.
MPs are keen to reduce strategic dependency on China to lessen the risk of key businesses in key sectors being acquired by the UK’s strategic competitor, and aiding China’s goal of self-sufficiency.
Anne-Marie Trevelyan, Trade Secretary has said China is welcome to invest in non-strategic parts of the UK economy and that an FTA with China is not “front of mind” for her.
Considering the human rights issues in Xinjiang, Tibet and Afghanistan, the war in Ukraine, the election of the “enemy of democracy” in Hong Kong, the cost of living crisis, the free and open Indo-Pacific and supply chains becoming more self-reliant, it appears UK-China relations could be on a bumpy road.
The above in a nutshell demonstrates that the strategic realm traverses not just military and security but geopolitical and geoeconomics, perhaps that is what strategic ambiguity is all about.