Beijing to Britain

Question on sanctions, head scratching over BRI, Scotland on Confucius Institutes

Hello,

The United Kingdom now has the starting point of a new ‘China Strategy’ - albeit a modest couple of pages in a much longer document, the Integrated Review, setting out the country’s foreign policy. Government will use this to attempt to align political behaviour with regards to Departments, and provide clarity to businesses operating between both countries.

This starting point on a strategy for China will continue to prove highly contentious. Political views will remain polarised, and those MPs active on China will likely push for further clarification.

The Review adds credence to our view that two loose schools of thought have emerged in Westminster. One calls for a fundamental reset of British relations with China, championing human rights over trade, and pushing for all engagement to be through a values-led approach. The other school pushes for a realpolitik approach; while the so-called ‘Golden Era’ may be over, it is better to keep China at the table through diplomacy and trade, even at the expense of human rights - without these, the UK has no leverage or bargaining chips.

The majority of China-centric politicians in the UK can roughly be placed into one of these schools, although their views often change depending on the issue at play. It’s worth noting that neither school believes that an enriched Chinese middle class will steer the country towards democracy. While the Government may pretend that is has strategised around the values-led approach advocated by the first school, is the latter approach that it has chosen to embrace in a hybrid fashion, by portraying trade as a vehicle to hold China to account.

And so ‘Beijing to Britain’ was born - a weekly overview of the ebbs and flows of this discussion, and how it impacts politics, the private sector and society.

As always: tips, feedback, and your views to BeijingToBritain@protonmail.com.

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Politics

  • Sanctioned MPs and Xinjiang camps FAC

  • Belt and Road Initiative

  • Scotland on China

  • Hong Kong

Business

  • National Security and Investment Bill

  • HSBC

  • China’s economy

  • Revolut in China

Society

  • Anti-Asian racism in the UK


First, a quick look at this week for China in Parliament

  • 74 mentions of China

  • 0 mentions of Xi Jinping

  • 29 mentions of Hong Kong

  • 8 mentions of Uyghurs

  • 1 mention of CCP

  • 5 mentions of Magnitsky

  • 589 out of 650 MPs (90.6%) have a Twitter account.



Who’s asking what?

Order! Order!

Some of the more notable questions asked of the Government this week

  • Stephen Kinnock (Labour) askedthe Secretary of State for Foreign, Commonwealth and Development Affairs, whether it is his policy that all (a) Uyghurs, (b) Kazakhs and (c) other members of Chinese ethnic groups resident in the UK, regardless of their immigration status, will be provided with consular and other appropriate assistance to establish (i) the whereabouts of and (ii) contact with their children in China in the event that they require such assistance.”

  • Imran Khan (Conservative) askedthe Secretary of State for Foreign, Commonwealth and Development Affairs, what recent discussions he has had with his Indian counterpart on countering the influence of the China in the Indo-Pacific.”

  • Afzal Khan (Labour) askedthe Secretary of State for Foreign, Commonwealth and Development Affairs, what representations he has made to (a) Chinese and (b) Hong Kong authorities on the detention of Andy Li; and what assessment he has made of reports that Andy Li is being held in solitary confinement without access to his family or lawyers.”



Spotted

China’s former Ambassador to the UK, Liu Xiaoming, has found new pastures. Liu will be China's Special Representative for Korean Peninsula Affairs. Readers may remember that he had previously served as PRC’s Ambassador to North Korea between 2006 to 2010.

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Politics

Sanctions, camps, BRI and Scotland

Sanctions and camps

On Tuesday, two separate but notable events took place. The first was an Urgent Question, secured by IPAC member Tim Loughton MP, to ask what the Government was planning to do about China sanctioning him and other British citizens. The second was a Foreign Affairs Committee hearing, chaired by Tom Tugendhat (also sanctioned, co-founder of the China Research Group), into the camps in Xinjiang. We will examine both now.

Loughton’s urgent question followed two weeks of silence from the Government on this issue as Parliament was on recess.

The UQ opened with Loughton laying out his view, edited for brevity:

What further action are the Government considering against the Chinese Government to emphasise how unacceptable and unfounded their action is? Will the Minister assure the House that the Government will not be proceeding with any new agreements with the Chinese Government while these sanctions remain in place?

Given growing concerns about the malign influence of the Chinese Government in sensitive research projects in our universities, the sinister tentacles of the Confucius institutes on campuses and increasingly in our schools, not to mention the wide-scale buying of influence in UK boardrooms, will the Government commit to a detailed and transparent audit of Chinese influence in our education system, our military capability, our business and our infrastructure projects, and, if found to be acting against British interests, send them packing?

Given the disgraceful recent dressing-down of our ambassador in Beijing for supporting on social media the role of a free press, will the Minister confirm that British diplomats will not be bowed and will be fortified in calling out abuses by the Chinese Government wherever they happen, as we sanctioned parliamentarians have been fortified to call out the abuses of the totalitarian Government in China by their badly-thought-out and counterproductive use of sanctions, which we will wear as a badge of honour? Will the Minister signal, clearly and firmly, that project kowtow is over and that Britain will not flinch from standing up and calling out Chinese Government abuses, which they have got away with for far too long?

Representing the Government, Minister for Asia Nigel Adams replied:

We have been absolutely clear with China that its sanctioning of UK individuals and entities is unwarranted and unacceptable. My hon. Friend is right to shine a light on these measures. We will not allow this action by China—neither will our diplomats—to distract attention from the gross human rights violations in Xinjiang. We will continue to work alongside our partners to send the clearest possible signal of the international community’s serious concerns and our collective willingness to act.

Stephen Kinnock, Labour’s Shadow Foreign Affairs Minister, was in a bullish mood as he set out the Opposition’s view:

We welcome the Prime Minister’s invitation to those who were sanctioned to meet him, and we hope that the Government are providing those individuals with adequate advice and support. However, we are deeply concerned about the rank hypocrisy and inconsistency in the Government’s actions regarding China.

When Beijing introduced the Hong Kong national security law last summer, the UK withdrew from two UK-China Government investment forums: the joint trade and economic commission and the economic and financial dialogue. However, it is reported that those forums are now reopening. Will the Minister confirm that?

On Hong Kong, does the Minister now agree with the Opposition that British judges who serve in Hong Kong are only lending a veneer of credibility to a broken system and that they should therefore withdraw? Lord Reed’s review was announced in November. When will its conclusions be published? Where are the Magnitsky sanctions against Carrie Lam and the human rights violators in Hong Kong?

In January, the Foreign Secretary said that “we shouldn’t be” doing trade deals with countries committing human rights abuses

“well below the level of genocide”, yet the Government whipped their MPs against the genocide amendment to the Trade Bill. Will the Minister explain that rank hypocrisy and why the Foreign Secretary says one thing in public and something else altogether in private? The Government claim to be alive to the threat that Chinese state-backed investment poses to Britain’s economic security and prosperity, so why on earth is the Business Secretary weakening our defences by watering down the National Security and Investment Bill? Today, Taiwan suffered the biggest Chinese military incursion into its airspace to date of 25 planes. What conversations is the Minister having with his counterparts about that worrying development?

It is clear that the Government have no strategy on China at home and no strategy on China abroad. Will they now commit to an audit of every aspect of the UK-China relationship so that we can finally call time on the Conservatives’ failed golden era strategy and replace weakness, division and inconsistency with an approach that is instead based on strength, unity and consistency?

Further interjections of interest came from the SNP’s Shadow Foreign Affairs Minister, Alyn Smith (IPAC):

Beijing has taken advantage of mixed signals from the UK Government. Although the Government have not done nothing, they could be tougher. It was a Conservative Government who whipped their own Members against a genocide amendment to the Trade Bill—a matter of great regret—and the UK still does not define the situation in Xinjiang as genocide. Does the Minister not agree that we need to be tougher on this? It is high time that the UK Government follow the lead of others, define what is happening in Xinjiang as genocide and make it clear that the UK will not do business with genocidal regimes anywhere?

And Layla Moran (IPAC), who holds the same position for the Liberal Democrats:

On 8 April, US Senate Foreign Relations Committee chairman Bob Menendez announced a bipartisan agreement on new comprehensive China legislation. What consideration has the Minister given to seeking cross-party support for a comprehensive and nuanced new foreign policy settlement towards China that protects democracy and human rights? As he will have seen from the strong support for the genocide amendment to the Trade Bill, such a settlement would be welcomed across the House.

Note Adams’ response to this, which indicates an as-yet unseen Foreign Office group is working on China:

Four months ago, the Foreign Secretary initiated a small, interdepartmental, Minister-led group on China, working on the exact point raised by the hon. Lady. It is absolutely right that we react after seeing China’s increasing international assertiveness in recent years.

An increasingly lonely voice, Richard Graham (chair of the China APPG) pushed for a more nuanced approach to the relationship:

When it comes to the call to accuse China of genocide in Xinjiang, I am reminded of the work of Evelyn Beatrice Hall, who wrote in “The Friends of Voltaire”, as an illustration of Voltaire’s beliefs:

“I disapprove of what you say, but I will defend to the death your right to say it”.

Therefore all of us, perhaps especially those of us who have had China visas denied in the past for alleged misdemeanours, should show our solidarity with colleagues so sanctioned.

Does the Minister agree with the statement made the other day by the former Foreign Secretary William Hague? He said that

“it’s very important to find a framework of co-operation even with a rival power when there’s so much at stake in the world on climate change, arms control and on the future stability of the financial system.”

Does my hon. Friend agree that this has to be the way forward?

To which Adams replied:

As the former Foreign Secretary William Hague pointed out, this is a difficult balancing act, but we must pursue a positive economic relationship. That includes tackling all sorts of other challenges, but we have to call out China when it commits human rights violations. In great contrast to the sanctions that China has placed on right hon. and hon. Members, the sanctions that we issued, alongside our international partners, were thought out. They took some time to deliver, but they had a legal basis to them, contrary to the recent sanctions on our colleagues that we have seen from China.

It’s worth skimming the whole transcript.

———

Meanwhile in Portcullis House, the Foreign Affairs Committee heard evidence from a variety of witnesses as part of its inquiry into Xinjiang detention camp. This inquiry has a remit to:

examine the ways in which the UK Government can prevent UK companies from benefitting from forced labour in Xinjiang, support members of the Uyghur diaspora community, and strengthen the UK Government’s, and particularly the FCDO’s, atrocity prevention mechanisms

Which means it overlaps significantly with a Business, Energy and Industrial Strategy’s inquiry to:

explore the extent to which business in the UK are exploiting the forced labour of Uyghurs in the Xinjiang region of China.

The Committee will investigate the risks that UK based businesses face when engaging supply chains that originate in China and what more the Government can do to ensure that business and consumers in the UK do not perpetuate the forced labour of Uyghurs.

Speaking before the FAC was:

  • Peter Irwin, Senior Program Officer for Advocacy and Communications at Uyghur Human Rights Project

  • Rushan Abba, Founder and Executive Director at Campaign for Uyghurs,

  • Rayhan Asat, Attorney, Yale World Fellow, President at American Turkic International Lawyers Association

  • Charles Parton OBE, Senior Associate Fellow at Royal United Services Institute (RUSI) and;

  • Azeem Ibrahim, Research Professor, Strategic Studies Institute at US Army War College, and Director at Center for Global Policy

Read the wide-ranging transcripts here. The key point here is that two heavyweight Committees have been scrutinising the overlap between the private sector and Uyghur forced labour for months. This is an issue that is not going to fall off MPs’ radars for a while yet.

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Hong Kong

Following the recent sanctions imposed on Chinese officials involved specifically in Xinjiang, more than 100 MPs and peers have now urged Boris Johnson to impose similar sanctions on Chinese officials who led a crackdown on Hong Kong pro-democracy campaigners.

Led by former Governor of Hong Kong, Chris Patten, the list of names includes included a strong Labour turnout, such as Shadow foreign secretary Lisa Nandy, and significant numbers of IPAC politicians.

IPAC’s Iain Duncan Smith also went on Sky to explain the argument for further sanctions.

Calls for sanctions against Carrie Lam, Hong Kong’s Chief Executive, have been going on for some time. It seems unlikely that this pressure will succeed. On Friday, the news emerged that democratic media tycoon Jimmy Lai was sentenced to 14 months in prison for unauthorised assembly - for participating in two protests in 2019. Here’s how the Global Times covered it, and the BBC.

The FCDO did release a statement:

The Hong Kong authorities’ decision to target leading pro-democracy figures for prosecution is unacceptable and must stop.

The right to peaceful protest is fundamental to Hong Kong’s way of life - protected in both the Joint Declaration and the Basic Law - and it should be upheld.

Which was closely mirrored by Foreign Secretary Dominic Raab on Twitter:

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New targets

In January this year, we wrote at length about what relationship an independent Scotland may want to have with China (an area we feel is still sorely underreported). As we noted at the time:

Scottish expertise supported the development of the first offshore wind farm in Guangdong province, and Scotland proudly notes that the first Chinese person to study in Europe was Dr Huang Kuan at Edinburgh University in the 1850s.

This lack of journalistic coverage could well change imminently - Scottish elections are scheduled to take place in four months. Should the Scottish National Party (SNP) win with a majority in May (which current polling suggests will be the case), all indications point to them attempting to push through a second independence referendum shortly thereafter. A key part of making the case for independence will involve the SNP setting out a vision for what Scottish foreign, trade and defence policy could look like.

As Scotland gears up for the elections next month, political parties have begun releasing snippets of their manifesto pledges to the public via the media. The most notable so far has come from Scottish Greens, who, according to the Times, are set to call Confucius Institutes a “propaganda tool of a state responsible for widespread and grievous human rights abuse”.

It’s largely irrelevant that the Greens are not on track to win a large number of seats; the fact that a mainstream party is running this sort of manifesto pledge is worth noting. It does also beg the question - how many Scottish voters know enough about Confucius Institutes to have a political opinion on them which may or may not influence their vote? Regardless, we would suggest keeping a close eye on this; there’s clearly political capital to be gained from attacking the relationship between the UK’s higher educations and China.

Fortunately, the question of what Scotland’s engagement with China could look like was discussed this week by the newly established UK National Committee on China (UKNCC). Hosted by RUSI’s Andrew Cainey, the event featured insight from:

  • Wendy Alexander, Dundee University

  • Prof. Jane Duckett, University of Glasgow

  • Roddy Gow OBE, Asia Scotland Institute

  • Chris van der Kuyl, 4J Studios / Parsley Box

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BRI?

Following CCP sanctions on British citizens and US President Joe Biden breathing life into ambitions for a more strategic Western stance on China, your writer has noted the renewed political and commentariat interest in China’s flagship Belt and Road Initiative (BRI).

Discussed in Parliament only eleven times throughout 2020, it has since become one of the trending foreign policy issues in the halls of Westminster and the corridors of Fleet Street. Both seem to agree that the BRI is bad news for developing countries; a project aimed at trapping them in debt to China with minimal return. In March, Baroness Kennedy of The Shaws noted in the Lords that:

Regrettably, I am watching a diminution of trade to places where we should be putting some funding to preserve the rule of law and make it possible for people to create real democracies. Instead, we have China doing it all across Africa in its belt and road policy—which means, of course, that it has the backing of all those indebted nations when it comes to any international debate about calling China to heel. What a mistake we have made in allowing that to happen and not being the people who are helping the development of Africa, Pakistan and the other such places that are now in China’s pocket.

To which Lord Cormack later added:

China is going to be the dominant power towards the end of this century and is already one of the dominant powers in the world—but look at its record, with the belt and road, and giving aid to buy influence and to subvert. Even we are in danger of Chinese subversion, and we have to recognise that. If we do not, that will be to our own peril.

A month prior, Lord Robathan stated:

The belt and road initiative, which is eight years old or thereabouts, was welcomed by the media and, seemingly, western Governments. But, in fact, China has been buying up Africa, Sri Lanka and elsewhere with its belt and road initiative. I was in Ethiopia 15 months ago, where there is a brand new airport in Addis Ababa. Ethiopia may find that some of these debts do not get repaid but that is for another day.

This perhaps uncharitable assessment by British politicians has rarely come with a set of recommendations or ideas as to how Britain could counter or work with countries involved in the BRI. As a source working between both countries noted, the first step could be an acknowledgement that fundamentally, China is building infrastructure in countries desperate for investment, while Britain is not. China’s BRI can simultaneously have many flaws and be raising the standards of infrastructure in countries otherwise ignored by the Western world. There can be debt-trap diplomacy at play and the pressing need for roads, bridges and IT networks to be built.

In terms of a potential UK BRI strategy, it’s not clear that the Government has a plan yet. It did receive a passing mention in the Integrated Review…

The scale and reach of China’s economy, size of its population, technological advancement and increasing ambition to project its influence on the global stage, for example through the Belt and Road Initiative, will have profound implications worldwide. Open, trading economies like the UK will need to engage with China and remain open to Chinese trade and investment, but they must also protect themselves against practices that have an adverse effect on prosperity and security. Cooperation with China will also be vital in tackling transnational challenges, particularly climate change and biodiversity loss.

…but no further strategy was presented.

In the Lords, when asked by Lord Balfe last month “what steps are we taking in the Council of Europe’s ministerial council, where there are a lot of belt and road countries that are now in deep financial trouble?, Minister from the Foreign Office Lord Ahmed dodged the question.

Here’s a fun titbit which few have covered; there was once an All Party Parliamentary Group (APPG) on the Belt and Road Initiative and China-Pakistan Economic Corridor. It ceased to exist when it’s chair, Faisal Rashid, was voted out during the 2019 election. We made a little thread on our Twitter account about it last December.

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Odds and ends

  • Britain’s Ambassador to China, Caroline Wilson, presented credentials in flowing Mandarin to President Xi (Twitter)

  • MPs will be given a chance to vote on a non-binding motion on Thursday which would see the situation in Xinjiang declared as genocide. (The Guardian)

  • Campaign group Fight For Freedom. Stand With Hong Kong launched a flagship campaign to welcome Hongkongers moving to the UK. (Twitter)

  • The Chinese Embassy in London released a statement following the UK Government announcing a £43 million programme to support families from Hong Kong arriving in the UK on the BN(O) visa route to access employment, housing and education. The statement reads in part that:

    • The UK, with its grave racial discrimination and other social problems, is far from a paradise. It has been brought to our attention that there are many reports about Hong Kong residents being discriminated and living in distress after coming to the UK. 



Spotted

Palau's President Surangel Whipps interviewed in the Telegraph, telling the paper his country was facing a pressing need to shore up allies, as Beijing steps up its efforts to lay claim to territory and the energy rich waters of the Indo-Pacific.

Whipps talked at length about the role Palau could play in the Indo-Pacific tilt emerging from Western nations, saying that the arrival of HMS Queen Elizabeth, the UK’s new aircraft carrier, and its accompanying battle ships, will help “promote peace and security.” He added: “We welcome the UK fleet.”

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Business

Lobbying, China’s economy, online banks

Here comes trouble

The National Security and Investment (NSI) Bill heading through Parliament is shaping up to be the perfect storm between political and business interests; a meeting between geopolitical angst over China and corporate angst over foreign takeovers being frozen out of the UK.

The latest update in the NSI Bill’s journey appeared in the Times on Sunday, which reported:

An amendment to the National Security and Investment Bill is likely to reduce sharply the number of foreign takeovers that are scrutinised by the new regime, which is being implemented partly to monitor Chinese influence on British industry.

Kwasi Kwarteng, the business secretary, has been persuaded by concerns voiced by critics including the CBI, which feared that the rules would needlessly delay acquisitions that pose no risk to national security, would increase red tape and could deter foreign investors.

The original plan within the NSI Bill was that a newly established government agency would be notified when overseas investors acquire more than 15% of a company. Under the latest amendment, this would be increased to 25%.

A government spokesman said:

“The National Security and Investment Bill will strengthen the UK’s ability to investigate and intervene in mergers, acquisitions and other types of deals that could threaten our national security. This change will ensure the new regime is proportionate and as transparent as possible without reducing the government’s intervention powers.”

The Spectator was displeased, running an article which stated:

Look no further than the 2008 financial crash to see where this can lead. In the wake of that meltdown, desperate and wobbly western companies turned to China for salvation. Beijing obliged with cynical precision. Opaque state-backed entities snapped up tech and infrastructure firms across Europe, driven by the Chinese Communist party’s strategic objectives as much as by commercial sense. For the grateful recipients, due diligence frequently consisted of little more than counting the number of zeros on the cheque.

The government says it wants the new rules to be ‘proportionate’ and insists it maintains a great deal of discretion in the way the powers are exercised — though that can cut both ways in times of economic stress. It also points to its resolve in excluding Huawei from Britain’s next generation 5G networks. That is true — as far as it goes. The Chinese telecoms giant remains deeply embedded in existing set-ups, and has rapidly expanded research collaboration in the UK, working with 35 institutes and universities — including funding advanced facilities at Cambridge, Edinburgh, Surrey and Imperial College London. It was allowed to buy a stake in Oxford Sciences Innovation, a company that commercialises research from Oxford University. The stake is less than 1 per cent, a toehold — but is that the sort of toe Britain wants in the world’s largest fund dedicated to academic spin-offs?

It will also be interesting to see if any politicians or Special Advisors look to pair the NSI Bill’s dilution with the ongoing lobbying scandals taking place around David Cameron and Greensill.

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Hunt on China’s economy

Another valuable discussion hosted by the China Research Group (CRG) took place on Thursday. ‘China's Economic Rise under Xi Jinping’ was hosted by Jeremy Hunt, former Foreign Secretary, Elizabeth Economy (Senior Fellow at the Council on Foreign Relations and Stanford's Hoover Institute and George Magnus (Economist and Research Associate at Oxford China Centre).

Hunt framed the conversation by recalling a meeting with Henry Kissinger.

In the year that I was foreign secretary, one of the meetings that had the biggest influence on me was a very early meeting with Henry Kissinger in New York. And I asked him what was the difference between a good foreign minister and a bad foreign minister. And he said, a good foreign minister is someone who thinks strategically, and isn't always just thinking tactically about how to solve the next mini or major global crisis, but someone who's trying to think about the big questions. And it became clear to me that the big question in geopolitics was China. And actually, there was very little strategic thinking about it either in London or in Washington.

Further input from Economy and Magnus saw debt, dual circulation and China welcoming foreign capital discussed in expert detail.

On dual circulation, Hunt asked Economy:

What does that mean, for example, for the City of London? I mean, if basically, China is planning to become a giant financial hub in its own right, then, does that mean it's pretty crazy for the City of London to get really stuck into China, because actually, in the end, they're going to work out how the City of London does things, when they figured it out, kick them out is that that's been a pattern that's happened in other areas. But I'm just wondering if that should be a big, red flashing light for companies, businesses sectors, looking at investing in China?

Her reply:

Well, again, I think the smart thing to do would be to have a near and mid and long term plan. Right. So there's the ability to take advantage of the Chinese market today. But then to pay attention to what the ambitions are, you know, by 2035, as George mentioned, and beyond. And so I don't think it's necessary for companies to start pulling out this minute, but I think in certain sectors, sector by sector, you know, China is opening in financial services, for example, that's an area that over the past six months to year, we've seen fairly significant opening. At the same time, in the past few weeks, there have been a number of new little restrictions and regulations on some of the banks, on foreign banks, suggesting that maybe they're going to trim their sails a little bit. So you just always have to be aware of, you know, the fact that you can go in, but China can always pass new regulations and restrictions that are in some way going to compromise your ability to operate the way that you want to. But I would say that this would be a great question for George because this is exactly the kind of topic that he works on. So I'm gonna I'm gonna pump that one to him.

And Magnus:

But, you know, I mean, my view is, I think foreign firms should be quite wary, in the way that Liz described, about the commitments that they make in and to China. Because the strength of those commitments from the Chinese side, actually, is suspect. The rules can change. I mean, there's nothing more that China would like than for, particularly with Hong Kong under the kind of pressure that it is now. Nothing more than it would like them to make places like Shenzhen and Shanghai, you know, Asian financial centres, which will have a strong kind of competitive position. When I think these things are very likely, because capital markets, because the way we really understand capital markets, require something more than just about money and expertise, both of which are important. It's about, you know, the rule of law, about deep financial institutions, about the, you know, coherence and strategies that have been devised over years to, to develop products and commercialise them and so on. But yeah, I mean I do understand why, like financial firms are drawn to go to China, and many of them show, you know, no qualms about doing so. But I think, I think it must, I think it should come, you know, tinged with a warning that actually the rules of the games can change quite suddenly.

Talking of BRI, this was a strong observation from Economy:

And the last point I'll say is he [Xi Jinping] also said that China is going to green the Belt and Road Initiative, that was in the second Belt and Road forum in 2019. Clearly haven't done that, you know, they've increased the role of renewables, but they're still exporting over 100 coal fired power plants. That's a very easy area to target and to pressure China to do better [at COP26]

The transcript can be read here. Thoroughly worth your time.

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HSBC

Few companies have graced the pages of this Briefing more than HSBC. The London-headquartered bank has been the punching bag of MPs and Lords looking to chastise British companies seen to be kowtowing to China since the Hong Kong protests started again in 2019.

News that four of the company’s top brass will be moving to Hong Kong at a time when 3,000 Hong Kongers are fleeing to the UK a week was unfortunate. The Times notes:

While HSBC had been expected to move three of its bosses to Hong Kong, the announcement yesterday that Nicolas Moreau, its head of global asset management, was transferring as well was a surprise.

Those relocating are Greg Guyett, co-head of global banking and markets; Nuno Matos, chief executive of wealth and personal banking; Barry O’Byrne, chief executive of global commercial banking; and Nicolas Moreau, head of global asset management.

It’s worth skimming this profile of Trista Sun and Pinnacle, HSBC’s plan to “grab a greater share of China's growing middle class, a segment it expects to swell to 600 million people by 2028” by “employ[ing] 3,000 roaming bankers in total, armed with digital tablets.”

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This time it will be different

London-based challenger bank Revolut has announced plans to expand into China, and is currently seeking a “head of operations” for China who will work from either Shanghai or Beijing. Speaking to the paper previously, Nikolay Storonsky, Revolut’s chief executive, said:

China is extremely competitive and it will probably require a lot of investment as well. So for now it's not on the horizon. We are trying to go deep in our existing markets and then open, for example, Latin America. And then at a certain stage we will go to China as well.

In a recent article, What the West Gets Wrong About China, Rana Mitter and Elsbeth Johnson noted something interesting on this theme:

Seventy years on, many Chinese believe that their political system is now actually more legitimate and effective than the West’s. This is a belief alien to many Western business executives, especially if they’ve had experience with other authoritarian regimes. The critical distinction is that the Chinese system is not only Marxist, it’s Marxist-Leninist. In our experience, many Westerners don’t understand what that means or why it matters. A Marxist system is concerned primarily with economic outcomes. That has political implications, of course—for example, that the public ownership of assets is necessary to ensure an equal distribution of wealth—but the economic outcomes are the focus. Leninism, however, is essentially a political doctrine; its primary aim is control. So a Marxist-Leninist system is concerned not only with economic outcomes but also with gaining and maintaining control over the system itself.

That has huge implications for people seeking to do business in China. If China were concerned only with economic outcomes, it would welcome foreign businesses and investors and, provided they helped deliver economic growth, would treat them as equal partners, agnostic as to who owned the IP or the majority stake in a joint venture. But because this is also a Leninist system, those issues are of critical importance to Chinese leaders, who won’t change their minds about them, however effective or helpful their foreign partners are economically.

This plays out every time a Western company negotiates access to the Chinese market. We have both sat in meetings where business executives, particularly in the technology and pharmaceutical sectors, expressed surprise at China’s insistence that they transfer ownership of their IP to a Chinese company. Some have expressed optimism that China’s need for control will lessen after they’ve proved their worth as partners. Our response? That’s not likely, precisely because in China’s particular brand of authoritarianism, control is key.

It will be worth keeping an eye on how Revolut’s foray into China pans out.

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Odds and ends

  • An enjoyable piece from the British Chamber of Commerce in China looking back on early British businesses in the country. (BCCC)

  • 16 British schools are currently scheduled to be opened, or at least at the planning stage, in the Greater Bay Area. Of those, nearly 40 per cent have bet their future on Shenzhen. (South China Morning Post)

  • China’s exports grew by 30.6% in March compared to a year earlier, partly skewed by low base from 2020. (South China Morning Post)


Spotted

A brief China Britain Business Council (CBBC) interview with Ambassador Caroline Wilson. Of particular interest is this sentence:

The UK and China are also conducting a joint trade and investment review, designed to explore options to further strengthen our trading relationship now that the UK has left the EU. We expect the review to be concluded this year.

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Society

Anti-Chinese racism continues

On Thursday, the BBC’s children's television channel, CBBC, aired a segment on the rise in anti-Chinese and anti-Asian racism affecting children in the UK. CBBC ran the segment on Newsround, the prime-time news programme aimed at children.

Nine-year-old Deyue says that when schools reopened in March it was a difficult time.

"When I went back to school people said more offensive things about Asians, like they ate bats and dogs and are mean to Muslims."

Her brother, Deyang added that one boy kept saying that he ate bats, until it made him cry.

"I just find that really offensive and racist," he said.

Holding a picture, drawn to show the comments she has heard, Deyue added that the experiences of her and her brother had left her asking "why did they do that?".

"I really don't like them saying mean things to Asian people," she said.

Charities that you can support include the Chinese Welfare Trust, End the Virus of Racism and Racism Unmasked Edinburgh.

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