Hello,
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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.
Politics
Taiwan
Foreign Affairs Committee
Corruption sanctions
Feigned ignorance
Business
Financial Interests
UK China funds
TikTok
Rare earth
Society
Attack on justice
First, a quick look at this week for China in Parliament
27 mentions of China
No mention of Xi Jinping
4 mentions of Hong Kong
2 mentions of Uyghurs
1 mention of CCP
0 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
Preet Kaur Gill, (Labour) Shadow Secretary of State for International Development, asked “the Secretary of State for Business, Energy and Industrial Strategy, how much Official Development Assistance his Department plans to allocate to projects in China in 2021.”
Baroness Goudie (Labour) asked “Her Majesty's Government what are their priorities for discussion at the G7 summit regarding human rights; and what plans they have to raise the human rights situation of Uighur Muslims in China at that summit.”
Spotted
Graham Perry, son of 48 Group founder Jack Perry and elder brother to its current Chairman Stephen Perry, quoted at length in China Daily this week. Described as “a leading authority on China and a former radio presenter on LBC in the UK” by the journalist, Perry takes the contentious line that there is no genocide in Xinjiang, and states:
In China, no evidence has been produced, either on the ground or by satellite, of gas ovens, or burial grounds, or rail routes to killing camps, or locations of mass murder, or photos of death marches, or smoke exuding crematoriums, or burial pit executions.
He continues:
It is quite a surprise that so much of the genocide allegation is (mainly) based on the questionable evidence of just one person [this is a reference to Adrian Zenz] with a quite spurious political past, and, further, is based in reliance on figures put together outside China without discussion or review with the people in China responsible for the research and investigation.
Politics
Taiwan, Foreign Affairs Committee, corruption, ignorance
Taiwan is the new talk of the town
Here are three issues that we would wager will be seeing much more political airtime in the coming months, especially around the G7 and COP26: Taiwan, China’s green commitments, and the Beijing Winter Olympics.
The first is already in motion following the launch of a new Inter-Parliamentary Alliance on China (IPAC) campaign, #LetTaiwanHelp, to see Taiwan included in the World Health Organisation. Interesting to note that IPAC are said to be fundraising from private donors and international foundations that promote democracy at the moment.
In the UK, your writer noted with curiosity the range of MPs who have so far added their name to the campaign, especially Foreign Affairs Committee chair Tom Tugendhat, who runs the China Research Group (rumoured as being an IPAC competitor).
Other supporters include Iain Duncan Smith (IPAC), Alicia Kearns (CRG), Lord Rennard and Lord Collins. We would expect to see more support on this coming from members of the Taiwan APPG too. Keep an eye on this, as it is likely to draw intense ire from the Chinese side.
What’s the Government thinking?
On Tuesday, as part of its inquiry into Xinjiang detention camps, members of the Foreign Affairs Committee (chaired by Tugendhat) grilled Nigel Adams, Minister for Asia, Rupert Ainley, Interim Director of North East Asia and China at the FCDO, and Paul Williams, Director of Open Societies and Human Rights at the FCDO.
The session was substantive, and illustrated many of the issues currently fuelling the political pressure on the Government and reflecting the frustration of some MPs as they urge the Government to develop a more coherent approach to China. It’s not often that a Minister of this seniority gets before this Committee. The quality of the session was evident, given the FAC members appeared well-briefed, and all three witnesses gave informed and thoughtful answers (as much as being a voice of Government allows). Your writer noted with particular interest the questions regarding the revolving door between public and private sector with regard to Huawei.
Below are key moments, edited for brevity. View the whole thing here:
Tom Tugendhat: We have all seen extensive reports of identity-based persecution in Xinjiang, and we have seen it compounded over many years. This is not something that is a surprise to any of us— and probably even less so to you than it is to those of us who have not got other forms of intelligence and collection that could inform us. Why has the Government only recently started to take action?
Nigel Adams: I do not accept that entirely. I think you will see that the Department has been on this problem since 2017. Our initial focus has been on building diplomatic pressure on China to change course and, importantly, building the evidence base that has led us to the actions that we have recently taken. So an awful lot of work has been going on in the last four years on the problems and the human rights violations in Xinjiang.
…
Henry Smith: Welcome, Minister. Is the Government’s vision for the future UK-China relationship feasible? How can we simultaneously cooperate in certain areas and say that we need more action on atrocities as serious as those occurring in Xinjiang?
Nigel Adams: I do think it is realistic and achievable. The IR recognises that there is systemic challenge presented by China that requires a robust diplomatic framework for our relationship, and we need to be able to manage disagreements and defend our values, but also preserve space for co-operation where our interests align, such as on climate change challenges and on global health challenges, as we have just seen. It is achievable, and we will invest in enhanced China-facing capabilities, through which we will get a better understanding of China and its people.
Henry Smith: In a situation where the Government had to choose between a trade deal and human rights, what would take precedence?
Nigel Adams: It is not an either/or situation. We have been calling out the human rights violations from day one. We have led and brought together. We have spent most of our time building a caucus of countries to support us in statements at the UN, culminating in the sanctions alongside 29 other countries. It is not an either/or: we will call out human rights violations. That is why the Foreign Secretary made the announcement that he did on 12 January, on those four issues I spoke about a few moments ago. As far as I am aware, there is no plan at all to have any sort of free trade agreement with China. If you are saying to me—I know you are not—that we should not be doing business with China, that really is for the birds. It is the second-largest economy in the world. In 2020, I think—I will be corrected if I get this wrong—the thick end of £80 billion-worth of trade was done between China and the UK. That is a significant amount of trade. Thousands of jobs in the UK depend on Chinese investment. But that does not stop us taking the action that we have done when we see blatant human rights abuses.
…
Chris Bryant: It was going to be my next question, but I will ask the Minister, if it is okay with you. I simply do not understand why you just said yes to four elements of the definition of genocide in the genocide convention, and then you say you cannot say whether genocide is ongoing.
Nigel Adams: As you know, Mr Bryant, it has been a long-standing policy of UK Governments of all colours over many years that the definition of genocide is decided by a competent court. We debated this at great length last Thursday on the Floor of the House. It does not prevent us from taking action in respect of these serious violations. That is absolutely clear, and that is what we have done in the case of Xinjiang. We have led international efforts. We have built a caucus of countries to come together not just in statements, but in action. When we brought forward our sanctions, and I know you were a very doughty champion of the sanctions regime, we did so in good company alongside 29 other countries. That takes a bit of time to build. Whether it is called genocide or not—the policy has been for many years that a court needs to decide that—it does not stop us taking action.
Chris Bryant: It is quite difficult to conceive of a court that could be competent, especially where the Government keep on making sure that no court can be competent: either the British Government or the Chinese Government. Nigel Adams: Genocide has been proven in the past only twice. Chris Bryant: Only in retrospect.
Nigel Adams: Yes. It is notoriously difficult to prove a case of genocide. It is obviously a crime. It is the most serious of crimes. Competent courts could include an international court or a national court that meets those international standards as well.
…
Alicia Kearns: On that point about China’s retaliatory sanctions against the China Research Group and various Members of Parliament, you summoned the Chinese chargé d’affaires to the Foreign Office to answer your questions about this. What was the outcome of your conversation? Did China recognise the fact that these were clearly an assault on democracy and the values of our Parliament?
Nigel Adams: I do not think I can go into absolute detail; there are diplomatic rules around conversations. I summoned the chargé—they are between ambassadors at the moment, so he is the most senior official. Minister Yang is the most senior official. He was left in no uncertain terms with a strong and formal protest, and we will not tolerate attempts to silence those who are highlighting human rights violations, not least democratically elected politicians in this House. It is clearly something of a bit of a challenge for the Chinese to quite understand how a democracy works.
…
Tom Tugendhat: I understand what you are saying about the various ways in which we currently engage in commercial relationships with China, and I understand that in March last year we were very reliant on them, but do you think that China sells to us because of some sort of bonhomie—they have a good relationship with us and that is why they have a trade relationship with us—or do you think it is naked opportunism, much like, let’s be honest, most commercial relationships?
Nigel Adams: It is the latter. They are a trading nation. They have done incredibly well, actually, if you look at the way they have turned their economy around. Of course, they are a trading nation, and they will want to sell to as many countries where they can provide their services and goods as they can.
Tom Tugendhat: Given that that is the case, do you think that we need a particular trading agreement—of any sort—with them?
Nigel Adams: I am not sure we do. We trade perfectly well with China where companies need their goods and services. We are enhancing protections to ensure that British businesses are alive to any potential human rights violations in their supply chains. That is ongoing work. A number of companies have come under the spotlight in that regard. We want co-operation on trade. If you look at the countries where, since the pandemic started, the UK has seen export growth, I may stand corrected by my officials, but I believe China is one of only two countries where there has been any growth. It is an important trading nation.
Rupert Ainley: I think I would also say that, in terms of our trade approach to China, echoing what the Minister said, it is about the growing middle class as well, in terms of how we are trying to sell to China. By 2030, the middle class in China will be bigger than those of the next 25 developing countries put together, and those are the people who buy UK goods and services. Also, the nature of the Chinese market means that Government support is incredibly important to our businesses that are trying to do business in China, and also to trying to bring down some of the market access barriers that exist and are in the way, whether nontariff barriers or licences. We have had some success in that over the last few years, though of course we urge the Chinese to open up and work on a level playing field according to the rules that we expect.
Tom Tugendhat: Do you think that is likely to happen? It does feel somewhat like we are feeding the crocodile in the hope that they will eat us last.
Rupert Ainley: I don’t think it’s about offering trade on the one hand and saying that we will take a certain stance on human rights on the other. As the Minister set out, we can do both at the same time, and we do. That is clearly the approach set out in the integrated review of our China strategy.
…
Stewart Malcolm McDonald: Why are they so good at employing former government officials and Crown servants?
Nigel Adams: Huawei?
Stewart Malcolm McDonald: Yes.
Nigel Adams: You will have to forgive me, Mr McDonald, I am not familiar with the employee list of Chinese telecommunications companies or their HR policy.
Stewart Malcolm McDonald: I will go through some for you. It is not their HR policy that I am concerned about; it is Government policy.
Let us take Lord John Browne, the former non-executive director of the Cabinet Office board. He is a former UK chairman of Huawei, up until 8 September last year.
Sir Andrew Cahn is a current non-executive director. He is a former, extremely long-serving and senior civil servant, who was the chief executive of UKTI. He is now a non-executive director at Huawei UK and a former chair of its UK advisory board.
The current Lord-Lieutenant of Greater London—a representative of the Crown, no less—is a member of the Huawei board. John Suffolk, a former chief information officer appointed by David Cameron, is currently the head of global cyber-security for Huawei.
What is Government policy on all those extremely senior former Government and Crown servants going off to work for a company that the Government consider to be a threat to national security?
Nigel Adams: Clearly, that is a matter for those individuals. I don’t know any of them—I think I have heard of Lord Browne, who was involved in the energy sector, if it is the same Lord Browne, but none of the others. I presume if they have held positions and are about to accept appointments, they will go through the due process. That might well fall under the auspices of the ACOBA regime.
Stewart Malcolm McDonald: Do you think, for example, that it is a good thing that the UK Government’s former chief information officer serves as the head of cyber-security for a company that the Government consider to be a threat to UK national security? That strikes me as a bad thing; it must strike you as a bad thing.
Nigel Adams: Well, of course, but it is a matter for that individual. It is a matter for—
Stewart Malcolm McDonald: So the Government are completely hands off as far as that is concerned—you can always take the individual out of it—
Nigel Adams: I am afraid, Mr McDonald, I do not know the regime for former Government officials. I know that there is the ACOBA process: if I were to stop being a Minister and wanted to take up an appointment, I would have to get that cleared. I am unaware whether there is a regime for those individuals, but we can certainly find out and drop you a line to confirm it—but I am not aware of the regime
Stewart Malcolm McDonald: Are there any plans to audit this stuff? How do the Government—at the risk of sounding a bit Orwellian or even CCP-like—keep tabs on those former, extremely senior officials in government and Crown servants going off to work for companies that the Government consider a threat to national security and an arm of an authoritarian regime that Parliament believes to be committing genocide?
Nigel Adams: Again, you will understand that, as geographical Minister for Asia, this is not an area that comes under my competency, but I am more than happy to find out via the relevant Department and to get an answer to your question.
….
Chris Bryant: I am still here. I want to go back to this question. It feels sometimes to us as if the Government wants to be good, but ends up in an amoral position, because it’s facing in two directions at the same time. One is wanting to be pulled towards engagement and trade, which we hope might open up better opportunities for ourselves and for the Chinese people, but at the same time we are wanting to assert the historical liberties and freedoms that we have always relied on in the UK. Is that a difference of view between the Foreign Office and Downing Street?
Nigel Adams: I don’t believe that to be the case. They are not two separate issues—we have been very clear. I think the evidence is there. We have taken action. We have been gathering evidence, and we continue to gather evidence. We are constantly calling for the Human Rights Commissioner to get access. We have built that caucus of support—we have grown the caucus of support internationally, using the UN as a vehicle. We have introduced sanctions. It is not an either/or, Mr Bryant. We are very clear. At the same time, of course, China is an incredibly important market for us and trading partner.
...
Bob Seely: Briefly, to follow up a couple of things that Chris was saying. It is blindingly obvious that there are tensions because I hear it from Ministers. There are clearly tensions between Lord Grimstone, the Foreign Office and people who want to take a more forthright approach, not only on human rights, but on authoritarian states such as China. Rather than deny that or say that everyone is acting harmoniously, it would make for a much more beneficial session if there was greater candour. We know there are difficult and complex trade-offs here between trying to do the right thing and acting with others. The Government want to act and are doing some quite good stuff. I fully realise that, but it is clear that you are desperate to avoid declarations of genocide. I am articulating the idea that more candour from you and a discussion—there are some significant and incredibly difficult grey areas and moral quandaries here—would make for a better session for us, and it would be more valuable for you if we could discuss that thinking in public. Do you agree with that?
Nigel Adams: I certainly agree that it would make a much better session for you if I were to sit here and say we are at each other’s throats across Departments on China. It would make a great session.
…
Tom Tugendhat: May we ask about the post in Beijing? I hasten to add that this is not at all a criticism of Caroline Wilson and her team, who are doing a fantastic job in extraordinary circumstances. What specific actions are being done by post to support Xinjiang or to report on it, or to support Uyghur Muslims or Uyghur communities outside Xinjiang?
Nigel Adams: Caroline is extraordinary and a brilliant ambassador for the UK. It is a very difficult posting for anyone who goes there, and it has been a fairly torrid year for all our staff—thick-sided, some 700 staff over in China. Our human rights officers regularly do field visits in the areas where we have particular concerns. Caroline at every opportunity engages with the MFA, sometimes involuntarily, when she is summoned herself by the Chinese. She has regular contact and good channels. On the Uyghur population in country, there are things that we can and are doing. You will forgive me if I do not go into too much detail on that— there is a potential risk to Uyghur population if they are seen to be supported. Similarly, there is a risk to our team if they are seen to be interfering.
…
Tom Tugendhat: Do you think they’ll make it to 2049?
Rupert Ainley: Do I think who will make it?
Tom Tugendhat: The Chinese Communist party.
Rupert Ainley: Sadly, I do not have that crystal ball. It would make our policy making a lot easier if I knew exactly where Xi Jinping and the Communist party would be in 2049.
Tom Tugendhat: Do you think that abolishing term limits, getting generals to swear allegiance in public and cracking down on internal dissent speak of weakness or strength?
Rupert Ainley: There is clearly a vision that the Communist party has for China, and they are cranking lots of handles in order to squeeze. That is what they are doing. You see that when you read the Mandarin literature or the circulars that they send around. That is the thought that is being imbued across China.
Tom Tugendhat: Forgive me, but it is just that, when I see people who are so afraid of a transfer of power that they realise that they have to hang on to power even unto death, it does not speak to me of an organisation that is confident that it can survive a turn of the wheel, and it does not suggest to me that that is a person who is confident that he can quietly retire to a hotel in Macau or whatever. It speaks to me of somebody who is terrified that the moment he gives up the power he has as chairman of the military committee he will be murdered by one of the relatives of the people he has murdered over the last few years.
Rupert Ainley: If China was more open, we would be able to have much more insight into those sort of workings and understandings of what might happen and what people might be thinking.
Tom Tugendhat: He certainly made quite a lot of enemies in his first few years, did he not, murdering quite a lot of his rivals. I do not think that that is a secret; I think you can agree with that relatively easily.
Rupert Ainley: China has become more authoritarian under his rule. There have been lots of things with which we disagree. There have been various clampdowns, which I think we have called out throughout this time.
Tom Tugendhat: Okay; I think that is a relatively soft way of describing state murder. Thank you very much indeed, Minister, for coming this afternoon and for helping to answer our questions on Xinjiang. I am very grateful to Mr Williams and Mr Ainley for coming as well.
International corruption
As Boris Johnson’s Government responds to successive accusations of sleaze, it was not without irony that on Monday, the Foreign, Commonwealth and Development Office (FCDO) announced an expansion of the current sanctions criteria to include corruption.
Titled ‘The global anti-corruption sanctions regime’, the new regulations have replaced the Misappropriation (Sanctions) (EU Exit) Regulations 2020 concerning misappropriation of State funds from any country outside the UK.
Setting out the new sanctions in Parliament, Foreign Secretary Dominic Raab stated:
Corruption has an immensely corrosive effect on the rule of law, on trust in institutions. It slows development, it drains the wealth of poorer nations. It keeps their people trapped in poverty. It poisons the well of democracy around the world.
China was mentioned in his opening remarks:
As hon. Members across the House will recall, this follows the launch of our global human rights sanctions regime, which I introduced to the House in July 2020. Since then, the UK has imposed human rights sanctions on 78 individuals and entities involved in serious human rights violations, including in Russia, Saudi Arabia, Venezuela, Pakistan, Myanmar, North Korea, Belarus, the Gambia, Ukraine and, most recently, in relation to Xinjiang in China. Now, we have an equally powerful weapon in the fight against corruption.
In response, Labour’s shadow Foreign Secretary Lisa Nandy tapped into the current sleaze controversy, stating:
The Foreign Secretary mentioned sanctions against Chinese officials engaging in genocide in Xinjiang, but what message does it send to the Chinese Government when on Saturday we learned that a former Prime Minister could simply message the then Chancellor to ask for Chinese investment into the UK in areas of critical national infrastructure, such as energy, and could gain access, despite having been only 15 months out of office and despite this being in clear breach of the rules?
This was in reference to former Prime Minister David Cameron meeting then Chancellor of the Exchequer Philip Hammond to discuss his $1bn UK-China investment fund in 2017. More on that later.
Given the clear FCDO presentation of these sanctions as a direct means of tackling corruption, it’s worth noting how MPs pushed for a wider expansion of the term. For example, chair of the Foreign Affairs Committee and China Research Group co-founder Tom Tugendhat made the case for applying them to Chinese officials:
I could ask him to look a little bit wider. We know that corruption is undermining the people of China. We know that the red princes are robbing the people and enriching themselves already.
The SNP’s shadow International Development spokesperson Chris Law asked:
When will the Foreign secretary return to the House to give a statement imposing global human rights sanctions on the perpetrators of this crime against humanity, not least the Chinese Communist Party Committee Secretary, Chen Quanguo?
Then Nusrat Ghani (IPAC) asked:
Whether these new sanctions will apply equally to all individuals who fall short of the law? For example, will they apply not only to junior but to senior officials in the Chinese Communist party who are implicitly involved in the abuse of the Uyghur and are living off the finances of Uyghur slave labour?
A while later, DUP member Jim Shannon asked:
What consideration has been given to the widespread use of these sanctions in areas such as those involved in atrocities against the Uyghurs, the Christians, the Falun Gong and the Tibetan Buddhists in China to ensure that businesses as well as Governments will feel the brunt, the pain and the impact of these sanctions?
It’s clear that the appetite remains among MPs from all parties for increased sanctions on CCP officials - Chen Quanguo being the top target. Interestingly not mentioned in this debate, but often put forward as a candidate for sanctions, was Hong Kong Executive Carrie Lam.
Feigning ignorance
We have been consistent in our criticism of officials and politicians on both sides who have played fast and loose with the facts to try and political point score. Often this has been British MPs writing hyperbolic opinion pieces, or political outliers like Nigel Farage tweeting that Christmas was cancelled thanks to China. Neither are we fans of the abrasive ‘Wolf Warrior’ style of diplomacy embraced by many Chinese diplomatic officials.
With this in mind, it’s worth looking at Minister Ma Hui, currently second in command at the Chinese Embassy in London (more on him here). Ma has been in his post since 2017, and should understand by now how the Parliamentary system in this country works (not a huge ask for a senior Embassy member). Despite this, he has spent several days sharing tweets aimed to discredit last week’s Backbench Business Debate in which the House unanimously agreed genocide is being committed in Xinjiang.
First, he retweeted the below tweet with the caption: “Some would insist a unanimous vote of a dozen or two is democracy; a unanimous vote of almost 3000 is rubber-stamp! What strange logic! Some discussion is necessary.”
Minister Ma tagged in Zhang Zhisheng, Consul General of China in Zanzibar, Tanzania (Ma now tags Zhang fairly regularly) who called the MPs that led the debate “the cancer of mankind”:
Ma also shared this tweet, which is both factually incorrect (more than seven MPs voted) and again fails to understand how Parliamentary machinery works.
This leads to two conclusions. Either:
Minister Ma does not understand how the Parliamentary system works, which is not a great look for the second most senior CCP official in the country. If this is the case, Minister Ma should consider asking for more detailed briefs from his team because the diptels he is sending back to Beijing cannot be of high quality;
Or
Minister Ma does understand how the Parliamentary system works, but has decided to spread fake news and undermine the result in order to send the right signals back to Beijing. In this case, this undercuts Ma’s legitimacy when he laments about the Western world’s inability to understand China (a fairly regular and valid theme on his Twitter), while also undermining his own gravitas among the diplomatic corp in London.
Either conclusion is frustrating and counter-productive to the overall relationship.
Odds and ends
MPs from all parties continue to be deeply upset by the Government’s cut to foreign aid and Official Development Assistance. (Transcript)
Joe Biden has urged Western democracies to come together and challenge China. Keep an eye on this as the G7 approaches. (Reuters)
HMS Queen Elizabeth has left Portsmouth on maiden deployment. (BBC)
Spotted
This week, Martin Wolf penned a widely-shared Financial Times piece titled ‘China is wrong to think the US faces inevitable decline’. This graph was included to emphasise his point that:
Stock markets are imperfect. But the value investors put on companies is at least a relatively impartial assessment of their prospects. At the end of last week, 7 of the 10 most valuable companies in the world and 14 of the top 20, were headquartered in the US. If it were not for Saudi Arabian oil, the five most valuable companies in the world would be US technology giants: Apple, Microsoft, Amazon, Alphabet and Facebook. China has two valuable technology companies: Tencent (at seventh position) and Alibaba (at ninth). But those are China’s only companies in the top 20.
Business
Investments, funds, TikTok, rare earths
Sharing info
Is there a better way to spend a Saturday morning than scanning the most recent Register of Interests updates with a cup of coffee? Yes. Regardless, here’s a by-the-numbers look at where our elected and unelected officials have financial skin in the game.
When declaring shares, Lords are given two options; they declare if their shareholding either (a) amounts to a controlling interest, or (b) does not amount to a controlling interest, but exceeds £50,000 in value. All of the below come from the (b) category.
Note - this does not imply anything sinister. It is a good thing that Lords and MPs declare their interests in this way.
Alibaba
One of the BAT group of companies (Baidu, Alibaba and Tencent), this giant is currently under fire from Beijing. Market cap of $628.877B
Five Peers hold shares: Lord Carter of Coles, Lord Stirling of Plaistow, Lord Fink, Lord Glendonbrook, Lord Levene of Portsoken
Jardine Mathesons
One of the original Hongs, Jardines has a diversified interest across Asia and a market cap of $49.462B
Three Peers hold shares: Lord King of Bridgwater, Lord Reay, and Lord Sassoon
Lord Powell of Bayswater is a Director of Jardine Strategic Holdings Ltd
Swire Pacific
A longtime rival of Jardines and equally as active throughout the region, Swires has a market cap of $11.033B
Only one Peer holds shares: Lord Marlesford
Taiwan Semiconductor Manufacturing Co Ltd
Often cited as being one of the world leading firms in its industry, TSMC has a market cap of $546.06B
Seven Peers hold shares: Lord Carter of Coles, Lord Stirling of Plaistow, Lord Ponsonby of Shulbrede, Lord Green of Hurstpierpoint, Lord Grabiner, Lord Glendonbrook, and Lord Deighton.
Tencent
Part of the BAT group and now under increasing scrutiny from Beijing, this technology firm has an estimated market cap of $766.593B
Three Peers hold shares: Lord Carter of Coles, Lord Glendonbrook, and Lord Stirling of Plaistow
UK-China fun(ds)
Last Sunday, the Guardian revealed that former Prime Minister David Cameron met then-Chancellor Philip Hammond to discuss a $1bn UK-China investment fund in which he would soon be vice-charing.
The paper reported:
As part of its transparency obligations the Treasury had previously disclosed that Cameron met Hammond, who served as his foreign secretary, in October 2017 “to discuss China”. It had not said whether their discussion included the UK-China fund that Cameron was in the process of helping to establish.
But the Observer and the Bureau of Investigative Journalism can reveal that Cameron told Hammond “of his plans to create a commercial UK-China fund to invest in innovative, sustainable and consumption-driven growth opportunities”. This was admitted by Hammond to Peter Dowd, Labour MP for Bootle and the then shadow chief secretary to the Treasury, in an April 2018 letter that has not been reported on until now. It also reveals that Cameron received general government approval for the proposed venture before it became fully operational.
A spokesperson for Cameron said: “In 2017 he held meetings with UK and Chinese ministers about the potential for a fund, to ensure that if a fund was established, it would be welcomed by both governments.” Hammond said Cameron informed him about the investment fund “in the interests of transparency”. The then chancellor and his Chinese counterpart publicly endorsed the fund shortly afterwards during a trip to Beijing.
The renewed political interest in these UK-China funds, particularly if they have hired former Government or Whitehall staff, could lead to some closer political and journalistic scrutiny which may bring with it financial implications. There’s clearly an appetite for this at the minute.
On such example is an HSBC fund which has received Government acknowledgment. In late 2018 the Financial Times reported on a £1bn British business fund planned by HSBC and Chinese sovereign wealth giant China Investment Corp.
This was confirmed by then-Chancellor Hammond, who said:
This year we are enhancing our financial cooperation, launching the ground-breaking London-Shanghai Stock Connect, and agreeing a new £1 billion fund to support trailblazing UK businesses. We are also supporting our Great British food industry, with China now opening up its markets to British beef and pork.
The fund is set to be managed by Charterhouse Capital but unsurprisingly has faced significant delays due to the deteriorating relationship between the UK and China. One wonders which other funds are in similar positions, especially with the National Security and Investment Bill hanging over potential takeover attempts.
Separately, worth glancing at this detail from a recent Bloomberg piece on the bank’s attempt to woo billionaires:
Asia-Pacific has 831 billionaires, more than any other region, according to a recent report by UBS and PricewaterhouseCoopers.
In the next decade, about $1.9 trillion of wealth in Asia will be passed on to the next generation, HSBC said. Globally, HSBC Private Banking attracted $13.1 billion of inflows in the first quarter, up from $5.4 billion in the same period last year. Client assets increased by more than 25% during the quarter due to inflows and favorable markets.
TikTok
Timely news from social media company TikTok (2bn+ downloads) this week. The firm announced it would be opening a European Transparency and Accountability Centre in Ireland, which will be fully operational by 2022.
This caught your writer’s eye for two reasons.
First, the alleged links between TikTok’s parent company ByteDance Ltd and the CCP continues to worry British politicians. This was evidenced most recently in a Business, Energy and Industrial Strategy (BEIS) Committee report on forced labour from Xinjiang in UK supply chains. TikTok presented verbal evidence once (offering MPs a chance to analyse its algorithms), and written evidence twice, eventually ending up with its own subchapter in the report.
The Committee stated:
We welcome TikTok’s offer to review its algorithm, and we will visit their offices to do so with an expert team as soon as is possible. Meanwhile, we remain deeply concerned about the flow of information between TikTok UK, its parent company ByteDance Ltd and other subsidiary companies (such as ByteDance (HK) Ltd), which are subject to China’s National Intelligence Law. We invite TikTok to publish independently verified governance and data flow arrangements to confirm full legal separation between TikTok UK and other ByteDance Ltd group companies.
The second piece to this story that raised an eyebrow was the discussion around China’s Draft Data Security Law along with the draft Personal Data Protection Law (PIPL). The South China Morning Post states:
A clause has been added to China’s draft data security law that will punish Chinese companies for handing over domestically stored data to foreign police, courts and investigators without Beijing’s consent, a move that will make it harder for overseas law enforcement agencies to get data out of China.
…
According to the China News Service, the new clause stipulates that any Chinese company or institution could be fined up to 1 million yuan (US$154,000) if found to have handed over data to a foreign judiciary or law enforcement agency without Beijing’s consent. Any individual responsible for such unauthorised data transmissions can also be fined up to 200,000 yuan.
Although TikTok (Information Technologies UK Ltd) has gone through great pains to clarify to MPs that user data is stored outside China and not shared within the ByteDance umbrella, should this story cut through to Westminster it may end up ruffling some feathers. After all, in the BEIS Committee report, it was made clear that:
Article 7 of China’s National Intelligence Law (2017) states that “[a]ny organisation and citizen shall, in accordance with the law, support, provide assistance, and cooperate in national intelligence work, and guard the secrecy of any national intelligence work that they are aware of”.While TikTok stated that its policy is “not to share any […] data with the Chinese Government and, in fact, the Chinese Government has never asked for it”, it is clear that the National Intelligence Law compels Chinese companies to deny to any other Governments that they are sharing data, and keep secret any intelligence work they undertake on behalf of the state.
It seems unlikely that TikTok’s new transparency hub will put these worries to rest. Even MPs interested in Chinese affairs are not typically well versed on Chinese digital laws; one would imagine they will interpret this as a red flag.
Shiny stuff
On Friday, Sky’s Ed Conway published a strong piece in The Times calling for a more strategic approach to challenging China’s monopoly on rare earths. He wrote:
What do you do when a country is a monopoly? Most nations have pretty clear rules about companies taking control of an entire sector, but when the monopolist is a country, you run into a grey area. The standard answer is to refer it to the World Trade Organisation, and that’s what happened a decade ago after China slapped quotas on rare earth exports and threatened to cut off Japan, sparking fears of a global shortage. Except here we are again.
In its latest integrated review of the military and diplomatic landscape last month, the Ministry of Defence proclaimed that control of these materials was a matter of critical importance. That it recognises this is a problem is encouraging but the deeper problem is that the government doesn’t really have a policy on this.
Japan has a dedicated body, Jogmec, whose job is to identify threats to the supply of critical materials and resolve them. Among its projects is one supporting an Australian miner producing rare earths in an effort to secure non-Chinese supply. There is nothing like Jogmec anywhere else in the world. The European Union has long talked about critical minerals without doing much about it.
The piece is a timely one; there’s already significant political angst over rare earths in Westminster. We paid particularly close attention to Alex Stafford MP’s comments on this last month; as chair of the APPG on Critical Minerals (and a former Shell employee), he is one of the most informed politicians on this issue.
He suggested:
The Government must adopt a two-fold approach, the first arm of which is to focus on relocating as much of the critical minerals supply chain as we can to the UK, thereby boosting the UK economy and creating jobs and opportunities. The second arm is to take a leading role in creating a Five Eyes critical minerals alliance to co-ordinate an overarching strategy to secure a stable network of interdependence.
One thing your writer ponders as this Parliament draws to a close is whether we see the UK Government taking a significantly more active approach to investing in and protecting British companies involved in this sector. If so, which companies could profit?
Odds and ends
Both HSBC and Standard Chartered posted strong results this week. (BBC, SCMP)
China has quietly spent £134bn hoovering up UK assets, from nuclear power to private schools and pizza chains (Sunday Times)
Pilgrim’s Ashton plant has been forced to move to three-day week due to ‘political tensions’ with China. (Pig-world)
The FCDO has published its latest fact sheet on China’s economy. (GOV)
Former chair of Standard Life Aberdeen and now UK minister Gerry Grimstone has cast doubt on the future of one of the UK’s largest planned inward investments — a nuclear power station proposed by Chinese state group CGN. (Financial Times)
Car maker Lotus is to build electric sports cars in the UK with £2.5bn investment. Geely, run by Chinese billionaire Li Shufu, purchased a controlling stake in the company with a £100m investment in 2017. (Telegraph)
Spotted
Labour pushing for a new China strategy. We’ve made the case before that China could end up being an issue voters care about at the next election back in December:
A thought to ponder: although we are a couple of years out from a General Election, there’s no doubt that China is becoming a higher profile political issue in the UK. Could it become a major campaign issue for Conservatives looking to retain Blue Wall ex-Labour seats, and for Labour looking to win back disgruntled Leave voters? Two graphs, in particular, point to this potential scenario.
Society
The legal system under attack
It’s been a bruising time for Britain’s judiciary. First, members of the UK’s Essex Court Chambers were sanctioned by the CCP last month. This was, as the Global Times explains, because:
after consulting secessionist terrorist organization World Uyghur Congress, authored a legal opinion concluding that China's policies in Xinjiang constitute "genocide."
The Financial Times reported on the consequences:
Lawyers say the sanctions could give China influence over who a firm chooses to assign to their international arbitrations. It could also make solicitors think twice about instructing Essex Court, which specialises in commercial and financial litigation, arbitration and public international law, for Asian work.
Analysts also warned it could lead to self-censorship in the UK legal industry, with firms and chambers wary of being associated with anyone who works for groups or individuals critical of China.
On Tuesday, four professional bodies — The Bar Council of England and Wales, The Bar Council of Ireland, The Bar Council of Northern Ireland and The Faculty of Advocates of Scotland issued a joint statement condemning Beijing’s sanctions:
The naming in the sanctions of a barristers’ chambers, which comprises some 95 other barristers who practise from the same premises but as independent legal practitioners, is a further indiscriminate attack on legal professionals. It is inconsistent with respect for the rule of law.
The Chinese state, as well as Chinese citizens and their businesses, benefit as much as anyone from a functioning international legal order. We call on the PRC government to review these sanctions, which call into question its commitment to the rule of law, as well as its status and reputation as a reliable partner in international trade and commerce.
Measures which target lawyers who are complying with their professional obligations, simply because their work attracts the disapproval of the Chinese government, are also a threat to the global legal community.
We therefore call upon national and international bar associations to condemn the imposition of these sanctions as an unjustifiable interference with the professional role of lawyers and an attack upon the rule of law internationally.”
Across the other side of the world, the South China Morning Post has also documented the deteriorating relationship between Bar Association chief Paul Harris and Beijing, following the former giving an interview to:
“Stand News last week when he had noted the convictions over the August 18 and 31 protests marked the first time a Hong Kong court had imposed prison terms for illegal assembly, arguing that peaceful demonstrations were a legal and valuable channel for people to express their emotions and grievances. Otherwise, they could turn to more destructive action, he warned.”
Beijing was immensely displeased:
“How could such an anti-China politician as Paul Harris who has close connections with foreign countries fulfil the principles of safeguarding Hong Kong’s rule of law and the Basic Law and support the one country, two systems principle as previously stated by the Bar Association?” a spokesman for Beijing’s liaison office in Hong Kong said on Sunday.
“It makes a mockery of the Bar Association by condoning Paul Harris to continue chairing the group.”
Earlier this year, the Bar Association had been pressured to remove Harris for his after it emerged he was a member of the British Liberal Democrats. At the time, the SCMP reported:
Earlier this week, members of the pro-establishment camp asked Harris to resign after British media reported he was a Liberal Democrat and had only stepped down as an elected councillor of the Oxford City Council before his election.
Harris told the Post he had “been a member of … the Liberal Democrats, for most of my adult life”, but did not say whether he would quit the party to avoid any potential conflict of interest.
We have covered extensively the calls from certain British politicians to stop British judges keeping a role in the Hong Kong judiciary. Your writer has heard from angry folk on both sides. Ironically, it now seems it will end up being Beijing rather than MPs that cause British judges to leave the system and city behind.
Reading list
What we learned from this week
How China Lends - A Rare Look into 100 Debt Contracts with Foreign Governments. Anna Gelpern, Sebastian Horn, Scott Morris, Brad Parks, and Christoph Trebesch
Even doveish China-watchers in America are becoming hawkish. The Economist
China's Tech Rivalry with James Kynge. China Research Group [Podcast]
Do China’s intellectual elite support the government? The Spectator [Podcast]