Chinese investment in UK battery farms, takeovers, National Security Law, CCP turns 100

A Beijing to Britain briefing

Hello,

There will be no Beijing to Britain next week - your writer will be on holiday, sitting in the rain on the beach somewhere in Cornwall. Normal service will resume the week after.

Welcome to ‘Beijing to Britain’ - a weekly overview of the ebbs and flows of the discussion in Westminster and the City around the UK’s relationship with China, and how it impacts politics, the private sector and society.

As always: tips, feedback, and your views to BeijingToBritain@protonmail.com. If this Briefing has been forwarded to you, please do sign up.


Politics

  • Hong Kong

  • China

  • Sunak on China

  • Parliamentary business

Business

  • Batteries

  • Geoeconomics

  • Blocking foreign takeovers

Socials

  • What’s being discussed on social media?


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

  • 32 mentions of China

  • No mentions of Xi Jinping

  • 8 mentions of Hong Kong

  • 1 mention of Uyghurs

  • 2 mentions of CCP

  • 1 mention of Magnitsky

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

    • 14 MPs’ tweets containing the term ‘China

    • 7 on ‘Hong Kong

    • 6 on ‘Uyghur

    • 0 on ‘Magnitsky’



Who’s asking what?

Order! Order!

Some of the more eye-catching questions asked in Westminster this week

  • Stephen Kinnock (Labour) asked “the Secretary of State for Foreign, Commonwealth and Development Affairs, what discussions has he had with the Secretary of State for Housing, Communities and Local Government on the role of the Chinese state owned Beijing Construction Engineering Group International in the delivery of services to (a) local authorities and (b) the public sector.”

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Spotted

Former leader of the Liberal Democrats, Sir Vince Cable, being widely criticised on Twitter. Cable has carved a role for himself as a China ‘dove’ since leaving Parliament, consistently pushing for engagement between the UK and China, while skimming over human rights questions raised by the CCP’s actions in Xinjiang and Hong Kong. He most recently published a book, China: Engage! Avoid the New Cold War.

Cable this week wrote an opinion piece in the Independent titled ‘Shouting at China over alleged Uighur genocide won’t help – the West must find a way to work with them’. On the issue of genocide, he argues:

There is understandable outrage at such activities, and those who have advocated closer engagement with China find themselves in the dock as appeasers or apologists for the modern equivalent of the Nazis. In building up an atmosphere of hostility to China and helping to mobilise a common front against the China “threat”, the use of the genocide allegations has been a very effective amplifier of anger over “the China virus”.

Some scepticism is in order. The alleged “genocide” being perpetrated does not involve evidence of mass murders, let alone the wholesale “ethnic cleansing” of minorities (as can plausibly be argued is happening in other places like Myanmar with the Rohingya Muslims). A much broader legal construct is being used to justify the genocide charge. For those of us who are not lawyers this looks a little like trying to devise a crime that will fit the accused. Suffice it to say that the US State Department lawyers advising the Trump administration, when it launched the accusations, is known to have had serious doubts about the legal case.

It is also striking that, whilst Western governments have followed the American lead in repeating the accusations, non-Western governments have not. One would have thought that democratically elected governments in Muslim majority countries like Indonesia, Malaysia, Bangladesh and Pakistan might have been quick to join in. But they have declined and, in some cases, pointed to what they regard as worse abuses in countries currently aligned to the West.

Despite the outrage online, this is not a new thread of argument for Cable, who also published a piece in 2015 titledVince Cable: It’s risky, but we must welcome China as the new superpower. His views on this issue are well documented; asked in a CBBC interview earlier this year if ‘companies with CSR commitments as well as investment funds with ethical/moral investment guidelines will find issues such as Hong Kong and Xinjiang highly problematic and a barrier to them operating or investing in future?’, Cable replied:

Companies using Xinjiang raw materials and final products are going to face pressure from NGOs and anti-China political groups on the political left and right. Some will feel the need to make CSR statements on the issue. What makes it more difficult for companies is that some in Western governments want to increase pressure on China as part of a ’new cold war’ and they are likely to continue to fan the flames of hostile public opinion.

The former Secretary of State for Business, Innovation and Skills also published a forward to an anonymous document calling into question genocide claims in Xinjiang. We will leave it to readers to come to their own view.

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Politics

Birthdays, anniversaries, speeches

From one…

Wednesday saw the one year anniversary of the National Security Law arriving in Hong Kong. The day was marked with a small number of events and statements throughout Westminster, and accompanied by a handful of articles and tweets:

All in all, a surprisingly muted response from Parliamentarians to the one year anniversary of the NSL. Your writer is aware that those of us are interested in such things exist in a bubble, but given the flashpoint Hong Kong has become for any MP interested in China’s return as a superpower, to not even have a Backbench Business Debate on the issue does seem odd. Perhaps it was because…


…To one hundred

The Chinese Communist Party celebrated its 100th birthday on Thursday. We will leave it to many more experienced journalists and analysts to produce insight as to what the past and future holds for President Xi’s party. Foreign Policy’s James Palmer has an interesting perspective:

The CCP has remade itself several times, from abandoning Soviet models to its contemporary emphasis on ethnonationalism. But its Leninist determination to be the sole power in China has never changed, even if its ability to enforce its authority has been weaker at some times than others. The role and scope of the party have become far more visible under President Xi Jinping, but it was never absent.

To the outside world, the CCP often looked like an anachronism—a holdover that, optimists argued, would inevitably dissolve under the pressures of modernity and globalization. By the early 2010s, public anger at corruption, mixed with the increased coverage of local politics by bloggers and journalists, seemed to spell real problems for the party.

Under Xi, that came to an end, as internal party purges reduced the most blatant forms of corruption—at least for a few years—and the state cracked down on any form of civic society outside the party.

Today, the CCP is more in control at home than ever and more determined to enforce its censorship worldwide. But even as the party celebrates itself, it faces a dire reputation abroad, as more new polling shows. In 15 out of 17 developed countries surveyed, China’s unpopularity is at historic highs, with negative evaluations of Xi especially high and respondents strongly preferring economic ties with the United States.

It’s also worth reading this assessment of General Secretary Xi’s speech by Ren Zhongyi's grandson, Ren Yi, aka Chairman Rabbit. The writer compares it to a speech given in 2001 to mark the CCP’s 80th birthday. (Mandarin here, please forgive your writer’s shoddy translation below):

According to the standards passed down by the Communist Party of China, the General Secretary’s speech at the centennial meeting of the founding of the party is already very popular, but it still presents the party’s very heavy and unique discourse system. More and more Chinese can understand it, but it is more difficult for foreigners to understand. The so-called incomprehensibility is that they don't know how this kind of speech has changed from before, except for individual "gold sentences" and clear points of view. They don’t know the evolutionary iteration of the Chinese Communist Party (according to the party’s discourse, they have now completed the three historical leaps of "Marxism Sinicization"), they don’t know which term corresponds to what, don’t know. They cannot discern the progressive development of the Communist Party from behind the heavy vocabulary.

Therefore, identifying and interpreting this gradual development will be very important for telling the story of the Chinese Communist Party in China, especially abroad.

There was no shortage of coverage or editorials from Fleet Street:

The Times, Guardian and Telegraph all ran cartoons.

Some politicians shared their thoughts.

  • Chair of the APPG on China, Richard Graham, appeared on Sky News.

Various MPs tweeted:

And a small protest and march took place outside the Chinese Embassy.


Much ado about nothing

While many of his colleagues tweeted about China on Thursday, Chancellor of the Exchequer (and oft-touted next PM) Rishi Sunak delivered his annual Mansion House speech.

Sunak used his speech in part to focus on Britain’s economic future with China. He said:

Our principles will also guide our relationship with China. Too often, the debate on China lacks nuance. Some people on both sides argue either that we should sever all ties or focus solely on commercial opportunities at the expense of our values.

Neither position adequately reflects the reality of our relationship with a vast, complex country, with a long history. The truth is, China is both one of the most important economies in the world and a state with fundamentally different values to ours.

We need a mature and balanced relationship.

That means being eyes wide open about their increasing international influence and continuing to take a principled stand on issues we judge to contravene our values. After all, principles only matter if they extend beyond our convenience. But it also means recognising the links between our people and businesses; Cooperating on global issues like health, aging, climate and biodiversity;

And realising the potential of a fast-growing financial services market with total assets worth £40 trillion…

…as we harness the UK’s financial innovation and expertise to meet those global challenges.

And it is precisely because we’re taking steps to protect our domestic economic resilience…

…that we can pursue with confidence an economic relationship with China in a safe, mutually beneficial way without compromising our values or security.

Now, just as our principles inform our economic relationships the EU, US and China, so must they apply to our most global industry: financial services.

Some analysts and commentators picked up the simplistic binary false choice of the speech. Very few people of note actually argue for either ‘severing all ties or focusing solely on commercial opportunities at the expense of our values’. The conversation moved on from this point over a year ago; the question is no longer a case of ‘do we pick to engage or disengage’ with China, but rather ‘how do we engage through a values-led approach, and what issues are we willing to concede on?’ The Chancellor’s point about ‘principles only matter if they extend beyond our convenience’ may make a nice soundbite, but lacks substance, and left many, including Financial Times readers, unimpressed.

The top three comments read:

  1. Wow. We do not trust China to build our 5G network but trust it to build our nuclear power plants but we're sending nuclear-powered aircraft carriers (without planes) to intimidate it but want to grow our trade but criticize it on human rights violations in Hong Kong but not on Xinjiang... The Cold War was defined by the M.A.D. strategy, Global Britain will be defined by its schizophrenic strategy.

  2. Depressing in the extreme. We have given up providing financial services to a hinterland of 500m people in exchange for the possibility of doing some business with a geopolitical enemy intent anyway on building its own financial infrastructure. Does anyone at all think this is a win?

  3. Nice. Congrats to the big visionaries. Selling out to China is a big win for them. 

As we have often written, the Government’s approach to China manifests itself as a series of policy inconsistencies and contradictions across Departments. No better example could be provided to this end than Sunak’s speech, delivered within 24 hours of the Foreign Secretary stating:

Today marks one year since the National Security Law was imposed on Hong Kong. Since then we’ve seen this legislation used to systematically crush rights and freedoms, not protect public security. These actions by Beijing continue to breach the Joint Declaration. Tomorrow marks 24 years since the handover of Hong Kong. Its prosperity and way of life rely on the respect for fundamental freedoms and the rule of law. The UK will not look the other way on Hong Kong and we will not duck our historic responsibilities to its people.


Elsewhere on the estate

China featured in a couple of debates and questions. Sarah Champion, who chairs the International Development Committee, chastised the Government during a debate on Official Development Assistance and the British Council.

The British Council is one of the best examples of soft power that I know, and the Government are standing by and letting it crumble. That is set against a growth in cultural institutes from other states—namely China’s Confucius Institutes—that are creeping across the planet. That is not exactly the action of an outward-looking, global-focused Great Britain, is it?

In the Lords, the UK’s Foreign Aid Programme was the subject of one debate, with some peers attacking the overseas development funding given to China. Notably too, some Peers debated a question put forward by Viscount Ridley on the theory that Covid-19 leaked from the Wuhan Institute of Virology. Both Lord Stunell and Lord West of Spithead asked variations of the following:

What assessment [the Government] have made of the similarities in design between the Taishan Nuclear Power Plant in Guangdong, China, and the plant being built at Hinkley Point C; and whether any changes to the Hinkley Point C design are being planned as a result of the recent problems at Taishan.

Lord Alton used a reading of the Telecommunications Bill to warn against Hikvision, Huawei and the 48 Group:

Earlier this month the Sunday Telegraph revealed that UK local authorities will review contracts for CCTV equipment from Hikvision, a Chinese tech firm that makes cameras used to monitor Uighur Muslims in China’s detention camps. The company is blacklisted in the United States but not here. This weekend the Washington Post reported on how Hikvision had recruited former legislators to extend its power and influence despite President Biden banning Americans from investing in the company, citing its links to the Chinese military. The UK is not immune to the influence of organisations such as The 48 Group Club, with a network of links to former and current politicians—including one who now publicly urges us to tone down our criticism of the treatment of Uighurs.

Beyond such influence, the role of hidden cameras was dramatically illustrated last week, as others have said, from the office of the former Secretary of State for Health. Yesterday the Lord Speaker wrote to us all saying that there are several hundred CCTV cameras in Parliament. I hope that in Committee we will consider the implications for civil liberties of placing such power in the hands of companies that install or own these cameras.

This tied in neatly with concern across Westminster with the use of Hikvision cameras by the Estate, following Matt Hancock being caught on film. Peers discussed that too.


Odds and ends

  • Young China Watchers and the Lau China Institute at King’s College London have announced their third Essay Competition: “China, the Environment and Climate Change”. Young people - submit your work here!

  • Chatham House has a new Chair. Sir Nigel Sheinwald GCMG takes over as Council chair on 21 July, following Lord O’Neill’s three-year term in the role. (Chatham House)

  • Boris Johnson has formally invited President Xi to COP26. (Times)

  • Jo Johnson, brother to the PM, continues to discuss the role the CCP plays in British universities. (ORF)

  • The Irish Times has been criticised for running a full page ad from the Chinese Ambassador. Readers may remember the Telegraph used to do something similar.

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Spotted

Across advanced economies in Europe, North America and the Asia-Pacific region, few people think the Chinese government respects the personal freedoms of its people. In 15 of the 17 publics surveyed by Pew Research Center, eight-in-ten or more hold this view.

Read the Pew research here, full of colourful data.

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Business

Batteries, banks, boycotts, buyouts

In for a shock

Lots of attention on the news that Nissan will be building a £1 billion flagship Electric Vehicle (EV) Hub in Sunderland. Chinese firm Envision AESC will be involved in creating an accompanying gigafactory.

This led your writer to ponder over a project perhaps not receiving its fair share of attention: the Minety battery storage in Wiltshire. Sold as the ‘largest in Europe’, it is being built by China Huaneng Group and Chinese sovereign wealth fund CNIC, with China-based Sungrow responsible for integrating the battery storage systems. Shell is also involved in managing - what is in effect one giant battery - through its subsidiary Limejump. It seems that planning permission for an expansion is to be decided early this month too.

With the capacity to power 15,000 homes for a day, its job will be to smooth out the grid — to dampen the peaks in supply and fill in the troughs. Although there was a smattering of articles in industry press at the beginning of 2020 , this project has largely gone under the radar. This is puzzling as it has all the trappings of a potential new target for China-sceptic politicians and campaigners.

First, let’s quickly refresh our minds on what sectors are covered under the new National Security and Investment Bill:

Advanced Materials • Advanced Robotics • Artificial Intelligence • Civil Nuclear • Communications • Computing Hardware • Critical Suppliers to Government • Critical Suppliers to the Emergency Services • Cryptographic Authentication • Data Infrastructure • Defence • Energy • Military and Dual-Use • Quantum Technologies • Satellite and Space Technologies • Synthetic Biology • Transport

While this clearly falls under the ‘energy’ category, it is outside of the scope of the NSI Bill (it’s not an acquisition). Likewise, it looks like the bulk of the deal was made prior to the Bill being established. However, a Times piece from last year notes that this will be the second major project for China Huaneng Group:

Europe’s biggest battery storage project could be built in Essex after the government granted consent for the £200 million development. Intergen, which is co-owned by a Chinese state utility group, plans to build the giant battery at a site on the Thames estuary near Stanford-le-Hope by 2024. With a maximum output of 320 megawatts, the battery is expected to be the biggest in Europe, capable of discharging enough electricity to power 300,000 homes. Intergen is still deciding between a 640 megawatt-hour capacity, which could store enough energy to power the homes for two hours, or a 1.3 gigawatt-hour capacity, which would last for four hours.

Does this mean that China Huaneng Group will be involved in the UK’s two largest battery projects over the next couple of years? Should backbench and opposition MPs kick up a fuss, will this make it harder for Chinese businesses to work with British companies on similar energy projects?

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Negative attention

Reuters published a deep dive into London-HQed HSBC this week. The bank has served as a lightning rod for geopolitical tensions between China and the UK. The article is eye opening on a number of levels and confirms much of what was being discussed in private about various Chinese firms blacklisting the bank.

Reuters identified nine state-owned enterprises that have ended or cut back on their business with HSBC as a result of the bank’s falling out of favor with Beijing. Among those who’ve shut out HSBC is Beijing-based China Energy Engineering Group Co., Ltd., a Fortune Global 500 construction conglomerate, which previously used the bank to provide guarantees for international projects, among other things. Early in 2020, the construction giant’s senior leadership sent an e-mail internally instructing employees to avoid HSBC completely, said two executives at the company with knowledge of the matter. The reason for the move, one of the executives explained, was the Huawei incident.

The political elements are also fascinating; while politicians in Westminster have painted the bank as being in the pocket of China, a different story has emerged.

People inside the state enterprises and HSBC say Beijing has grown disenchanted with the bank over sensitive domestic and international legal and political issues, from China’s crackdown in Hong Kong to the U.S. indictment of an executive at Chinese national tech champion Huawei Technologies.

….

In another sign of displeasure, Chinese regulators in Shanghai last August fined the bank and three senior HSBC bankers on the mainland, and in a rare move publicized their names. In the middle of last year, Chinese regulators also stopped holding one-on-one meetings with senior HSBC bankers, according to two mainland employees at the lender with direct knowledge of the matter.

HSBC’s treatment by both the Chinese and British Government will set precedent for other similar businesses and the choices they make. Both sides are making unrealistic asks, but as we have said before - a handful of angry MPs does not a market of a billion people make.

This is a lesson fashion brand H&M learned the hard way. Having been one of the brands that raised concerns over alleged human rights abuses against Uyghur Muslims in China's Xinjiang province, and giving evidence before a British Select Committee on the matter, the fashion giant found itself on the receiving end of a Chinese consumer boycott.

During its results this week, H&M announced its sales in China were down 23% in the local currency for the second quarter of 2021, compared to the same time last year. China accounted for around 5% of the retail group's sales last year and is one of its biggest suppliers. As Stu Woo notes in the Wall Street Journal:

H&M’s dilemma in China demonstrates the tightrope that fashion brands are walking. In recent years, many apparel companies have adopted environmental and human-rights concerns as part of their image. They are now trying to balance that while maintaining access to the massive Chinese market.

That balancing act has prompted some fashion brands to reconsider their public statements about not sourcing from Xinjiang, a vast Chinese region that accounts for one-fifth of the world’s cotton output. Governments including Washington and leading human-rights groups including Amnesty International say Chinese officials are subjecting ethnic Uyghurs and other Muslim minorities in Xinjiang to forced labor and other repression.

A few companies, including Zara owner Inditex SA, removed or altered their online statements about Xinjiang. H&M, as well as North Face owner VF Corp. , publicly reaffirmed their commitment to avoiding sourcing from Xinjiang.

While H&M was the most drastic example of the Chinese backlash, nationalistic internet users in China also attacked, to a lesser extent, other members of the Better Cotton Initiative, a fashion-industry coalition that also raised concerns about Xinjiang.

H&M could yet emerge from this in a financially stronger position over the long term; France has just announced it will be looking into accusations four fashion bands sourced goods made by forced labour from Uyghur Muslims in China. The BBC reports Uniqlo, Zara-owner Inditex and French textile firm SMCP deny the claims, while Skechers declined to comment.


Pre-empting

A headline in the Financial Times caught your writer’s eye: ‘Oxford Nanopore to use ‘anti-takeover’ shares to remain British champion’. The paper describes the biotech as:

The company, which was spun out of Oxford university in 2005, has had a breakthrough year after its DNA sequencing technology became essential in tracking the spread of Covid-19 variants around the world. Its devices have been used in 85 countries, and about 18 per cent of all coronavirus genomes globally have been run on them.


In March it said it would list on the London market in the second half of this year, with analysts expecting it to reach a valuation of between £4bn and £7bn. Since then, it has raised a further £195m from investors including Singapore’s Temasek.

Most notable about the upcoming listing is the fact that the company filed for shareholder approval to give its chief executive, Gordon Sanghera, “limited anti-takeover shares” so that he can veto a hostile takeover. These shares expire after three years, and do not confer any other voting rights.

Readers may remember that last year Chinese giant Tencent was in talks to buy 11% of Oxford Nanopore, and is now an investor. In 2018, the company took on investment from state fund GIC in Singapore, China Construction Bank and Australia’s Hostplus. Despite this, Chief Executive Sanghera has remained consistent in his view that the company should not sell out to foreign bidders.

As we’ve covered above, Oxford Nanopore would fall under one of the sectors covered by the NSI Bill in the event that a foreign company attempted a takeover. By filing for limited-anti takeover shares, the firm has also played a card that will likely please Government too.


Odds and ends

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Spotted

Whoops. Following in the footsteps of his predecessor, Chinese Ambassador to the UK Zheng Zeguang appears to have accidentally liked a tweet. This one states the CCP bullies Tibetans and Uyghurs. Time to fire that intern again?

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Society

What are people talking about online?

This week, various Chinese bodies reached out to British friends asking them to congratulate the CCP on reaching 100 years. One such video can be seen below of three willing volunteers can be viewed below.

Also on Twitter this week; the banging of warm drums continued, Labour’s unofficial Solidarity movement with Hong Kong shared an image, and British YouTubers in China tweeted about Hancock being caught on camera.

On YouTube, the BBC’s video discussing President Xi’s remarks was viewed over 160,000 times. The South China Morning Post brought in another 500,000 views with a video discussing the Delta variant.

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Reading list

What we learned from this week


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