Johnson welcomes Chinese investment, MPs push to remove investment in China, Golden Era anniversary
A Beijing to Britain briefing
Hello,
Powered by roughly four espressos a day and a chronic lack of sleep, we have just celebrated the first year anniversary of Beijing to Britain, overlapping with the six year anniversary of President Xi Jinping’s State Visit to the UK. Harmonious indeed!
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.
Here’s what we’re looking at this week.
Politics
Global Investment Summit: Let the cash flow
Stop the flow: MPs are not happy with Chinese investments
(R)AUKUS: A Westminster hall debate examines the new crew
Spotted: Our roundup of things dipping under the radar
Business
Hostile environment: Chinese investors need assurance
Going Green: Chinese companies are involved in almost all major battery projects
Spotted: Our roundup of things dipping under the radar
589 out of 650 MPs (90.6%) have a Twitter account.
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Politics
Chinese investment welcome, investment in China not welcome, AUKUS
Investing 101
Chinese investors, take note. “For everything that’s in a non-strategic area, we welcome investment from all those who understand the value and importance of working here.” So said the new International Trade Secretary Anne-Marie Trevelyan, quoted in the Financial Times ahead of the Government hosting the Global Investment Summit.
This Summit has been branded as a chance to bring in green investment. The Government launched a new Investment Atlas, which showcases strategic investment opportunities to “level-up the UK”. We’ll be keeping a close eye on this, as it includes “53 strategic investment opportunities across the UK” … such as “offshore wind substructures in Scotland and manufacturing ports in Teesside and Humber, sustainable food systems delivery in Telford and net zero transport in Coventry.” Will the Government be sharp enough to protect these assets from hostile investment, and how vague will it be about declaring an opportunity as strategic? What would backbenchers say if they saw a Chinese firm buying into net zero transport networks for example?
Chinese businesspeople have spoken to us before about the anger and frustration many felt about the UK renegading on Huawei, which at one point was welcomed with open arms. As if to assuage the fears of Chinese investors, Prime Minister Boris Johnson made it explicitly clear that he is still pro-Beijing. In an interview with Bloomberg, Johnson said: “I’ve said this many times- it’s worth repeating. I am no Sinophobe - very far from it. I’m not going to tell you that the U.K. government is going to pitchfork away every overture from China. China is a gigantic part of our economic life and will be for a long time -- for our lifetimes. But that does not mean that we should be naive in the way that we look at our critical national infrastructure. Johnson insisted that the relationship can prosper “in spite of all the difficult conversations about the Dalai Lama or Hong Kong or the Uyghurs.” “Actually trade with China has continued to expand for a very long time and I think probably will continue to expand for the rest of our lives” (video here).
In short; as long as Boris Johnson remains Prime Minister, the UK will work on a case by case basis regarding Chinese investment in critical infrastructure, but will generally remain welcoming and keen for more of it. Levelling Up comes with a price tag, and Johnson is more than happy for China to get involved.
However, Foreign Secretary Liz Truss gave an interview to the Telegraph days later, explicitly stating that the UK cannot be dependent on China. “The way I would put it is that, of course, we trade with China. It’s an important trading partner of the UK. But it’s important that we don’t become strategically dependent.” “I think it’s very important that we don’t become strategically dependent and I think it’s important that we make sure that we’re working, particularly in areas of critical national infrastructure, with reliable partners,” she said in relation to nuclear power stations. What will Beijing make of this front page?
Also worth jotting down: Trevelyan reckons that Britain would accede to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership “by the end of next year”. “It’s a great free trade relationship with a number of countries that are like us and who are absolute believers in free trade and fair competition,” she said.
Shrewd Chinese investors should ask themselves the following: will my investment in key UK projects under the Johnson administration still be honoured by his replacement? As public opinion hardens towards China, the chances of Beijing appearing as the foreign policy issue of the next election increase.
Investing 102
On the backbenches, the mood towards UK-China investment is slightly less rosy.
This week, 137 politicians from the major parties signed a letter urging the Parliamentary Contributory Pension Fund to cease its investments in Alibaba, Tencent, China Construction Bank and Sinopec, the chemical and oil firm. Read the letter in full here.
The letter was pushed by Siobhain McDonagh MP, a Treasury Committee member who has also been outspoken on HSBC’s behaviour in Hong Kong following the introduction of the National Security Law. It follows a report with the original research from Hong Kong Watch into ESG and China (our summary here).
This should not come as a surprise to Westminster Watchers. There is an undercurrent of genuine anger towards institutions many MPs see as profiting from human misery around China, and the fact that the House’s own Parliamentary fund is in any way linked to this is causing frustration.
(R)AUKUS
MPs debate the impact of the alliance on Anglo-China relations
Slipping under the radar on Wednesday morning was a Westminster Hall debate brought forward by Daniel Kawczynski MP which asked Parliament to consider “the impact of the AUKUS pact on Anglo-Chinese relations.” Kawczynski (like almost all those gathered) was in favour of the agreement, noting Beijing had “stolen hundreds of those atolls from each of those four nations [Vietnam, the Philippines, Brunei, Malaysia.]” Lots of sabre rattling: “I have already been warned by various Chinese publications here in the United Kingdom that I am on a watch list and that if I continue to speak out and scrutinise Anglo-Chinese relations, I will be the next Tory MP to be put on China’s sanctions list.”
Kawczynski also added that the former Japanese Ambassador to the UK came to his office to "highlight to me personally the ongoing and increasing violations of Japanese airspace by many Chinese planes, deliberately invading that airspace and testing the Japanese resolve." He also said “we must stand by the Taiwanese people.”
Skim the entire debate, but make time to read the offerings of Geoffrey Clifton-Brown and Mark Logan in particular. The former is the deputy-chair of the APPG China and a veteran in this sector, while the latter served for over a decade in China and represents the minority of political voices calling for a more moderate approach to the relationship with China.
Clifton-Brown’s view boils down to pushing for a more strategic engagement; he notes “what one really needs to look into is: what is the psychology driving China when it takes an action? How will it react to this trilateral security pact?” And furthermore, “I think we have to be pragmatic. I do not think we should cut off our trade with China; I just think we should diversify it.” He concludes this thought, “The message I want to leave this House with is that if we stop engaging with China, we stop having any influence with it.”
Logan said that “unlike many of my Conservative hon. Friends, I have not given up on China yet. Like my hon. Friend Sir Geoffrey Clifton-Brown, I still think we can influence China’s direction. However, we will not do so if we stand on the sidelines, hector and use an overly hawkish tone.” He concluded his speech by discussing the rising anti-Asian racism in the UK, making him one of the few Tory MPs to acknowledge this in the House.
Spotted
A short section of things we jotted down this week.
We would draw readers’ attention to Labour increasingly championing its line on China. This speaks to our core belief that China will be the foreign policy issue at the next election - perhaps Labour have begun to realise this could be a vote winner too. Note this rhetoric in particular: “The Tories have bent over backwards for Beijing for a decade and been played”.
There’s a new All Party Parliamentary Group (APPG) in town. The APPG Magnitsky Sanctions has been created to “raise the profile of human rights and anti-corruption sanctions within parliament, to examine specific situations where sanctions may be appropriate, and to consider changes to the operation of the UK’s Magnitsky Sanctions legislation to improve its efficiency and impact.” Its members are Chris Bryant (Chair), Iain Duncan Smith, Janet Daby, Lord Austin of Dudley, Baroness Smith of Newnham and Stewart Malcolm McDonald.
NATO will take a more confrontational approach to countering China. In its Ten Year Strategy set to be published next summer, the group will outline that Beijing is impacting the security of its member countries. “China is coming closer to us . . . We see them in the Arctic. We see them in cyber space. We see them investing heavily in critical infrastructure in our countries. “And of course they have more and more high-range weapons that can reach all Nato allied countries. They are building many, many silos for long-range intercontinental missiles,” Nato secretary-general Jens Stoltenberg told the Financial Times.
Despite being aware of ongoing harassment against Uyghurs on British soil, the Home Office is not keeping a record of incidences that are reported.
On Monday morning, Trade Minister Penny Mordaunt hosted UK-Taiwan trade talks. The talks “progressed market access ambitions in a range of sectors including energy and offshore wind power, financial services, pharmaceuticals, agriculture and whisky.”
Statements from Britain’s Defence Secretary on Taiwan here, Foreign Secretary on Hong Kong here, and UN statement on Xinjiang here. Busy week for the Chinese Embassy. Statement on Hong Kong, and response to Financial Times article on Covid.
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.” This week was the six year anniversary of Xi Jinping’s state visit to the UK! Watch a video of him and then-PM David Cameron sipping pints of IPA and munching on fish and chips here. We’ve rounded up some of the best moments on our Twitter here.
Business
Investors cautiously welcome, battery projects
More than words
China’s Ambassador to the UK asks for more certainty
As discussed further up this Briefing, the British Government is sending out mixed signals regarding Chinese investment. There is positive rhetoric and meetings - pictured above is the Prime Minister discussing bringing in investment to the UK’s green sector this week, sat next to Isbrand Ho, Managing Director of BYD Europe.
John Edwards, Her Majesty's Trade Commissioner for China, also wrote this week that “the UK and China, in my view, are ideal partners to stand shoulder to shoulder in addressing the defining challenge of our time – perhaps in human history. And both countries, as Minister Alok Sharma recently told delegates at the Low-carbon Development Forum in Shanxi, China, have made investing in clean growth the centrepiece of their respective economic policies.”
But this is counteracted by increasingly aggressive rhetoric towards China in the Commons and Lords, and leaking from the Cabinet, towards Chinese companies rather than just the Government. This stems in part because an increasingly larger group of British politicians view Chinese companies as being intrinsically linked to the Chinese Communist Party, and therefore a security risk. Mixed rhetoric from various Cabinet Secretaries and the PM adds to this political confusion.
This is an issue China’s Ambassador to the UK, Zheng Zeguang, is watching closely. Speaking to reporters this week, Zheng said: “If you tell investors that they are welcome to come and invest, they would show some interest – but only when you demonstrate sincerity with your actions would they make an investment decision. Therefore, it is important that the UK continues to improve the investment environment for Chinese investors.”
This taps into the heart of the issue for some Chinese investors - while they may be welcomed by the Johnson administration, there’s no guarantee that the next Government will take such a shine. Despite this, many have just cracked on regardless of the political angst. For example, as Edwards notes, “Beijing Construction and Engineering Group (BCEG) has emerged as one of the leading overseas investors in the UK’s green infrastructure and urban redevelopment projects, securing £4.5bn for projects in Manchester, Liverpool, Bolton, Wigan and Middlesborough.”
Battery on
Chinese firms continue to underpin Britain’s battery revolution
Hidden away at the bottom of the Government’s Global Investment Summit press release is the news that Chinese firm Huaneng will be investing in the 50MW Battery Storage project in StoneHill.
It looks like this will be built adjacent to the 150MW Battery Storage Project at Minety, a project in which two other Chinese institutions are involved; Chinese sovereign wealth fund CNIC, and China-based Sungrow. We’ve covered both before here. This project is the largest lithium-ion storage system in Europe.
For all the bravado about Britain engaging in a green revolution, it will take significant foreign investment and expertise to grow these technologies. It’s particularly fascinating that Chinese companies are now involved in almost every major battery project in the UK. Given the Government is keen to minimise Chinese investment in strategic assets, it is curious that batteries continue to be largely overlooked.
Spotted
A short section of things we jotted down this week.
There’s an article in the Times this week which talks about English private schools in China having “Chinese Communists” on their boards. The article incorrectly states that Wycombe Abbey licenses two schools in China, in Hengqin and Changzhou. A Chinese source got in touch to say that it only has a building in the latter, despite having plans to create one in the former.
Skim the G7 Trade Ministers' Communiqué here.
The inaugural UK-Taiwan Hydrogen Forum took place this week. Co-hosted by the British Office in Taipei and the Taiwan Institute of Economic Research, with supports by Taiwan Hydrogen and Fuel Cell Partnership and Scottish Hydrogen and Fuel Cell Association, the Forum brought together more than 100 UK and Taiwanese hydrogen and fuel cell companies with 11 companies presenting at the Forum to explore possible areas for collaboration.
Reading list
How to counter China. Charlie Parton, The Spectator
Have we reached peak China? Maximilian Mayer and Emilian Kavalski, Politico
China: The patriotic 'ziganwu' bloggers who attack the West. BBC
CRG Weekly: Pork and UK-China trade. China Research Group
The time to make clean investment is now. The partner to invest with is the UK. John Edwards, Her Majesty's Trade Commissioner for China
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