China is now the world’s biggest foreign lender. It now proudly carries a record £1.6 trillion ($2.1 trillion) of investments at 2023 prices. The progress the nation has achieved in the United Kingdom’s economy has been impressive. Since the beginning of the century, it has spent an astonishing £45 billion ($59 billion) on domestic companies and projects. This massive financial engagement has caused great concern about China’s access to military-grade technology through its investments.
Chinese leader Xi Jinping was given the royal treatment back in 2015 during his state visit to the UK. This was a major turn in the strategic relationship between China and the UK. Earlier this year, China made a historic move by releasing an encapsulating directive. This program was intended to make the state a world leader in advanced manufacturing sectors such as aerospace, electric vehicles, and robotics. These aspirations fit into China’s larger goal to become the leader in ten key, strategic industries important to both national and economic security.
China Reform, the largest stakeholder in Yitai Capital, has been particularly active in funding UK businesses, exemplified by its investment in Imagination Technologies, a key player in semiconductor technology. Analysts note that China’s spending spree has not only bolstered its economic footprint in the UK but potentially facilitated access to sensitive technology with military applications.
Dr. Brad Parks, executive director of AidData, observes that while some Chinese investments were driven purely by commercial interests, others aligned closely with Beijing’s strategic objectives. For one, he notes that Chinese overseas investment reached its zenith already in 2016 and 2017. This tremendous increase movement represents an era of unprecedented civic participation and economic empowerment.
Prof. Keyu Jin, an economist specializing in China’s economic strategies, emphasizes the effectiveness of China’s long-term planning. Even so, Harris says the results of this strategic approach are nothing short of “remarkable.” Specifically, he notes that China’s political system allows for goal setting and planning over multiple decades, increasing its long-term competitiveness.
“It’s the longer-term strategic thinking that China has always had, and I’d argue that many other countries also should have.” – Prof Keyu Jin
The UK Government’s response to these national and global developments has been cautious, but unclear. The UK government has just carried out its first-ever “China audit,” to assess the effects of Chinese investments. It is these unpublished findings that are keeping political leaders frustrated. Dame Emily Thornberry MP expressed her disappointment regarding the delayed release, stating, “I was promised by the foreign secretary that it would be published.”
“Then we hear that the China audit has happened but we’re not going to be told about it, we’re only going to get a few lines.” – Dame Emily Thornberry MP
Fears for national UK security have stoked forces in UK political circles that have sought to preemptively stamp out the threat. Sir Jeremy Fleming, former director of GCHQ, warned that China has been strategic in isolating its critical industries from Western investment while simultaneously pursuing foreign assets that could be vital for its technological advancement.
“They have been very strategic and careful not to allow Western companies to invest or to get involved in key bits of their industry which are strategically important.” – Sir Jeremy Fleming
The story behind the backlash against China’s investments in the UK is another sign of today’s larger geopolitical contest. As John Bolton, national security adviser to President Donald Trump, opined, the refusal to acknowledge a possible reversion to Cold War forms. He implored countries to be vigilant and cognizant of these pressures.
“There was a reluctance to think we were slipping back into some kind of Cold War.” – John Bolton
Chancellor Rachel Reeves is on an all-out drive to win foreign investment – particularly from China – the UK needs to improve its economic picture. Under currents of fear remain over what it would mean to allow Chinese companies deeper access into sectors that are strategically critical.
Sir Jeremy Hunt, then the foreign secretary, acknowledged that this represented a fundamental change in the UK’s worldview. Once considered a benign power full of business promise, China is less and less viewed this way because of its increasingly muscular foreign policy.
“We thought China was basically a very friendly power and there was lots of money to be made. But under the surface, we were beginning to sense a much more assertive China.” – Sir Jeremy Hunt
Policy conversations are still developing around the best ways to handle Chinese investments. Some experts are calling on countries to reconsider how welcoming they are to foreign participation in vital sectors.
“My personal view is that we have been far too free in allowing access to strategically important industries in science and technology.” – Sir Jeremy Fleming
Imagination Technologies responded to concerns regarding its compliance with export laws and regulations related to its semiconductor intellectual property technology, stating that it “has always complied with applicable export and trade compliance laws in respect of its commercial licensing of semiconductor IP technology and related transactions.”