China’s UK Footprint: Balancing Investment with Security Concerns
Chinese investment in the UK has elicited fierce debate around the issues of national security, potential geopolitical influence, and the recently surfaced and growing risks of Chinese capital maligning critical UK infrastructure. The recent government intervention at the British Steel plant has only intensified the controversy as it attempts to grapple with the repercussions of Chinese investment in infrastructure deemed vital to the United Kingdom.
The Scale of Investment: A Complex Picture
According to the Office for National Statistics (ONS), total Chinese investment in the United Kingdom’s economy stood at 4.3 billion pounds in 2023. While this amount seems considerable, it is dwarfed by the total 2 trillion pounds of international investment in the British economy in that year. Still, this figure from ONS is likely to be an understatement. Given the opaque nature of Beijing’s overseas ownership stake disclosure policy, combined with their counting methodology whereby only the immediate country of investment is taken into account, Chinese investment is likely to be far greater than this claim.
Accounting from the other side is sometimes more optimistic. Estimates by the think tank American Enterprise Institute, based on corporate filings, depict a less grim picture of public and private investment by China in the UK, suggesting total investment from 2005 to 2024 to stand at 105 billion dollars (or 82 billion pounds). With these estimates, the UK becomes the 3rd largest national destination for Chinese investment during that period after the US and Australia.
Diversified Portfolio: From Energy to Football
UK critical infrastructure and businesses with high consumer demand have attracted investments from Chinese firms across a wide array of sectors.
Critical Infrastructure: There are marked investments, such as the 10% share stake of London’s Heathrow Airport by the China Investment Corporation, which is a Chinese sovereign wealth fund. UK Power Networks, which is owned by Li Ka-Shing’s investment group, not only distributes electricity across London but also across the southeastern and northeastern parts of England. This group also holds a 75% share in the Northumbrian Water Group, which provides large-scale water supply and sewage services across the northeast of England.
Energy Sector: China General Nuclear Power Group sponsors Somerset’s Hinkley Point C nuclear power station; this group has considerable investment in the project. Due to funding difficulties, the company has reduced its stake to 27.4% for the Hinkley Point C project while having a 66.5% stake in the upcoming Bradwell B nuclear site in Essex, outperforming the rest of what EDF holds.
Automotive Industry: Geely Auto, headquartered in Hangzhou, China, has ownership of the London EV Company, which specializes in manufacturing electric black cabs for taxis in Coventry.
Consumer Brands: Another leader in United Kingdom pubs, Greene King is owned by Li Ka-Shing’s group and is deregulated from Guernsey.
Sports: Fosun, a conglomerate that is based in Shanghai, has ownership of the Wolverhampton Wanderers Football Club.
A Nuance Perspective: Beyond Majority Control
We should keep in mind that there are instances where Chinese investors do not possess dominating interests in United Kingdom firms. In some situations, their operational influence is constrained due to minority shareholding and regulatory supervision. Airports and water utilities are types of bound infrastructures, as they are heavily monitored, reducing the degree of freedom acquired by their Chinese owners.
The Huawei Debate: Espionage and Disruption
Certain Chinese investments in British infrastructure have raised some concerns during discussions, particularly with regard to the participation of Shenzhen’s Huawei Technologies in the United Kingdom’s 5G mobile telecommunications network, including Huawei Wholesale Services UK Ltd.
The founder of Huawei, Ren Zhengfei, sparked security worries the instant he was exposed as a former Chinese army officer. Although the UK’s National Cyber Security Centre seemed to settle on the risk assessments as manageable back in 2019, they shifted their stance under American pressure. The UK’s demand for Huawei’s complete removal from their telecoms infrastructure, a move that comes at enormous cost, marked the loss of British control over the investment. Espionage versus Geopolitical Leverage: The Two Main Threats
As a policy fellow on China for the Council on Geostrategy, Grace Theodoulou attributes two particular security threats resulting from Chinese investment in core infrastructure as
Espionage: The possibility of surveillance by Chinese audiovisual equipment installed in government buildings or devices controlled by the Chinese.
Geopolitical Control: The possibility for disruption of infrastructure operations by Chinese companies for geopolitical reasons.
A Hypothetical Situation: Invading Taiwan and Sanctioning China
Theodoulou articulates a scenario where China uses its influence over UK infrastructure to curb Britain’s capacity to sanction Beijing subsequent to a Chinese Taiwan invasion. This example demonstrates how economic relationships may be intertwined with the principles of national security.
Counterarguments: Profit-Driven Motivations and Economic Realities
But some analysts do not believe that Chinese investors would go as far as damaging UK infrastructure or firms on purpose. Their reasoning is that such actions would undermine their investment and most likely result in government confiscation. Professor Giles Mohan argues that these companies are mainly “profit-driven” and that the notion of sabotage is “asserted and not proven.”
Making Divisions: Critical Infrastructure vs. Consumer Goods
The analysts further argue that a significant difference should be made for Chinese investment in critical infrastructure, which has higher levels of associated security risks, and investment in consumer products, which pose significantly less risk to public safety.
A Difficult Balance to Achieve
The case of Chinese investment into the UK economy is deeply interconnected with multiple angles. It attempts to meet the demands of foreign direct investment for higher rates of economic activity alongside valid concerns for national security and strategic weaknesses. The discourse reinforces the fact that there is no easy answer to the problems resulting from globalization and the need to protect sensitive assets and infrastructure.
