RUTH SUNDERLAND: Ban this Chinese dish

RUTH SUNDERLAND: In China, opportunities to pounce on Western companies are a way to advance political interests – it’s time to wake up

  • UK politicians have been naïve to Chinese raids on UK national property
  • Until recently, ministers were extremely relaxed about China’s involvement
  • During David Cameron’s years as prime minister, China was courted as an investor

British politicians have been permissive to the point of naivety in their attitude to Chinese raids on British national property.

Until recently, ministers were extremely relaxed about China’s involvement in key sectors such as nuclear power, communications and energy supply.

The issue was brought to the fore this weekend at HSBC, the UK’s largest bank. Its main shareholder, a Chinese insurance company partly owned by the communist state, demanded the dismemberment of HSBC, by splitting its Asian activities.

Time to wake up: Until recently, ministers were extremely relaxed about China’s involvement in key sectors such as nuclear power, communications and energy supply

In comparison to a multibillion-pound international financial powerhouse like HSBC, the fate of Newport Wafer Fab, a Wales-based microchip factory, may seem like a niche interest. Admittedly, in City terms, the £63m deal to sell NWF to a Chinese-owned rival is a small beer.

But it will be the first big test for the new national security and investment law, introduced this year to protect the country’s strategic interests. The decision that Business Secretary Kwasi Kwarteng takes on NWF will have a huge impact on the prosperity of the UK for decades to come.

Unfortunately, the situation is already a mess. NWF was sold to Nexperia, a Dutch company whose parent company is the Chinese group Wingtech. This should never have been allowed. However, thanks to the new law, this sale can still be canceled, which is exactly what should happen.

NWF faced difficulties during Covid as it fell through government safety nets. This, observers say, gave Nexperia an opening to force it into a takeover. Either way, it’s amazing that the deal was done. It raises competition concerns because it gives the Chinese, who through Nexperia own another factory in Manchester, control of around 65% of large-scale chip manufacturing in the UK. A third factory in Greenock, near Glasgow, is owned by an American company.

This leaves the UK in a perilous situation for sovereign chip production at a time when every other major economy is growing and not selling.

To good effect, data chips are used in everything from smart phones to washing machines and electric cars.

Some fear Wingtech’s acquisition of NWF is an opportunistic and short-term move to push it forward until a new facility opens in Shanghai in a few years. This is speculation but the stakes are very high.

Prior to the takeover, NWF was engaged in research in sensitive areas including defense cybersecurity, 5G telecommunications and robotics. It was also the only independent free-access facility of any scale in the UK.

The management of the agreement was chaotic. Last year Boris Johnson asked national security adviser Sir Stephen Lovegrove to review the deal. But Foreign Affairs Committee MPs said so few details had been provided that they had ‘left with the unfortunate conclusion that no review had taken place’. It’s really shocking.

A report last month claimed that Lovegrove believed it was not worth intervention. The government says it has made no decision.

In the Cameron years, China was courted as an investor. Under Theresa May and then Johnson, the climate cooled. Even so, ministers welcomed Jingye from China when they bought British Steel in 2019.

The UK tends to view takeovers such as that of NWF through a commercial lens, sometimes clouded by greed or opportunism. But in Beijing, opportunities to pounce on Western companies or fund infrastructure projects are seized, as a way to advance political interests.

It’s time for us to wake up.

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