Labour's cosying up to China leaves British industry at Beijing's mercy

Telegraph

15-04-2025

The tussle over British Steel has laid bare just how exposed UK industry is to foreign influence.
Ministers seized control of the day-to-day running of its Scunthorpe site after talks with British Steel's Chinese owner Jingye broke down. It was about more than just an issue with an individual company, as Jonathan Reynolds, the Business Secretary, made clear over the weekend.
'I wouldn't personally bring a Chinese company into our steel sector,' he said, marking a clear departure from five years ago when Boris Johnson said the Jingye takeover meant the sound of steelworks in the North East would 'ring out for decades to come'.
Reynolds has said there was now a 'high trust bar' for dealing with companies from China. However, he insisted most Chinese investments were 'in non-contentious' industries like cars, farming and life sciences.
The qualification makes clear the uncomfortable balance ministers are struggling to maintain. While taking a hard line on British Steel, the Government is wary of offending Beijing as Labour courts Chinese cash.
Rachel Reeves, the Chancellor, flew to Beijing in January hoping to 'build a long-term economic relationship with China that works in the national interest'.
Chinese investment is important to driving the growth the Chancellor so sorely needs and its industry is crucial to meeting Ed Miliband's net zero drive.
China supplies much of the renewable energy infrastructure needed to decarbonise the energy grid by 2030 and is building the cheap electric vehicles (EVs) we need if we are to wean Britain off combustion engines within a decade.
However, experts say MPs should be much more wary about China's drive to buy up Britain, with investments spanning from nuclear energy to Heathrow Airport.
Sir Richard Dearlove, the former head of MI6, warns that Chinese involvement only spells trouble.
'They shouldn't be involved in any of our critical national infrastructure because they're just not reliable partners, and their behaviour over steel illustrates that pretty well.
'Why on earth the last high quality steel maker should have a Chinese owner when we now need it to build submarines and tanks is anybody's guess,' he adds.
Energy industry investments
One of China's most contentious investments in recent years has been China General Nuclear Corporation's (CGN's) stake in the Hinkley Point C nuclear power station.
A deal announced in 2015 saw CGN take a 33.5pc share in the project, although the Chinese halted funding in 2023 amid mounting tensions between London and Beijing.
Tom Greatrex, the chief executive of the Nuclear Industry Association, has insisted Beijing's investments in nuclear energy does not threaten national security because there is no Chinese tech involved.
However, Dan Marks at the Royal United Services Institute (Rusi) think tank believes otherwise.
'As a financial investor of course there's a lot less risk. But the real question is, do you want Chinese state companies to have quite detailed knowledge and access to operational material, even if they don't have access to very detailed engineering plans?
'They'll still know a lot more than everybody else, and they'll know what corporate discussions are being had, what direction everything is going in and whether it's making money. This is important information.'
Critics also point to China's dominance in the manufacturing of wind turbines as a red flag in terms of national security.
A dossier commissioned by Germany's defence ministry recently warned that enabling Beijing's dominance over energy supplies meant it may have the power to delay projects and even remotely shut down turbines 'as an instrument of economic warfare'.
Politicians are now urging the Scottish Government to rethink a deal with Chinese supplier Mingyang to decarbonise the North Sea in a deal that could see Beijing overseeing power generation for millions of British homes.
'We're shooting ourselves in both feet with net zero and having a timetable that is going to endanger this country,' says one defence source. Miliband's commitment to one of the most ambitious decarbonisation timetables on the planet is 'completely bonkers', they add.
'Britain beholden to Beijing'
Labour pledged an 'audit' of Britain's relationship with China in its 2024 manifesto. 'We will co-operate where we can, compete where we need to, and challenge where we must,' it said.
Downing Street said there were no current plan for a wider review into Chinese investments. A spokesman said there was already 'a very rigorous review system, particularly when it comes to our energy sector – all investments are subject to the highest national security scrutiny'.
However, Luke de Pulford, co-founder of the Inter-Parliamentary ­Alliance on China, says Labour must speed up the audit it promised in its manifesto.
De Pulford also warns that unless the Government changes its approach to net zero, Britain will be beholden to Beijing.
'Our net zero targets are completely unachievable without reliance upon China. We have to wake up and smell the coffee over what the Chinese Communist Party is and why it's making these investments. Then we need to audit and reduce our dependence upon China, particularly in areas of critical infrastructure.'
There is of course precedent for excluding China from critical infrastructure. The Government has banned Huawei from the UK's 5G networks.
However, investments elsewhere have raised concerns of naivety in government.The Chinese were allowed to take control of London-based Global Switch, Europe's largest data centre operator, despite significant concern elsewhere.
The company stores huge amounts of sensitive data and Australia's defence ministry moved secret files out of a Global Switch site in Sydney following the deal, amid concerns that the Chinese could access military secrets. The division was eventually hived off and put back into Australian hands.
There are also questions surrounding investments by China Investment Corporation (CIC). The world's second biggest sovereign wealth fund has stakes in warehouse and logistics giant Logicor, which counts major retailers including Marks & Spencer and Amazon among its clients, as well as Heathrow Airport, where Reeves recently backed expansion.
Then there are EVs. Roughly 100,000 new Chinese cars drove off British forecourts last year, representing almost one in 20 new vehicles sold.
Sir Richard says: 'If in future there is a crisis, they could be a real menace. EVs are computers on wheels that can be reprogrammed by the manufacturer at the drop of a hat. So you can get a Chinese car in a crisis and find out that it only goes backwards or it doesn't go anywhere.'
It's not just paranoia. The Biden administration warned last year that Chinese tech in cars that was connected to the internet posed a 'very real' threat to US drivers.
Marks at Rusi says it's not just EVs, either. 'For example, should someone like the Prime Minister have a smart speaker? Because that can equally listen to you, and it could be the manufacturer, it could equally be somebody hacking,' he says.
'EVs are particularly susceptible to it because they are kind of just so smart, and also because they're so dependent on software.'
Britain should, ironically, take a leaf out of China's book, he says. 'China doesn't allow EVs or other smart cars with sensors that are connected onto secure sites for any government use.'
Heeding Hong Kong
Ministers would also do well to monitor the fortunes of Li Ka-Shing, the Hong Kong billionaire with a sweeping portfolio of British businesses spanning from Superdrug to Greene King and, crucially, majority stakes in Northumbrian Water and mobile phone network Three, which has been given the green light to merge with Vodafone.
The 96-year-old billionaire is a self-made man but has recently come under pressure from Beijing over plans to sell a string of ports including assets in the Panama Canal. China is piling pressure on Li's CK Hutchison Holdings to call off the deal.
State media circulated an article in Hong Kong with the less than flattering title 'Don't be naive and senile'.
Referring to the Three-Vodafone merger, De Pulford warns that Beijing may assert more political pressure over Li's empire in future.
'That's a vast swathe of our telecoms infrastructure that will be owned by a Hong Kong company,' says De Pulford.
The UK Government remains intent on pressing ahead with deals, including exporting more British services to China. Sir Keir Starmer plans to travel there later this year.
De Pulford acknowledges that a complete decoupling will not be possible, but he says Britain must be wary.
'Ultimately, we need the water and trains to keep running. We need the lights to switch on when we push the switch. And we don't want to be in a situation where we've handed control to an adversary state over all of that critical infrastructure.'