The RUSI Newsbrief, 15 February, 2017
Prime Minister Theresa May’s proposed post-Brexit industrial strategy is commendable. However, the UK must avoid the pitfalls of an overly mercantilist policy, especially when it comes to dealing with China.
The UK prime minister’s Green Paper on a new industrial strategy was written ‘to provoke debate’ and ‘start a consultation’ as part of Theresa May’s commitment to make the UK a global leader in free trade. This is a commendable drive to build both post-Brexit prosperity and a post-EU identity for Britain. However, the dangers of developing overly mercantilist policies are ever present and a laissez-faire approach to inbound foreign investment should be avoided, particularly when it comes to foreign ownership of critical national infrastructure (CNI).
A growing number of autocratic states have become global trading partners, and while this is to be warmly welcomed, it is not without risks. China is of particular note in this regard. China is to surpass the US as the largest cross-border investor by 2020 and has a reputation for large-scale projects and visionary economic planning. Furthermore, the prime minister declared in a recent that the ‘golden era’ of UK–China relations is still in place.
Much of China’s economic miracle has been built on leap-frogging technologies, achieved through a mixture of cyber espionage and pushing foreign firms with desirable intellectual property into disadvantageous joint ventures with Chinese rivals. As far back as 2007, MI5 was executives in Britain to the dangers of commercial espionage from Chinese state actors. The asserts that ‘reports of Chinese espionage against the United States have risen significantly over the past 15 years’, noting that while the emphasis has been on ‘defence industrial companies, national security decision makers, and critical national infrastructure entities’. This article reviews three types of Chinese investment into foreign firms.
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