Dowden calls China a danger to UK economy

According to Deputy Prime Minister Oliver Dowden, China poses the “largest state-based threat” to Britain’s economic security. Last year, the UK government intervened in eight attempted takeovers of UK firms by Chinese buyers over national security concerns, which was more than any other country. However, deals involving both UK and US entities were also targeted.

Dowden emphasised that the government’s decisions were not based on specific countries but rather focused on protecting national security. He expressed the importance of maintaining engagement with China while remaining vigilant about safeguarding national interests. The National Security and Investment Act 2021 grants the government the power to intervene in investments that pose a risk to national security.

In the last financial year, the Cabinet Office received 866 notifications regarding potential breaches, primarily in sectors such as defence, energy, advanced materials, and communications. Out of these, 65 cases were selected for further assessment, with 42% involving acquirers associated with China, 32% with the UK, and 20% with the US. While most of these deals were approved, “final orders” were issued in 15 cases to protect national security by either blocking, unwinding, or imposing conditions on the transactions. Among these final orders, eight involved acquirers associated with China, four with the UK, and three with the US.

When asked about the disproportionate targeting of Chinese deals, Dowden explained that China is a significant global investor, and the country represents the largest state-based threat to economic security, as outlined in the national security review. However, he emphasised that the government’s scrutiny extends to transactions across the board.

In recent years, Chinese firms have faced regulatory scrutiny worldwide due to concerns about potential espionage activities orchestrated by the Chinese state. For instance, telecoms giant Huawei was banned from the UK’s 5G networks in 2020, mirroring decisions made by other countries. Additionally, last year, the Chinese-owned social media app TikTok was banned on UK government devices as part of a security review.

Dowden stated that the National Security and Investment Act aims to strike a balance by incentivising investment in the UK while ensuring national security in an increasingly volatile world. The legislation provides a “light-touch” approach, allowing foreign investors to have confidence in the safety of their investments in Britain. The goal is to manage engagement with the Chinese economy in a way that mitigates risks without completely decoupling, as it is not in the national interest in terms of jobs and prosperity.