Follow the money

China uses its massive economic power to buy political power in the UK and the rest of Europe. Should the west be more resistant to its overtures?

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The date is October 2015 and the red flags are fluttering outside Manchester Town Hall. Inside, Xi Jinping, president of China, raises a glass and toasts the prosperity of Manchester, which hecalls “the capital of the north”. Later, he will go to the Etihad stadium and pose for a selfie with Sergio Aguero and then prime minister David Cameron. New direct flights between Manchester and Beijing are announced, along with a China “business cluster” at the airport and extensive property investments across the city.

Xi’s visit sealed what the British government of the time called the “golden age of Sino-British relations”, meant to establish the UK as the destination of choice for Chinese investment in Europe. Once, China provided the goods used in every British household. Now it would also provide the money and the jobs.

While the UK is wide open to Chinese investment, the reverse does not apply

Three years on, the golden age is still official policy for both China and the UK. With Brexit looming and President Trump threatening trade wars with just about everybody, perhaps it is needed more than ever. After all, China still believes in globalisation, or so it says. It promises, in Xi’s words, “a common future of shared prosperity”. And the £22 billion China invested in the UK certainly comes in handy for a generally flatlining economy.

Not everybody agrees.

“When the ‘golden age of Sino-British relations’ was inaugurated, I thought it was an enormous embarrassment for the UK,” Dr Elizabeth Economy, China scholar and author of The Third Revolution – Xi Jinping and the New Chinese State, tells Big Issue North.

“As one of the world’s great democracies, Great Britain should be maintaining a principled policy toward China – one that balances its economic interests with deeper concerns over issues such as the rule of law, political accountability and human rights.

“It is particularly important currently given China’s repressive policies in Hong Kong, for which the UK bears special responsibility, and in light of Trump’s retreat from US leadership in this area. The “golden age” announcement appeared to be a singularly craven political move. Beyond that, it is just foolish. China does not respect countries that bend over to accommodate it – it simply walks over them. What has the UK actually gained over the past three years from prostrating itself before Beijing?”

The material gains are certainly mixed. In total, China has invested just over £34 billion in the UK since 2014, according to the American Enterprise Institute. Most of this has gone into property. But China has also bought into an eclectic mix of other assets, including Weetabix, Pizza Express, black cab manufacturer Manganese Bronze, House of Fraser, Barclays Bank and Aston Villa FC. Chinese investors seem to have a particular liking for Championship football clubs (see below).

Yet while the UK is wide open to Chinese investment, the reverse does not apply. Many sectors of China’s economy are closed to British investment, golden age or not. “The most important thing to stress in Sino-British relations is reciprocation,” says Steve Tsang, director of the China Institute at SOAS. “China wants to invest in nuclear power in Britain? OK, fine. But when can Britain invest in nuclear power in China?

“China isn’t a closed, developing country anymore. It’s a huge economy and a market leader in certain aspects of high technology. Britain, and other countries need to make the same demands of it that they would of any advanced country.”

A good example of this uneven friendship came earlier this month, when the Chinese state TV broadcaster CGTN announced the opening of a European bureau in London, promising to employ 350 journalists at wages “well over the average”. The BBC, meanwhile, is frequently blocked in China and always censored.

With many of its own markets closed, worries are growing that Chinese investment is partly a strategy to gain political influence through economic dependency while cherry-picking assets to make it a world leader in vital areas of high technology.

“Industrial espionage is no longer necessary if one can simply take advantage of liberal economic regulations to buy companies to gain access to their know-how,” Hans-Georg Meissen, head of Germany’s domestic intelligence agency, told a cyber conference in March. He noted that conventional industrial espionage had dropped sharply after China went on a local hi-tech buying spree. The German government is reviewing proposed Chinese investment in tech companies. In the US, Chinese telecoms giant ZTE was banned in April from buying American-made components over concerns that it was selling their technology on to Iran and North Korea.

Peter Vickery, counterintelligence head at ASIO, Australia’s domestic spy agency, described China as an “extreme threat to national security” in a recent report, adding that espionage was “worse than at the height of the Cold War”.

In the US earlier this month a former US intelligence officer was arrested after allegedly trying to sell American defence secrets. John C Demers, assistant attorney-general for national security, was quoted in the Financial Times as saying Ron Hansen “allegedly attempted to transmit national defence information to the People’s Republic of China’s intelligence service and also allegedly received hundreds of thousands of dollars while illegally acting as an agent of China”. FBI special agent Eric Barnhart told the FT the case “drives home the troubling reality of insider threats”.

Another report, by the Canadian Security Intelligence Service, alleged that New Zealand “had been influenced at every level of society”. The report came after Yang Jian, an MP for the country’s conservative National Party, was revealed by New Zealand intelligence services to have studied and taught at universities linked to the department of the People’s Liberation Army that trains open and covert military intelligence agents, according to the Guardian.

With Brexit coming, China might be pleased that the UK will no longer be part of the single market

“New Zealand provides a vivid case study of China’s willingness to use economic ties to interfere with the political life of a partner country,” the report said.

“There’s been no sign of political intervention in the UK yet,” says Tsang. “Though I think with Brexit coming, China might be pleased that the UK will no longer be part of the single market and will need to engage more with Beijing.

“The Communist Party of China has always been very open about what it is, namely a Leninist political system. And Lenin said: ‘Push the bayonet in till you meet cold, hard steel.’ This is how we should expect China to operate.”

This is perhaps especially true of China under Xi, who beneath his avuncular appearance has turned out to be the most hardline Chinese leader since Mao Zedong.

“He’s a true believer,” says Economy. “He reportedly applied for Party membership 10 times before being accepted. It was more difficult for him because his father was branded a counter-revolutionary and jailed during the Cultural Revolution. He finds western values threatening, and very much wants to promote a China model, although he has claimed otherwise.

“He favours a high degree of control. Whether in politics or economics, all of his policy initiatives are designed to increase the control that he and the Communist Party exert over society and the economy.

“I think he believes that he is the only person capable of leading China through this challenging period and achieving the ‘great rejuvenation of the Chinese nation’ – hence his determination to eliminate the two-term limit for presidency and stay in power as Communist Party general secretary, chairman of the Central Military Commission and president in perpetuity.”

To borrow a phrase from a certain American president, Xi wants to make China great again. And he has no time for people who will not get with the programme.

“Since Xi Jinping came to power, we have seen a mass crackdown on lawyers and activists,” says Patrick Poon, China researcher for Amnesty International. “We’ve seen the detention of other human rights defenders, and a number of repressive laws and regulations – including national security law, cybersecurity law, foreign NGO management law – were passed. The overall policy is to enhance restriction on freedom of expression.”

Repression in China and an assertive international stance are linked, he adds. “China is very keen on establishing its own human rights discourse domestically and internationally, through propaganda in state media as well as through its various organisations and entities abroad.”

Since coming to power, Xi has altered China’s party-state system to give the Communist Party greater control of state apparatus and himself greater control of the Party – the “chairman of everything” is one of his nicknames (another, “steamed buns Xi”, recently got the man who used it online a year in jail).

In foreign affairs, this has led to a shift in influence from China’s professional diplomats to the Party’s own United Front Work Department, which works on the simple principle of distinguishing friends from enemies. Yet at the same time, China has risen to its current power and status without fighting a single war – or as Xi put it, “imperialism is not in our DNA”. In its own way, that’s a remarkable achievement. But it also means that every other form of contact between nations tends to be used to build influence.

A favoured technique is the state-directed consumer boycott. When the Oslo-based Nobel Peace Prize committee gave 2010’s award to jailed dissident Liu Xiaobo, China responded by banning imports of Norwegian salmon. In 2012, a dispute over who owned a small rock in the South China Sea led to thousands of tons of Filipino bananas rotting on Chinese docks. And when South Korea installed an air defence system that could be used to target Chinese missiles in 2016, Beijing responded by banning South Korean pop music, which is wildly popular in China. China may not fight, but it seems prepared to use everything as a weapon.

Chinese influence comes in various forms, says Economy. “This is an issue that requires a scalpel, not a sledgehammer. First, there needs to be an understanding of the precise nature of the problem. Are politicians or former politicians taking money to represent Chinese views without acknowledging that they are engaged in such activities? Are former Chinese officials assuming office in other countries without admitting publicly that they were officials and members of the Communist Party in China? Is it simply that politicians are being swayed by trips to Beijing and high-level access? Each one of these issues requires a different type of response.”

One area of particular concern is over higher education, not least because it provides a direct means for China to influence the intellectual life of other countries. The means of that influence is the growing number of Chinese studying abroad, who are rapidly becoming essential to the cashflow of marketised universities and colleges. As of 2017, there were over 95,000 Chinese students in the UK, nearly all of whom will be paying tens of thousands of pounds for their degrees. Chinese students themselves overwhelmingly tend to choose uncontroversial STEM and business-related courses. But the growing dependency of education businesses on Chinese student consumers affects China scholarship. Academics whose work is deemed hostile to China increasingly find it difficult to get visas for research trips; many complain they don’t get backing from their universities when they do.

“It’s incredibly short-sighted,” says Tsang. “Academic institutions are about intellectual freedom and human dignity. Ultimately that is what they are founded on. If those are not your priorities, OK, no big deal. But they are ours, or should be.”

Six years after the Liu Xiaobo controversy, Norway’s foreign minister went to China to make amends and try to get a trade deal. The Chinese foreign ministry commented that it was satisfied that Norway had “reflected deeply” on the things that “harmed bilateral trust”. Norway didn’t comment on the matter, so perhaps it had. This is relevant here because the whole golden age of Sino-British friendship came about as a means of making up to China after Cameron offended Beijing by meeting the Dalai Lama. Will the UK too end up “reflecting deeply” on things that may harm China’s trust in us?

“This is not a problem with China, but with ourselves” says Tsang. “Will our politicians, our academics, our leaders sell us and themselves out for short term economic gain? Or will they stand up for themselves?”


Transfer fee

Don’t sell your football club to a Chinese investor who then disappears
Xi Jinping visiting Manchester City in 2015 and, main photo, in the Great Hall of the National People’s Congress, 2018. Photos: Joe Giddens/Getty, Xinhua/Rex

When Xi Jinping tried to hit row Z with a football on his 2015 visit to Manchester City, he also kicked off something of a buying spree for Chinese investors in British football. In the English Premier League, venture capital firm China Media Capital owns 13 per cent of the current champions, and both Southampton and newly promoted Wolves are controlled by Chinese investors. Indeed, Wolves are one of a cluster of Chinese-controlled clubs in the West Midlands, along with West Brom, Aston Villa and Birmingham City.

“Chinese companies are seeking investment opportunities  – they have a lot of cash and not so many productive instruments outside of bubbly real estate in China – expanding markets and strategic investments,” says Jonathan Sullivan, director of Nottingham University’s China Soccer Observatory.

“Specifically in terms of football, the purchase of overseas assets gives access to expertise, cultural assets and a foothold in strategic markets – and a way to spirit capital offshore and avoid government restrictions.”

Investing in mid-tier clubs also helps keep entrepreneurs below Chinese government radar

Chinese football investments are also located in areas with wider strategic potential, he says. Southampton is a major port and the West Midlands stands to benefit from HS2.

Investing in mid-tier clubs also helps keep entrepreneurs below Chinese government radar amid chronic worries about capital flight from the country. “There are few private entrepreneurs with the capital to buy a marquee club – and it is a risk for state companies, which don’t tend to have any expertise in sports and leisure. Because of the scattershot purchases and fear of money leaving the country, the government has issued strict new controls, which make a mega-purchase impossible.”

Company structures tend to be opaque, ownership lines unclear and money concealed in baroque nests of holding companies.

“The first thing a club should do if approached by a Chinese investor is find out how much money they really have,” says Sullivan. “But there is so much opacity around Chinese business generally that it is often hard to pin down. I think Chinese investors are generally pretty benign – they want to learn, to seek opportunities to gain experience in European markets, and certainly they don’t want to make radical changes to ‘our’ football culture. But there are very different ways of doing business, which make it a punt.”

One major difference between British and Chinese business culture is that it is not unusual for Chinese tycoons to simply disappear. This often means that they have been targeted by the much feared Central Commission for Discipline Inspection, the Communist Party’s internal graft-busting force, which can “disappear” its victims until such time that they make a satisfactory confession to fraud, corruption or whatever the charge may be.

“It is pretty easy for entrepreneurs to fall foul of political or policy changes in China, and if your owner were to suddenly become persona non grata with the CCP, that would likely be very bad for business. That isn’t something we at this end have any control over,” says Sullivan. “Due diligence should include research on the prospective owner’s background and relationships.”


Dictatorship by big data

Beijing imprisons tenth of Uyghur population
Omir Bekali, a Muslim from Xinjiang, talks about his time in a Chinese internment camp this year. The programme aims to rewire detainees’ thinking and reshape their identities. Photo: Ng Han Guan/AP

When then Chancellor George Osborne visited China in 2015, he kicked off with a tour of Xinjiang, a province in the far north west of the country.

In Chinese government-speak, Xinjiang is an autonomous region – a  territory home to large non-Chinese populations. Despite the title, Xinjiang remains firmly under the control of Beijing, not the native population of Uyghurs, a Turkic speaking Muslim group.

Osborne told reporters: “Regions like Xinjiang hold enormous potential in the years ahead.”

Since 2015 Xinjiang has realised its potential, though not in the way that the former Chancellor meant: it has become a laboratory for 21st century, big data-driven dictatorship.

The brainchild of hardline provincial Communist Party secretary Chen Quanguo, a security and surveillance programme designed to identify signs of Islamic extremism in the population has now become “the country’s most intense campaign of coercive social re-engineering since the end of the Cultural Revolution,” intended to erase religious identity and the desire for freedom from Chinese rule through “forced ethnic assimilation”, according to Adrian Zenz, a researcher at the European School of Culture and Theology,

Researchers estimate that between 800,000 and one million people – a full tenth of Xinjiang’s Uyghur population – have been or are currently imprisoned in so-called Transformation Through Education Bases, subjected to relentless state propaganda and “thought reform” efforts. Torture, say activists, is a regular part of the programme.

None of the people jailed have been charged or found guilty of any crime. Most have been identified as potentially subversive through the Integrated Joint Operations Programme, an automated system that identifies potential extremists through data obtained from CCTV cameras, ID card checks, facial recognition technology, bank records, online shopping habits, and wifi sweeps.

Xinjiang’s emergence as the first experiment in big data-based dictatorship also requires a massive police presence

Candidates for re-education are flagged by various indicators. Some have unacceptably long beards. Others have travelled abroad. Some use their phones too much, which means that they are plotting a terrorist incident. Some don’t use their phones enough, which means that they are trying to keep their plots secret. Some try to buy a kitchen knife without an ID card. Others find out that their ID card flags them as terrorists when they try to buy a kitchen knife. But not all Uyghurs identified as potential extremists are incarcerated. Some merely have to endure regular visits from police and local officials, who deliver lectures on loyalty to China and monitor daily household behaviour.

Xinjiang’s emergence as the first experiment in big data-based dictatorship also requires a massive police presence. Checkpoints ring Uyghur districts. Inside them, “convenience police stations” are ubiquitous. Security cameras surround local mosques and surveillance drones fly overhead.

In pioneering data-driven dictatorship, Chinese companies have become world leaders in surveillance and predictive policing technology. One company involved in the crackdown, Dahua, provides security cameras to US army bases, according to Foreign Policy magazine.  Another, Hikvision, recently released a promotional video in which it claimed to have developed facial recognition technology that could determine if someone was a member of a particular ethnic group. Both companies’ products are widely available in the UK.

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