Investment review powers seen backfiring on UK
Britain’s plan to introduce national sec urity legislation that proposes stricter screening of foreign in vestment could diminish the countr y’s appeal as an open economy and hurt British companies, says a researcher who participated in a parliamentary inquiry into the proposed bill.
He Shaowei, an associate professor at the U niversity of N orthampton whose research focuses on the rise of Chinese enterprises and the associated impac t on global business, said the move is a “worrying” sign that the United Kingdom is slipping into a protectionism that will hasten the country’s declining global influence.
He argued that foreign in vestors are important elements of the UK’s business ecosystem that help drive the country’s productivity.
“For e xample, in the emerging technology areas, such as AI (artificial intelligence) and robotics, foreign in vestors usually come with different perspec tives (that) are important to help understand the enabling power of these technologies,” he said.
The National Security and Investment Bill aims to empower the government to scrutinize transac tions on national sec urity grounds. H e contended that such a governmentled topdown approach ma y not work well in reality as “technologies are increasingly overlapping each other with fuzzy boundaries”.
He said there could be “dif ficulties in assessing foreign control of British firms” that could be met with technical challenges.
He said: “There is the dif ficulty in defining the k ey areas that are deemed critical to national sec urity. Take the popular AI for example. So, if a British farming business uses AI to boost its productivity and then a foreign compan y wants to in vest in it, would that trigger an investigation?
“While the government is worr ying (that) British firms (could) fall into the control of foreign hands as a result of in ward in vestment or acquisition, it would strug gle to assess to what extent a UK company is under control of a foreign company due to the investment.”
While the UK is strong in scientific discover y, H e said the countr y often neglec ts the complementar y capabilities that foreign in vestors bring to help British companies that already own advanced technologies to further learn and upgrade.
Chinese acquisition
While undertaking research into a Chinese acquisition of a British semiconductor company in Lincolnshire, He noted that the Chinese company wanted to learn advanced technologies from the UK enterprise, but also taught the business how to design and manufac ture power elec tronics for the railway industry.
“Within a fe w years, the C hinese firm helped its British subsidiar y upgrade produc tion lines, established a new R&D center and significantly expanded the R&D personnel and budget,” He said. “This enabled the British firm to continue developing its technologies and capacity.”
This relationship allowed authorities in Lincolnshire and Hunan province — where the Chinese enterprises is based — to fur ther enhance business e xchanges be tween the t wo regions. Among other benefits, this resulted in a 112 percent increase in Hunan’s trade with the UK in 20 19, amounting to $1.4 billion, He said.
In recent months, the UK has increased its scrutin y over C hinese investment and acquisitions. In July, the government said it would remove H uawei from the UK’ s 5G infrastructure over national security concerns. That marked a Uturn on its own earlier decision to allow the company a limited role.
Based on his research on Chinese acquisitions of British companies that already owned advanced technologies, He said there was “convincing e vidence showing that the Chinese acquiring firm, despite its primary knowledgeseeking motivation, brought new knowledge into the British firm and helped the lat ter fur ther upgrade their technologies and competitiveness”.