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The British government’s decision to take control of British steel from Chinese owner Jingye has led to a demand for greater scrutiny of China’s investment in the country.
However, it is difficult to solve decades of spending by Beijing and Chinese companies across the UK economy. More than $200 billion in Chinese investment has been flowing to the country since 2000, according to figures from the Rhodium Group, a research outfit.
According to the American Enterprise Institute Think-Tank, about a third of spending on major UK projects is in the energy, technology and transportation sectors, promoting exposure questions in areas of strategic importance.
Senior Labour Party raised concerns about key areas such as nuclear power, communications and transportation, where China’s ownership could endanger UK economic security and disrupt supply chains.
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Energy alone accounts for almost a fifth of all major Chinese investments since 2005, reflecting a wide range of projects from wind farms off the coast of Scotland to the gas networks in Wales and Northern Ireland.
Derexsia, a senior fellow at AEI, said the “size and expertise” of state-owned enterprises has made it an attractive partner for large-scale energy and transportation projects such as nuclear power plants.
“A somewhat scary drawback is the role of the Chinese state in its important national infrastructure,” he added.
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Key state investors include China Investment Corporation, which owns 8.7% of Thames Water and 10% of Heathrow Airport, and China General Nuclear (CGN), which owns a minority stake in Somerset’s Hinckley Point C plant.
CGN was also planning to work with French energy company EDF at the proposed new nuclear power plant in Bradwell, Essex, but authorities advised this week that the government should block investment amid increasing pressure to mitigate Beijing’s impact.
While state-owned enterprises are focused on energy and infrastructure investments, private investors focus on real estate and strategic manufacturing sectors such as semiconductors, steel and transportation.
Geely, who owns Volvo Cars, has acquired black taxi maker LEVC, and both own sports car brand Lotus, which has British factories.
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State-owned and private companies have cut funds significantly in recent years, with China’s FDI last year, reaching just 3% of its 2017 peak.
Scissors said the decline reflects “less welcome” attitudes and Beijing’s strict capital controls, with private investors being hampered by poor performance in real estate assets.
“Chinese private investors sent a lot of money abroad in 2015-16. The easiest way to do that was to buy real estate. Many of those purchases fell in value,” he added.
The UK is not only seeing a sharp decline in China’s funding. AEI data shows that investment in major projects fell 97% in the US and 87% in Europe, and 87% in the mid-2010s to 2023.
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Armand Meyer, a senior research analyst at Rhodium Group, said “enhanced scrutiny” from UK regulators has helped cut investments in recent years.
However, he added that the UK has been one of China’s biggest funding destinations in the last 20 years, taking into account state-owned companies account for “particularly high shares” of funds.
“The UK has historically attracted infrastructure investment from China more than most other OECD economies due to its relatively open attitude towards foreign ownership in the strategic sector,” he said.
“One of the key challenges for the UK and other OECD countries lies in the legacy of acquisitions completed before the investment screening regime became more stringent.”
