Why Britain should welcome China

Links to the People’s Liberation Army? Controlling communications systems? Sinister plans for world domination? We’re not talking about rejected scripts for the Bond film Skyfall, but rather the Chinese telecoms giant Huawei, and just some of the wilder allegations hanging over it right now. Huawei is one of the most ambitious, fast-growing firms in the world. In the next few weeks, Britain will have to decide whether to welcome it into this country or shut the door in its face, as the Americans, Australians, and many European nations are doing. While it is natural to be suspicious of some Chinese firms, that would be a terrible mistake.

Huawei (pronounced WAH-wey) isn’t exactly a household name. It’s just launched its first smartphone in this country and has ambitions to be the next Samsung. Right now, it’s best known as a manufacturer of telecoms systems – all those switches, routers and cables that enable us to play games like Angry Birds on the train home. Established in 1988, it’s the largest manufacturer of telecoms kit in the world, with operations in 140 countries and profits of more than $4bn. Not many firms have expanded that fast in less than a quarter of a century. As a supplier to Sky, Virgin Media and Vodafone, it’s a big player in Britain.

Nonetheless, lots of people don’t like it. The US government is putting restrictions on its expansion in America. In Australia it has been excluded from bidding to supply the national fibre network, and a similar move is under consideration by Canada. The EU is reported to be considering limits on its expansion too. The British government is about to come under pressure to do the same, with an intelligence report due this month that’s likely to highlight Huawei’s links to the Chinese intelligence service and army.

True, there are reasons to be cautious. The firm was founded by Ren Zhengfei, a former technologist in the People’s Liberation Army. Investigations by Congress have raised alarm signals about cyber-warfare: if you control telecomsnetworks, you can cripple a country. Yet even so, the scrutiny to which Huawei is being subjected seems to be part of a bigger wave of hostility being directed at Chinese expansion abroad. Already in Canada there has been huge opposition to the Chinese acquisition of an energy company. Meanwhile, the Australians blocked a Chinese take over of a mine. Corporate Sinophobia is increasingly common around the world.

It isn’t too hard to figure out why. China is so big and so successful that we feel nervous about a world where it will be increasingly dominant. As it becomes the world’s largest economy, which it may well do over the coming decade, that nervousness will only increase. When America became a major world power a century ago, it provoked hostility. So did Japan in the 1980s. China in ten years’ time is likely to be at least as powerful as either of those countries.

But China-bashing is still a mistake – in fact, there is a big opportunity waiting for Britain to become the only major developed economy to welcome the Chinese with open arms. Here’s why.

First, China isn’t really interested in dominating the world. If it was, we’d probably all have been speaking Mandarin and eating with chopsticks a couple of thousand years ago. No doubt there are close links between some of the emerging giants of Chinese industry and that country’s army and security services. In part, that reflects the way the Chinese economy works. The army, as you would expect in what is still a one-party state, plays a huge role in society and has links to many businesses.

But that doesn’t mean it is about to launch a cyber-attack on Europe. And it is not even as if a similar situation doesn’t already exist in the West. Boeing and the Pentagon are hardly strangers to one another – but that doesn’t mean we don’t want to buy any Boeing aircraft. BP didn’t pick up the nickname ‘Blair Petroleum’ in the last decade for its distant relationship with British government. Companies and the state often work closely together, and regularly do so behind the scenes – there is no reason why the Chinese should operate any differently.

Next, even if the Chinese were planning to dominate the world, it is hard to imagine why Britain would figure very highly on the list of targets. This is a small and increasingly bankrupt country. We are flattering ourselves if we think the Chinese want to take us over – it is hard to know what they’d be getting, apart from a lot of IOUs.

Finally, there is more than a whiff of racism about the way Chinese ambitions are often discussed. At the Olympics, Chinese success was regularly put down to cheating – or at least to unfair competition. In fact, the Chinese just take winning very seriously – a characteristic we should try to emulate, rather than criticise. The same is true of Chinese companies. They aren’t often underhand – at least no more than French or German companies. They just focus on success completely and work hard at achieving it – and there is nothing wrong with that.

There is actually a huge opportunity here for Britain to become the country that welcomes Chinese investment – particularly within Europe. As China’s manufacturing giants flood out into the world, they will need bases from which to expand. While other countries are banning them from setting up operations, Britain should embrace the Chinese – and collect a wave of much-needed investment in return. At the risk of stereotyping, the Chinese have long memories – and will remember their early friends for decades to come.

3 Responses

  1. 20/12/2012, concerned bear wrote

    I fail to see how giving yet more money to the Asian market and not supporting western manufactuers is a big mistake, don’t get me wrong there’s nothing wrong with buying asian products just not ones that have the ability to cripple our nation, mind you the 50,000+ hackers they’ve got on their payroll have already done a brilliant job of stealing massive amounts of trade secrets and research, so maybe we should just roll over and let them carry on.
    Politics etc aside Huawei’s software is full of vulnerabilities that we know of, never mind any backdoors that have or will be inserted in the future should they feel the need to do so.
    With any luck Huawei will be rejected there’s more than enough evidence of China’s hostility online.

  2. 03/01/2013, dave walsh wrote

    Love this comment –

    “At the risk of stereotyping, the Chinese have long memories – and will remember their early friends for decades to come.”

    Yes they do have long memories, and they are more likely to remember that the UK turned them into a nation of opium addicts and humiliated them in a series of 19th century colonial wars.

    For the last twenty years the Chinese have maximised their competitive advantages – cheap labour and a command economy that allowed them to drastically reduce poverty by massive industrialisation. These advantages are coming to an end and it will be interesting to see how they deal with increasing demands for transparency in government and greater individual freedom. I don’t write them off but I think they will settle slightly below the general expectation over the coming years as these and other problems like an aging population and maintaining the food supply come to the fore.

  3. 03/01/2013, quarterday wrote

    The Chinese Oligarchs send their children to the British Public Schools which puts us at massive advantage as compared to other EU Nations where English is not the first language. Some schools have as many as 15% Chinese pupils – and it has to be said that their diligence raises the bar for all.

Commenting on this article closed

MoneyWeek magazine

Latest issue:

Magazine cover
A new lease of life?

The drugs transforming old age

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues
Shale gas 'fracking' promises to transform Britain's energy market. Find out what it is, what it means, and how to invest.

More from MoneyWeek

FREE REPORT:
What you should really do with your money (2014 Edition)


How to buy and sell penny shares

A beginner's guide to investing in gold

How to invest in British fracking