Why Britain should welcome China

China-bashing is a terrible mistake, says Matthew Lynn. Britain should become the only major developed economy to welcome the Chinese with open arms.

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.

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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.

Matthew Lynn

Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years. 

He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.