China: Security and Trade (IRDC Report)

Lord Purvis of Tweed Excerpts

Thursday 20th October 2022 Grand Committee

[Lord Purvis of Tweed (LD)]

My Lords, as always, it is a pleasure to follow the noble Viscount. This has been a characteristically serious debate which has done credit to the excellent report comprehensively introduced by the noble Baroness, Lady Anelay. I had the pleasure of serving on the committee under her chairmanship, and indeed under that of the noble Lord, Lord Howell. We were blessed in this debate with contributions from both those chairs of the committee.

The IRDC is a significant and senior committee of this House, and the delays before its reports are debated are unacceptable. The fact that we made the same appeals when we debated the committee’s report on sub-Saharan Africa, which had been delayed and delayed until we had an opportunity to debate it, springs to mind. I hope that this is the last time there will be such a delay before we are able to debate such a significant report from this committee, because one of the purposes of these debates is not only to hold the Government to account but to inform the whole House of how we conduct that work in holding the Government to account. In that regard, I was struck by the contribution of the noble Lord, Lord Bethell, who rightly highlighted how, in many respects, there is a delicate line to tread in our relationship with China, but in order for us to tread that line, there needs to be the guidance of a clear government strategy. The fact that such a strategy is absent was the underlying proposition of the committee. It struck me when the noble Lord said that as a Minister he sought clarity and that it was “fuzzy and unclear”.

The Government’s response to the committee’s report said:

“The National Security Council continues to provide clear direction for the Government’s China policy. It is supported by the work of the Integrated Review Implementation Group on China”.


Can the Minister tell us why the National Security Council was abolished by the current Prime Minister, Liz Truss? I understand that it has now been replaced by a Cabinet sub-committee, which will not provide the clear direction that is necessary. What is the current situation? Is there a current situation? If not, it highlights the void not just in government strategy but in government operation. We cannot afford that as a country.

This is my opportunity to state on behalf of the Liberal Democrat Benches that what the Conservative Government are doing to our international reputation at the moment is just unacceptable. During this debate, I had a message on my phone from a good friend of mine who served in the United States Cabinet, who was in shock when he woke up to see the news from the UK. He was bemoaning—and sympathising—the fact that we are a laughing stock. He said: “The UK is too important to be laughed at.” That is from a former senior US official. I agree with him.

This debate on this topic really must be the opportunity to start providing more clarity on our way forward for UK relations with China. The committee highlighted—as have the contributions today—a whole series of areas where that strategy is necessary. It highlighted that there has been a shift, but it is unclear where that shift is to. We are, theoretically, currently in year 7 of the golden decade announced in 2015. Whether this golden decade is now in deep freeze or is still government policy for trade and development, I do not yet know. The noble Viscount mentioned the Asian Development Bank; can the Minister clarify whether our support for that is still categorised under overseas development assistance or whether that has been cut? George Osborne said during that visit in 2015—like my noble friend Lord Teverson, I was there in the hall, but I did not have the opportunity of shaking the President’s hand—that

“No economy in the west is as open to Chinese investment as the UK.”


Is it still? What is the Government’s intent for that? The Government’s response to the committee did not provide a great deal of clarity on that.

When the House debated the committee report on sub-Saharan Africa, so many areas combined with regards to our relationship with emerging markets and emerging countries, as well as the need for clarity on China. It is an absolute fact that, in the absence of a clear direction for our relationship with emerging markets and countries in Africa, China will fill that void. In the absence of a clear strategy, understanding and stability in our relationship with China, other countries will not see us as a reliable partner either.

We recognise that China’s development and rise has been remarkable, lifting millions of its citizens out of poverty and single-handedly having a major impact on overall human development. However, we cannot use just one indicator alone. The noble Lords, Lord Alton and Lord Bethell, and others have highlighted these issues with our trading relationship—I will return to that in a moment. Over this period, growth in UK-China trade has been marked, but it is not equal growth, because the UK now has a trade deficit with China in goods of more than £40 billion. That is at an unprecedented scale in our trading history. Under this Government, this deficit has grown. We are now in the unhappy position that trade with autocracies has risen under this Government, but trade with democracies has fallen. This is not good for our national security, nor is it good for our resilience as far as our own industry is concerned.

This report is about how the UK Government now respond to these concerns. While recognising China’s growth in the positive areas, my party and others in this debate have recognised some of the concerns, including China’s challenges to the international liberal order, such as at the UN Human Rights Council. I have a little more sympathy with the noble and gallant Lord, Lord Stirrup, than with—if he will forgive my saying so—the noble Lord, Lord Hannay. The issue about rules, values and standards is not necessarily that we impose them, but that we work with allies on what we consider to be the most beneficial areas. If they are unclear on our approach in some of these areas, an alternative approach will become the norm. From data transfer to e-commerce, regulatory reforms, privacy, and human rights within supply chains, we have been at the forefront, with consensus, of establishing some of these norms and rules. There is, in many areas, a competing narrative with which, if we are not robust, they will be filled. On human rights abuses, which have been referred to, we have debated them repeatedly and, unfortunately, will have to continue to do so.

We have heard in the debate about the aggressive posturing towards Taiwan, including the latest address by President Xi in the congress. A further concern is surveillance technology, which is used at home in China as a tool for suppression but has been bought here in the UK and by others abroad without the level of reliance on a set of standards, which we believe would be right for the use of surveillance technology. Of course, we have seen a regrettable and increasing trend of interference in civic debate in other countries—and, as my noble friend Lord Campbell of Pittenweem said, here in the UK, just within the last 48 hours.

We strongly support the need for a comprehensive China strategy but, in our view, a comprehensive industrial strategy too. They are intertwined. I hope that we will see some clarity on this soon from a new Government. It will mean that the UK has to have a significant review of China’s preferential market access in a whole sweep of areas, from foreign direct investment screening to pension fund investments. It is not acceptable that local authorities and public sectors are not aware, when investing in a Chinese-indexed market, whether their investments are in regions and enterprises in China that are conducting significant human rights abuses. There needs to be much more clarity in this area. I have repeatedly asked the noble Lord, Lord Ahmad, whether any of the preferential agreements signed in 2015 have been reviewed in light of the grotesque human rights abuses, and the Government have failed to provide any clarity as to whether they have.

In an industrial strategy, we need a review of supply-side security. The noble and gallant Lord, Lord Stirrup, and others are absolutely right. On concerns with regard to Taiwan, how resilient is the UK if China seeks to weaponise our trade deficit in certain key sectors? We have seen this within the domestic UK market with regard to chip supplies, as the noble Lord, Lord Alton, said. Why has not the UK opened up discussions about the equivalent of a US chips Act? Why is the United States looking at this in a strategic way, while the UK has, as the committee put it, a complete void in that regard? We must be willing to cease research co-operation and technology sharing if our Chinese colleagues are unable to provide adequate reciprocity and transparency in the regulatory framework.

The noble Lord, Lord Bethell, was absolutely correct to raise the issue of data. I am genuinely concerned about the Government’s current approach. He rightly said that China has access from government officials. The UK has now signalled that we will be leaving GDPR principles, but there is no clarity as to their successor. In some of our key sectors, the service sector and financial reform, this is critical, and I hope that the Minister has a response in his remarks.

I close on Hong Kong. It is a necessity for the UK to audit UK-based assets owned by CCP officials, state-owned enterprises and Hong Kong officials. We need to review bilateral FDI with Hong Kong relations. I hope that the Minister can say that the global human rights sanction regime is now being considered very carefully with regard to officials in Hong Kong. All those areas are vital, and we need to signal that we are now in the process of considering UK resilience in our relationship with China, in case of disruption. It is not a signal that we are seeking to remove ourselves entirely from our partnership with China or indeed to have, in certain areas, a weakening of the positive cultural relationship with the people of China. However, it is necessary for the United Kingdom to be resilient and to stand up for the rules, standards and values that we helped shape and should invest in, and we should work on with our partners.

Finally, I could not agree more strongly with my noble friend Lord Teverson. Many of the countries in emerging markets and developing nations that are looking at the UK and China at the same time see that the UK has stepped back. We have slashed support with very little notice, and there is a lack of stability and reliability in our relationship with them. That is creating a new void which China will fill, and that will be to the United Kingdom’s long-term detriment.

--- Later in debate ---

[The Minister of State, Foreign, Commonwealth and Development Office (Lord Goldsmith of Richmond Park) (Con)]

My Lords, I thank my noble friend Lady Anelay for tabling this debate and for her committee’s work, as well as for her introductory remarks. I thank all noble Lords for their insightful contributions.

Last year in our integrated review, the UK Government assessed that China’s increasing assertiveness and growing impact on many aspects of our lives will be one of the defining geopolitical factors of the 21st century. This is, therefore, a key and timely debate.

In line with the IRDC’s report, I will cover the UK’s approach to China, our trade relationship, regional security, and the importance of working with our allies and partners, and I shall do my best to answer as many of the questions that were raised as possible.

The global geopolitical context has changed greatly in the last year, and in response the Prime Minister has commissioned an update of the integrated review. Vladimir Putin’s invasion of Ukraine has threatened our collective security and stability, and it has had an acute impact on global economic resilience, supply chains and energy security. We will continue to press China to use its relationship with Vladimir Putin to push for an end to his war, rather than condoning or excusing his actions.

The noble Lord, Lord Goodlad, made the point that China’s influence on Russia is considerable. There is no doubt that that is true, so we continue to engage with China at every level—in Beijing, in London and at the UN—to make it clear that the world is watching what it chooses to say and do. Of course, we condemn any military support to Russia for its illegal invasion of Ukraine, and we expect China to stand up for Ukraine’s sovereignty and territorial integrity and to uphold its commitment to the UN charter. Without going into detail, I note the comments made by the noble Lord, Lord Howell, on China’s anxiety about Russia’s potential use of strategic nuclear weapons.

As the Foreign Secretary recently made clear in his speech in Singapore, it remains a top priority for the UK to pursue deeper engagement with our partners in the Indo-Pacific region. China is a major global actor as a G20 member, with a permanent seat on the UN Security Council. This Government are committed to doing more to adapt to China’s growing impact and influence. As we do so, our policy will be defined by our national interests, particularly our sovereignty, security and prosperity. It is in our interest to have a mature and robust relationship with China in order to manage disagreements, defend our freedoms and co-operate where our interests align.

One of the greatest strengths in our relationship with China is the link between the people of our countries. It is worth emphasising that the British-Chinese diaspora play a key role in our communities and culture. We continue to welcome hundreds of thousands of Chinese students to the UK and work to ensure that they are treated as well here as British and other international students are. International research collaboration, including within our universities, is central to the UK’s position as a science superpower. However, as a number of noble Lords suggested, we will not accept collaborations that compromise our national security, and we work closely with universities, funding bodies and industry to protect our higher education and research sector.

In response to the noble Baroness, Lady Coussins, who raised Confucius Institutes in particular and asked what the UK is doing about them, the Government obviously take seriously any concerns about the operation of international organisations at UK educational centres. Like all similar bodies, the Confucius Institutes need to operate transparently and with a full commitment to our values of openness and freedom of expression. As with any international collaboration, universities have a responsibility to ensure that any partnership with a Confucius Institute is managed appropriately and that the right due diligence is in place. We encourage providers with any concerns whatever to contact the Government directly.

A number of noble Lords mentioned the importance of engaging China on the global issue of climate change, and they were absolutely right to do so. The committee rightly observes that we cannot deliver our global climate goals without engaging with China. It is just not feasible; it is not possible. That point was well made by the noble Lord, Lord Teverson, and the noble Baroness, Lady Blackstone. As the world’s largest greenhouse gas emitter, and the world’s largest investor in renewable energy, China plays a critical role. In particular, we are working with China and other financiers of international coal to accelerate momentum and ambition for the global transition from coal to clean energy through our COP 26 energy transition campaign. As a consequence, and on the back of very extensive diplomacy in the run-up to COP 26, we were able to have an influence on China’s position. Noble Lords will know that China has committed to net zero by 2060 and has said that its intention, and its policy, is to see emissions peak by 2030, the end of this decade. China also committed to ending the financing of overseas coal, which we also pressed hard for in the context of our presidency of COP.

Scientific collaboration also plays a key role in mitigating climate change. The UK Government supported work by meteorological experts in both countries to model extreme climate change impacts around the world. We are increasingly working with China at the diplomatic level: first, to support efforts to secure an ambitious outcome for the CBD COP 15 in Montreal, at the end of this year; and, secondly, to follow up on commitments that we secured from China—quite late in the day, as it happens—to join other countries that signed the Glasgow leaders’ declaration, the commitment to end deforestation by the end of this decade.

Even more importantly, we secured a commitment from China’s biggest commodity trader, COFCO, to align its purchasing criteria with 1.5 degrees and our efforts to break the link between commodity production and deforestation. It was COFCO coming to the table that allowed us to encourage countries such as Brazil, under President Bolsonaro, to sign up to a commitment that they were absolutely not willing to sign up to that point. There are numerous ways in which we are seeking to work with China on climate change and the broader environmental challenge we face.

As an open economy, the UK Government welcome foreign trade and investment to support growth and jobs, including from China. However, we will not accept commercial activity that compromises our national security or values, and we have safeguards in place that enable us to engage with Chinese investors and businesses with increasing confidence.

The National Security and Investment Act came into force in January 2022. It is not specific to China and applies to all investors in the UK, regardless of nationality. We will not hesitate to use the Act’s powers to intervene if and where necessary—including to block the most concerning acquisitions. The Act’s annual report and final orders document the use of NSI powers to date, including to block two acquisitions by Chinese companies. In May this year, a package of measures came into force to update the UK’s export control regime. This enhanced our military end-use controls and added China to the list of destinations to which those controls must now apply. These changes strengthen our ability to prevent exports and address threats to national security and human rights.

In different ways, the noble Lords, Lord Campbell and Lord Alton, and the noble and gallant Lord, Lord Stirrup, referenced the controversy over Huawei, which rightly dominated the news for some time in the year before last. On 13 October this year, the Secretary of State for DCMS issued a designation notice to Huawei and a designated vendor direction to 35 telecom providers. This gives 12 specific restrictions to telecom providers in their use of Huawei. The Secretary of State has decided that these legal controls are necessary and proportionate to our national security risks. The UK is now on a path towards complete removal of Huawei from the UK’s 5G networks by the end of 2027.

The noble Lord, Lord Alton, also asked about Hikvision. I needed to check, but we continue to make clear our concern about human rights violations in Xinjiang—which I will come to in a few moments—including the use of mass surveillance and the technology used to facilitate it. We take the security of our citizens and establishments extremely seriously and have a range of measures, some of which I have just identified, to scrutinise the integrity of those arrangements.

The committee rightly identifies the risks to trade and investment and our supply chains in today’s increasingly interconnected world. We recognise that China has clearly set out to use its influence in the global economy to pursue its broader foreign policy objectives. We monitor this closely and are working to strengthen the UK’s critical supply chain resilience and avoid strategic dependency. This includes international collaboration with allies and partners to discourage trade restrictions and coercive measures.

My noble friend Lord Bethell emphasised this particularly well. To him I just say—he may even have been part of this—that BEIS launched the UK’s critical minerals strategy in July, which sets out measures to improve the resilience of critical mineral supply chains. Obviously, supply chains are complex and markets are volatile, with most critical minerals sourced from just a small handful of countries. China is a big player, for reasons that noble Lords have already identified.

I will move on to respond to comments from the noble Viscount, Lord Waverley, who talked about British investment partnerships. Through BII, we are providing a positive development finance offer in the Indo-Pacific region and around the world. Our offer is characterised by high standards, transparency and reliability. It supports the Build Back Better initiative—I hesitate to use the term—specifically as an alternative to the belt and road initiative. With a particular focus on climate finance and green infrastructure, we are helping developing and emerging countries in the Indo-Pacific meet their financing needs for infrastructure and enterprise.

The Government have deepened economic ties with our partners in the Indo-Pacific region in the last two years. We have signed free trade agreements with Australia and New Zealand and a digital economy agreement with Singapore, and we continue to make progress towards a new free trade agreement with India. We are also now in the second and final phase of accession to the CPTPP. By acceding to the CPTPP, the UK will join a valuable network of countries committed to the international rules and norms that underpin free trade. Meanwhile, as an ASEAN dialogue partner, and the only European country to have been given such status, we recognise the key role that ASEAN plays. We have made clear our full support for the ASEAN outlook on the Indo-Pacific.

The committee rightly recognised the importance of working with allies and partners in the Indo-Pacific and beyond with regard to China. We speak to those partners on a regular basis to understand their approaches towards China, their hopes and concerns and more. There is much common ground between us; we share many of the same concerns. We and our international partners have a clear message: China must live up to its international responsibilities.

A number of noble Lords rightly referenced the horrors in Xinjiang—in particular, the noble Lord, Lord Alton, who has raised the issue many times with me in our various exchanges in the Chamber. The noble Baroness, Lady Anelay, also spoke powerfully about the issue, as did a number of other noble Lords. Clearly, China must be held to the same human rights standards as all other members of the international community. The UK has led international efforts to hold China to account for its human rights violations through the UN and through our sanctions regime and measures to ensure that no UK organisations are complicit in these violations through their supply chains.

Given the gravity of the recent UN High Commissioner’s report, which found that China has carried out serious human rights violations—including, as the noble Lord, Lord Alton, said, possible crimes against humanity in the area—it is important that UN members are given an opportunity to consider those findings fully. On 6 October, the UK brought a vote to the United Nations Human Rights Council requesting a vote on the report. We did not succeed—the vote did not pass—and China successfully managed to stifle debate temporarily. However, we are convinced through our efforts that that will not endure and that we will be able to ensure that the report and its findings are properly digested and responded to in that key UN context.

I echo the comments of the noble Lord, Lord Collins, about those Members of Parliament in the UK who have been sanctioned by China, and pay tribute to them. Those sanctions are not only unwarranted but completely unacceptable, and we have provided, as noble Lords will know, guidance and support to those sanctioned by China, including a specialist briefing from relevant government departments on such things as cybersecurity.

Just to move to Hong Kong, China’s national security law has undoubtedly stifled opposition and, more than that, criminalised dissent. In response, the UK has declared China to be in a state of ongoing non-compliance with the Sino-British joint declaration. As noble Lords commented, we also introduced a bespoke immigration route for British national overseas status holders and their immediate family members. The UK will continue to stand up for the rights and freedoms of the people of Hong Kong, as agreed in the Sino-British joint declaration.

I think it was the noble Lord, Lord Purvis, who asked why the Prime Minister had scrapped the National Security Council—I hope that I have attached the question to the right noble Lord. My understanding is that she replaced it rather than scrapped it; she replaced it with a foreign policy and security council. From my understanding, there is no difference in function, so we are talking about semantics and a label, as opposed to anything meaningful.

[Lord Purvis of Tweed (LD)]

I am grateful for that clarification; perhaps the Minister could write to Members who took part. I looked at No. 10 Downing Street’s briefing on the new Cabinet sub-committees. It is a markedly different committee which includes trade; it is not simply a change of title with the same definition—as I understand it, but I am happy for him to write to me with more information, because it is important.

[Lord Goldsmith of Richmond Park (Con)]

I doubt I am qualified to get into a scrap on this issue, but my understanding is that there is nothing that the NSC was doing that is not done within the new council. But I shall seek clarity on the issue.

Regional partnerships are especially important in defence and security. We are deepening our engagement with Indo-Pacific partners bilaterally, multilaterally and with smaller groups of like-minded partners. The Five Power Defence Arrangements, where we work together with Australia, Malaysia, New Zealand and Singapore, reached their 50th anniversary last year. The AUKUS defence partnership with Australia and the US also strengthens regional peace and stability, and the UK has responded positively to the requests of our partners to build their capacity in maritime security. The deployment of the UK carrier strike group to the Indo-Pacific last year, where it engaged with 40 countries, demonstrated our commitment to partnership. Two Royal Navy offshore patrol vessels, now stationed permanently in the region, are further deepening this partnership and supporting capacity-building.

The former Prime Minister—my apologies: she is the current Prime Minister—has commissioned an update of the integrated review to be completed by the end of the year. That integrated review will take account of and reflect the dramatic changes that have happened as a consequence of Russia’s illegal invasion of Ukraine, but the priorities within the integrated review will remain the same: we are not looking at any dramatic shift.

I am so sorry, but I cannot read the names of who asked me certain questions; I apologise if I attribute them to the wrong noble Lords.

On Taiwan, the UK has a clear interest in peace and stability in the Taiwan Strait. As we have always said, the issue must be settled by the people on both sides of the strait through constructive dialogue, without any threat or use of force or coercion. On the issue of visits to Taiwan by western politicians—this is an example of where I cannot read the name of the noble Lord who asked the question—and specifically the visit of Speaker Nancy Pelosi to Taiwan, it is our view that China’s military exercises were inherently destabilising. They form part of a pattern of escalatory Chinese activity over recent months which includes a growing number of military flights near Taiwan. These are not the actions of a responsible international actor. They undermine peace and stability in the Taiwan Strait, which is clearly a matter of global concern. The UK’s long-standing policy on Taiwan remains exactly the same. We have no diplomatic relations with Taiwan, but we have a strong unofficial relationship based on deep and growing ties in an increasingly wide range of areas, underpinned by shared democratic values.

On the issue of academic freedom, particularly in relation to students from China here in the UK—a question raised by the noble Baroness, Lady Anelay—academic freedom and freedom of speech are obviously fundamental values to us in the UK. They are cornerstones of the UK’s world-class higher education system and central to a student’s experience. Universities have specific legal responsibilities to protect academic freedom and freedom of speech within the law. Academics, students and visiting speakers must therefore be empowered to challenge ideas and discuss controversial subjects. If institutions or individuals feel under pressure to compromise on those values, to compromise on academic freedom or freedom of expression, we strongly encourage them to come to the Government and provide us with that information.

It is essential to maintain the UK’s place at the heart of an unrivalled global network of economic, diplomatic and security partnerships—partnerships that deliver for British businesses and British people. That is why the Government continue to invest in China expertise and Mandarin language skills across government and our international network. This expertise, coupled with a deeper understanding of the wider Indo-Pacific region, will be even more important as China’s international assertiveness increases and our ties to the region continue to grow.

Before I come to the end, I want to address recent events in Manchester, which we discussed yesterday on the back of an Urgent Question. However, the Minister in the other place has since said more on the subject. Like other noble Lords, I have seen the consul general’s Sky News interview, which has been referenced in the debate today, in which he claimed that it was his duty to get involved in a physical altercation with a protestor. I would add, as my colleague in the other place did, that no matter how absurd those comments may appear to us, it remains important that we follow due process and await details from the police investigation before determining whatever actions we should take.

However, as the Minister for the Americas and the Overseas Territories, Jesse Norman, set out in the other place, we will take further action without any hesitation, depending on the outcome of that investigation. Our ambassador in Beijing will deliver a clear message directly to the Ministry of Foreign Affairs, and we will send a public message to the Hong Kong community in the UK. I was asked by a noble Lord—again, I sincerely apologise that I cannot read my own writing to see who it was—when that police investigation is likely to end. I am afraid I cannot give a specific date, but I will seek to extract one from the authorities and to share it if I can.

To conclude, the International Relations and Defence Committee’s report makes a valuable contribution to this hugely important topic. We welcome the committee’s scrutiny of our approach to China as we manage disagreements, defend our freedoms and co-operate where our interests align. I end by thanking my noble friend Lady Anelay once again for tabling this debate and all noble Lords for their insightful contributions.