China: Security and Trade (IRDC Report)

Lord Teverson Excerpts

Thursday 20th October 2022 Grand Committee

[Lord Teverson (LD)]

My Lords, it is a great pleasure to follow the noble Lord, Lord Howell, and his wise words, particularly on Chinese influence in Africa and beyond, because that is where the cut in our foreign aid budget has quite substantially taken away the power, prominence and respect that we had in international development. It is something that we pay for when our competitors take over.

My bedtime reading tends to be contemporary and modern history, rather than fiction—although obviously as you get close to the Trump Administration the two tend to merge. It is quite clear, and comes over in the report, that we as a nation were a major part of China’s humiliation through the opium wars. Perhaps there is a lesson there that, as you overtake people going up the global league table, it is good to remember occasionally that you might be on the way back down a few years later—maybe that affects the relationship.

I am reminded that we had President Xi here in this Palace in 2015, only seven years ago. He addressed us as the combined Houses of Parliament in the Royal Gallery, and I was privileged—I will use that word—to meet him personally for an instant afterwards at a reception, because I had chaired a committee delegation to China a few years before. We were given the chance to say one sentence to him. I do not know whether he understands any English—he certainly makes out that he does not, and he probably does not—or whether what I said was translated, but I made some fatuous comment about the importance of the European Union. What I really wanted to say to him was, “President of China, you don’t have to assert yourself as China in the globe, because the rest of the world realises that you as a nation will be a major player globally over the next century. You don’t have to assert that in other ways; it is evident in the economy, size, population and other issues.”

Unfortunately, he clearly has not taken the advice that I would have given him. As has been said, we have very much seen this in Hong Kong and the end of “one country, two systems”. We have also seen it in the gradual but assertive implementation around the nine-dash line in the South China Sea; although we have shown that we still treat them as international waters, along with our other allies, predominantly America, its taking control of that area continues. On Taiwan, both we and China have become more threatening, as we saw in particular with the Nancy Pelosi visit. I am pleased to say that India, which we often forget about, is also mentioned in this report, as is the control line, where China is claiming parts of the Indian nation—those are two nuclear powers occasionally facing off with border skirmishes. There is also the growth of its military power and the President going for life presidency of China. There are other big challenges that other Members have already gone through.

Connections with China are important, however. I will reflect some of the themes around climate change that the noble Baroness, Lady Blackstone, talked about, and then move on to supply chains, which the noble Lord, Lord Alton, mentioned. As the noble Baroness, Lady Blackstone, said, it is quite clear that China is the largest emitter of greenhouse gases in the world, having overtaken the United States. It accounts for something like a quarter of emissions. Without getting too techie on this, even on a consumption basis—often we look at China as the workshop of the world, exporting to us, and we export its emissions back—it still accounts for about a quarter of emissions, given its economic growth and the way that incomes have gone up there. Even cumulatively, to look back through history, China is now the second most responsible for the greenhouse gases in our atmosphere. No longer can it blame the western world for being the major emitter; admittedly, on a per capita basis, although it is now ahead of us in the United Kingdom, it is still well behind the United States.

Partly through our good work—and that of Alok Sharma in his presidency of COP 26—China has now set a target of peaking its emissions in 2030 and meeting net zero in 2060. I do not know whether it will do that; ironically, it seems it might actually achieve it through the continued zero-Covid policy, which has crippled and will continue to cripple Chinese economic capacity for some time to come, until it has to make that break—I hope for the Chinese population that it will use western vaccines.

It is imperative that we engage China in that process globally. As the noble Baroness said, it is ahead globally on investment in renewables of all sorts. In fact, it has three times the level of renewables investment of the United States, which is second. It is a key player in that area and we must encourage and include it globally, despite the rest of the issues, in those conversations moving forward. It is so important that we remain global leaders in that area. How does the Minister see our leadership now that the present Government—and, I presume, the next Government under a new Prime Minister—have endorsed fracking in this country? I would be very interested in his comments on that.

That leadership on investment, however, has another difficult effect on us. Through its supply chain and economy, China produces some 80% of solar panels globally. It has, if not quite a monopoly, a dominant oligopolistic position in supply chains nationally and globally, which is expected to rise to something like 95% if trends continue in certain areas of that supply chain. We in this country are very much into wind, and offshore wind, but solar is the major area of renewables transition and China has, and will continue to have, a stranglehold in that area. In EV batteries—I think the noble Lord, Lord Alton, mentioned EVs—it has a market share of about 60% at the moment in productive capacity. Even on wind turbines, 10 of the top 15 companies globally are Chinese. Most of those are for investment within China, but believe me, Chinese companies are predatory globally. Once they fulfil their own market and have extra capacity, they will move outside. There is real concern here about the transition needed throughout the world when China has a stranglehold on those technologies. I am interested to understand from the Minister, who I know is very strong in these areas, how we might start to change that so we do not have the equivalent of Russian gas dependency that the European Union has had until now.

I mention one more related area: rare earths. Again, China has something like an 80% stranglehold on the production of rare earths. As we know, there are 17 of these elements and, because of their conductivity and magnetism, they are used in all sorts of high-tech applications. I am not so much asking about alternative sources of supply—although that is important and I would be interested to also hear how the Government are approaching that. To me, this is the key area where we need to move from a linear to a circular economy; this is true in batteries—lithium and others. For all transition and high-tech sectors, we need to concentrate on and incentivise a circular economy, so that we can recycle these products and use them within our economy, increasing our security and lessening our dependence on other, chancier nations, securing our supply chain and helping the earth’s resources as well. Can the Minister say whether the Government are really going to push forward that agenda?

China may look on the United Kingdom as a not particularly helpful player in the past, but that is no excuse for its agenda at the moment. This report, produced under the excellent chairmanship of the noble Baroness, Lady Anelay, lays out a lot of those challenges. We must work with our allies in Europe, the rest of the world and the G7 to ensure that the rise of China is much more benevolent and less dangerous to us as a civilisation.