China

Debate between Neil Coyle and Bob Seely

Wednesday 15th May 2024 Westminster Hall

[Bob Seely (Isle of Wight) (Con)]

I beg to move,

That this House has considered Government policy on China.

It is a pleasure to serve under your chairmanship, Ms Rees. I am here to look at Government policy on China, but also to argue for a more coherent version of that policy, notwithstanding the very considerable progress that, to be fair to them, the Government have been making.

I will start by outlining a few ideas. For me, the 21st century will mark a struggle between two visions for humanity: between open and closed societies; between states that are the servants of their people and states that are the masters of their people; and whether the great scientific discoveries of this century—artificial intelligence, big data—will be used to help humanity or to enslave it.

Opposing the policies of the Chinese Communist party and the direction that it has sadly embarked on for the past 10 to 15 years does not mean being anti-Chinese. Many Chinese oppose the Chinese Communist party, as indeed do many tens of thousands of brave Hong Kong activists in our own country.

I am delighted that the Deputy Foreign Secretary is present to respond to this debate on behalf of Government. I fully accept that the relationship we have with China is significantly more complex than the relationship we had with the USSR; we have a much deeper trading relationship with communist China, and we need to work together on climate and the environment, although that should not be used as an excuse for the status quo. China presents the need for a more complex set of alliances and more complex containment, but there is a greater urgency because, in many ways, China is more powerful than the Soviet Union was. We need to change the dynamic. It is quite clear that shutting off the global economy, which the west still heavily influences, but no longer controls, is not an option.

For me, the direction of travel is clear. Just this week, what have we had? Chinese vessels encroach daily on Taiwanese territorial waters, with conventional military tensions increasing. In the UK, the head of GCHQ warns that China represents a growing and genuine threat, not only to the UK but to the internet as a whole. Three men, including a Border Force officer, are arrested on spying charges. The US announces that it will raise the tariff on Chinese electric vehicles to 100%, citing “unfair practices”.

We are in the middle of what the Government have called an “epoch-defining challenge”; some Members on the Government Benches, and perhaps indeed those on other Benches, see it as a more significantly adversarial relationship. I accept that there are elements of both, and that just focusing on the words to define this issue—be they “adversarial”, “enemy” or “challenge”—is not necessarily the most helpful thing. What is important is that our policies become less piecemeal.

As I say, I do not want to underestimate the journey that the Government have been on. Much has changed since the failed golden era. It is clear that the hope held by the UK, the US and other partners—that normalising trade relations with China would lead to greater security on all sides—has not materialised. Indeed, quite the opposite is true: what China and arguably Russia have done is trash the system from the inside. However, with respect, I think that our policies are still a little too piecemeal. Although we have had sensible decisions on Huawei, spurred by myself, my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith) and others, and the passing of the National Security Act 2023 and a significant number of measures, I still think we need to go further.

I am looking at trying to develop a coherent set of ideas, not only in this speech but with the think-tank Civitas, with whom I hope to publish stuff next month. I pay tribute to and thank people such as Charlie Parton, the former diplomat who has done a lot of great work advising Members of Parliament on both sides of the House on China strategy, highlighting what the Chinese Communist party has been saying to itself about the west; Ben Rogers and others at Hong Kong Watch; and Luke de Pulford at the Inter-Parliamentary Alliance on China for the work that they have all done.

[Neil Coyle (Bermondsey and Old Southwark) (Lab)]

I thank the hon. Member for securing this debate. Given the arrests this week and the issues that he has outlined, does he agree that the issue here is the pace at which we are assessing the situation, and the need for a cross-Government audit of the Chinese Communist party’s attempts to influence UK politicians and Government, and also individuals, which we saw this week with the arrests of individuals attempting to intimidate and harass Hong Kong democracy activists in the UK?

[Bob Seely]

I agree very much with the points that the hon. Gentleman makes. We need to increase our pace, which is one of things that I would like to argue today. What the Chinese Communist party wants is no secret. It does not want to live in harmony with the west; it wants to dominate it. Western nations are viewed in CCP literature as hostile foreign forces intent on damaging Beijing. In Document No. 9, for example, the CCP describes democracy as one of nine false ideological trends. The full list includes: promoting western constitutional democracy; promoting universal values, which would be an attempt to weaken the theoretical foundations of the party’s leadership; promoting civil society, to dismantle the ruling party’s social foundations; promoting neoliberalism, which would challenge China’s basic economic system; promoting the western ideal of free journalism, which would challenge the communist party’s grip on power; promoting historical nihilism, or rather a different interpretation of the communist party’s history; and questioning the socialist nature of socialism with Chinese characteristics. All those things are seen as false historical trends, and there are many other documents, which I will not go into.

The challenges—I use the Government word, “challenges”—from this potentially adversarial state are arising on many fronts. On cyber, just this week GCHQ has said that there is an increased threat; indeed, I was one of the unfortunate servicemen and women whose details were found potentially not to be as secure as we would have liked. I think it was last week when we were told that our details had been stolen or were potentially vulnerable to theft. Trade dumping is an absolutely critical element of this. China’s developing country status at the World Trade Organisation means that the rules on dumping do not apply to it. As we are slow off the mark here, and because the Americans have put a 100% tariff on electric vehicles, on which the European Union may follow suit, I worry that we will become a dumping ground for Chinese goods. That is not an accident. The destruction of our own industries is not happening because the Chinese are necessarily good at them—although some are and, in a free state, arguably more would be. It is a deliberate state policy of intellectual property theft that is happening now, but which was also happening 10 to 20 years ago.

Then there is the long-term planning to buy up resources, the super-cheap communist state loans, the over-production as a matter of policy, and the dumping of goods on international markets to bankrupt western firms. Huawei was an instructional lesson on that. It originally partnered with Nortel, a Canadian company that suddenly found its intellectual property in Beijing. Nortel then collapsed and its place was taken by Huawei, whose state agenda was to undercut western firms and dominate the 5G market. That creation of dependence is one of the things that is most dangerous—I will explain why in a couple of minutes.

There is also the transitional repression—the spying on and intimidation of not only China’s own people abroad, but Hong Kong activists, which is a growing problem that we seem reluctant to tackle robustly. Then there is the question of covid and its origins. If covid had come out of a laboratory in France or the United Kingdom, or the United States especially, we would never have heard the end of it from political parties in this country or the media; and yet I am staggered by the lack of interest shown in the likelihood that covid came out of the Wuhan virus laboratory. I am also staggered at the lack of interest in whether it had been genetically altered before it was, presumably, accidentally leaked. As Lord Ridley said:

“The UK security and scientific establishment refused to look at the evidence for a lab leak.”

That is an extraordinary claim from somebody who is a considerable expert on that. If nothing else, it is astonishing that we seem to be so uninterested in biosecurity standards in other countries, given the potential hazard not only to ourselves but to humanity.

The united front, the malign influence of which we have potentially seen in Parliament, is a long-term, whole-of-state strategy used by the Chinese Communist Party to further its interests within and outside China through multiple organs of the Chinese state and a range of activities—overt and covert; legal and illegal. It encompasses not only espionage but forms of malign influence that are sometimes overt, but sometimes covert. We know from our Intelligence and Security Committee that the united front has “achieved low-level penetration” across “most sectors of UK business and civil society”. What does the Deputy Foreign Secretary have to say about that? Is he concerned about that penetration across most sectors of UK business and civil society by the united front?

I will spend a couple of minutes on the domination of DNA research and on cellular modules, which are so little known, but potentially so important. China believes that its own biomedical data is a

“foundational strategic state resource.”

Yet, at the same time, it is hoovering up DNA data and genomic data from around the world. Western security officials, including those identified in the ISC report, see DNA biotech as another major concern. The Pentagon in the United States listed the BGI group, otherwise known as the Beijing Genomics Institute, as a Chinese military company, and the US Government have twice blacklisted the group’s subsidiaries for their role in the collection and analysis of DNA that has enabled China’s repression of its own ethnic minorities.

That is a really creepy and unpleasant policy that the CCP and the BGI group have been accused of: collecting DNA research for the repression of their own minorities. Needless to say, not only have we not done the same thing as the US, but BGI Tech Solutions was awarded a £10.8 million contract in this country for genomic testing of covid samples. Not only that, but in 2021, Reuters revealed that the company was selling prenatal tests to millions of women globally in order to collect their DNA data, using biotech methods developed with the Chinese military.

A top counter-intelligence official from the US Government has said that BGI is

“no different than Huawei…It’s this legitimate business that’s also masking intelligence gathering for nefarious purposes.”

I wonder if we are again sleepwalking dangerously and somewhat naively into another ethical crisis—the kind that we had with Huawei, and which we could now be seeing with BGI.

I have not had time to show the Minister my speech, because I only finished it about half an hour before the debate, so I will happily write to him on these questions, and perhaps he could give me a written answer. What are the Government planning to do on genomic research and protecting the United Kingdom, which does not only mean our DNA data—unless he thinks we can share it with the rest of the world; maybe we should or could be—and what do we think BGI and China are trying to do with our DNA?

I will talk a little bit about cellular modules because, again, it is an obscure, but important, topic. The internet of things refers to internet devices that talk to each other, from alarm systems, video recorders and fridges, to aeroplanes, boats and, maybe one day, nuclear weapon system launching programmes—and even the lights in our living room. Those gadgets rely on modules—groups of chips—that connect the equipment to the internet and talk to each other. China supplies the west with more than 60% of those modules. But because they are updated remotely by the manufacturer, it is practically impossible to ensure that they are not spying on us and sending back data flows to their source. If that sounds a bit paranoid, let us remember that TikTok is currently under investigation by the FBI after its parent company used the app to monitor journalists in the United States. Let us also remember that a Government car was allegedly compounded—I cannot remember if that was last year or a few months ago—because a cellular module in it might have been pinging back eavesdropped conversations. China aims to dominate the market, as it has with Huawei and BGI, for cellular modules. Do the Government have an opinion on whether that is a threat to our economy, to our people and to our national security?

I am not even going to bother touching on the military threat, because it is complex and detailed, though my fear is not only the slow domination. Sun Tzu, a great man and a philosopher of conflict, said:

“The greatest victory is that which requires no battle.”

That seems to be President Xi’s aim. Arguably, it should also be our aim. That idea should inspire us that we need to defend ourselves now, and that we need to take the short-to-medium and the long-term decisions to defend ourselves, not to aggressively wave fingers at people, but to be able to defend ourselves. The reason I say that is that the most dangerous outcome is that we become so dependent on China in the next five years, for everything from vehicles to fridges to cellular modules to our DNA, that when Taiwan is attacked, if we took out sanctions on China we would effectively collapse the global economy. It would cause chaos and collapse in Europe and our own country that would make the energy crisis for the Ukraine war look like a picnic, with rioting on the streets and destabilised western societies—or we can stand by and say, “Fair enough.”

The other, potentially even greater, threat is that we break the alliance between the United States and ourselves and the United States and Europe, which is undoubtedly China’s strategic aim. That will be a catastrophe for western civilisation. We need to deepen our alliances with the US and Oz and many other states in that part of the world, including South Korea, Japan, the Philippines and Indonesia.

Finally, I have two more points. On TikTok, for young people in China the algorithm is different from that in the UK. In China, it is used to promote science, education and history, including the history of China. In our countries, it makes citizens watch

“stupid dance videos with the main goal of making us imbeciles”.

That quotation is from the former chief software officer of the US Air Force and Space Force. In China, TikTok is about entertaining education; here it is just about entertainment. It is not only cyber-addiction, but real addiction, that is an issue. Do the Government have a position on the large-scale illicit supply of fentanyl by China to the United States, which I understand is now also becoming a problem in this country? I will wind up in two to three minutes; I said I would stick to 20 minutes, which I am trying to do.

What are we going to do about this issue? The real aim of the immediate policy is to insulate ourselves. In no particular order, here are some ideas. Let us add science to human rights. We can DNA test where cotton comes from. Should we not be mandating that, in supply chains that go anywhere near China, we DNA test cotton so that we can see whether it comes from Xinjiang and is made by slave labour, so that we can outlaw it? That is an important thing to do for fair trade, and to help jobs not only in this country, but in Bangladesh, India and places where they do not use slave labour. It is also important for human rights: taking a consistent approach to the human rights agenda and giving it the respect it needs.

We need to diversify as a matter of urgency. As a national priority, we need to diversify our supply chains, so that if there is war in the Pacific or around Taiwan, we are not going to destroy our standard of living, economy or people’s jobs in order to put sanctions on China, or to support the United States or Taiwan.

We need longer-term planning over rare earth minerals—something I have not even brought up due to time considerations. We are beginning to act but we are two or three decades behind China.

We should tell Confucius Institute centres to stop spying on their citizens, or shut them down and kick out the people in them. The same should apply to Hong Kong economic offices, which are now also being used to intimidate Chinese people in this country.

As for the military, we need a permanent western presence in disputed waters and more money spent.

On WTO and dumping, we need to work together; we need to treat China as a developed economy, even if in WTO terms it is not.

I also suggest that we need to have faith in ourselves. There is no inevitability about China’s future victory. It is a very powerful country, but like Russia, it lacks few actual friends. Its one formal alliance is with the basket case of North Korea, although the basket case of Russia is also a pretty close ally. We have many friends and allies, as do the United States and France, and we need to be working with those allies and with our partners in the Pacific for a new, subtle but thoughtful, determined and robust containment programme. That means spending on hard power, but it also means a much more assertive defence of our interests, as well as understanding how decades of subversive conflict across culture, business, sport and science can damage our national interest and threaten our people. Whether it is the use of artificial intelligence, big data, DNA sequencing, advanced propaganda techniques or cellular modules, we need to do more to understand the modern world that we inhabit.

We are in a battle for the future of humanity, between democracies and authoritarian states. At the moment, that conflict is being lost by us. It is also being conducted in myriad subtle ways. We need to grasp the extent of it and do more to react robustly to defend ourselves.

War in Ukraine: Illicit Finance

Debate between Neil Coyle and Bob Seely

Thursday 17th November 2022 Westminster Hall

[Bob Seely (Isle of Wight) (Con)]

I beg to move,

That this House has considered the Second Report of the Foreign Affairs Committee, The cost of complacency: illicit finance and the war in Ukraine, HC 168, and the Government response, HC 688.

It is a pleasure to serve under your chairmanship, Mr Efford. In speaking to the report today, I will outline a series of points made by the Committee in this report and in its 2018 “Moscow’s Gold” report. I will also talk about SLAPPs—strategic lawsuits against public participation —and the case for more action on lawfare.

Our report finds that the UK sanctions response to the war, while ambitious, was initially limited by a lack of resourcing, and the new beneficial owners register still contains loopholes that put some individuals under the threshold for having to declare beneficial ownership. That is against the public interest. The report, which I strongly endorse—I encourage folks to read it should they have time—proposes a number of reforms, including new transatlantic sanctions partnerships, so that London and New York can work more closely together, and the appropriate resourcing of enforcement agencies. Both reports, and the Intelligence and Security Committee, note the lack of funding for the National Crime Agency and other serious crime organisations in the country and that some of them are threatened by the lawyers of oligarchs—potential bad actors. We believe that to be very strongly against our national interest.

In my opinion, and I think also in the opinion of the Committee and many people engaged with this issue, including the right hon. Member for Barking (Dame Margaret Hodge) and other hon. Members, the UK and its offshore territories have for too long turned a blind eye to the transfer and concealment of illicit or semi-licit—if that is a word—wealth, and have granted a number of high-risk individuals political and judicial protections that they do not deserve.

We have built a significant industry catering to the needs of some really quite unsavoury characters. To date, vast sums of both illicit and licit finance have been recycled through the UK’s bespoke package of the financial services industry, legal services, public relations services, private eyes, estate agents, luxury assets, concierge services, visa and citizenship routes and the private education system.

Transparency International and various other bodies have estimated that the amount of wealth, criminal or otherwise, that has flowed from the former Soviet Union via corrupt German and Scandinavian banks, via UK shell companies, to tax havens—sadly, very often the UK—is probably between £500 billion and £1 trillion. That is one of the greatest flows, probably the greatest flow, of illicit wealth in the history of humanity. The fact that we in London are a core part of that flow is frankly pretty shameful.

I was discussing the issue with the great Bill Browder the other day. One of the problems is that this is not just Colombian drug cartel money; this is money that has come from deeply corrupt, but potentially legal deals. For example, an executive at one of the big state gas or oil firms at some points in the 1990s could, if they had the connections, buy an oilfield or a gasfield equivalent to the North sea, for $100,000.

By borrowing that money off organised crime or other areas, that person would effectively become a billionaire overnight, by the sometimes legal, sometimes not, but deeply unethical transfer of state assets—the privatisation of state assets using organised crime as muscle and bureaucratic connections to facilitate it. That is what has happened in the former Soviet Union—in not only Russia, but also Ukraine back in the day, especially under Yanukovych and others, and Kazakhstan. Clearly, that has enriched a small number of people in the United Kingdom, but I do not believe it has been good for the United Kingdom as a whole. It is not good for our reputation and for London as a service industry—although it is undoubtedly true that it has very considerably enriched a small number of people.

In 2018, the Foreign Affairs Committee published an excellent report under the previous Chairman, my right hon. Friend the Member for Tonbridge and Malling (Tom Tugendhat), called “Moscow’s Gold: Russian Corruption in the UK”. That report detailed that, despite the Government’s crackdown on Russian activity in the wake of the Skripal poisoning, back before the Ukraine war, business simply continued as usual for most of Putin’s allies in the United Kingdom.

One of the depressing things for me is that I was saying this before I was an MP, so nobody was listening, and have said it as an MP—and still nobody really listened. In 2007, back in the Munich conference speech, Putin declared a new cold war against the west. We have studiously done our best to turn a blind eye because it was too difficult for western states to get their heads around the fact that, in President Putin, we had an aggressive rival who did not accept the international system, would openly challenge it and would fight wars on his borders to secure what he thought were his vital interests—we can debate that or not. After his speech the invasion of Georgia happened, and then in 2014 there was the invasion of Ukraine through proxy groups that confused some people, but should not have done.

Before, during and after those events we have had a wave of assassinations, imprisonments and arrests. I met with Alexei Navalny’s chief of staff. Navalny now may be the most high profile political prisoner in the world; he is in a detention camp in permanent solitary confinement. That is the price for challenging President Putin. Last night, I was chatting to Marina Litvinenko, the wonderful wife of Alexander Litvinenko, who was murdered in Piccadilly back in 2006—he died of radiation poisoning. The problem is that we repeatedly turned a blind eye. Our love of Russian money flowing through the financial and legal systems clouded our moral judgment. That has enabled Putin’s regime. We need to learn from those errors and mistakes.

What is the scale of the problem today? From 2008 to 2015, there were no state checks on tier 1 golden visas. At least eight individuals now sanctioned, or under investigation, are thought to have obtained citizenship through those means. They are citizens like you or me, Mr Efford. How can that be right or in the national interest? The National Crime Agency estimates that money laundering costs the UK £100 billion annually. Serious or organised crime is estimated to have a price tag of £37 billion.

Russians accused of corruption or having close links to the Putin regime have bought at least £1.5 billion worth of property in Great Britain according to Transparency International—that is a vast amount of property. One of the reasons why so many people are struggling with their mortgages is that there are vastly inflated prices for property in London and the south-east. That is in part because it is seen as an easy way to launder money: to pay over the odds for property and then to sell. Even if it is then sold at a loss of 10% or 20%, these people have laundered—legalised—a vast amount of corrupt and criminal, or semi-corrupt and semi-criminal, money.

That £1.5 billion is part of nearly £5.5 billion worth of property in the UK that has been purchased through offshore shell companies. That problem happened under new Labour and the coalition with the Liberal Democrats. What on earth is this country doing allowing offshore shell companies to be vehicles to buy property? It is just wrong. It is wrong that so many people close to Putin own so much property in this country. It is wrong that so many offshore vehicles have been used. What on earth are we doing allowing that to happen, and what on earth are we going to do to stop it? I would love the Minister to reassure us, rather than just saying that we are concerned about it.

[Neil Coyle (Bermondsey and Old Southwark) (Ind)]

The hon. Gentleman is making an excellent speech and I congratulate him. I want to be clear that this is not just an issue about Russia. In my constituency and elsewhere, the red princes and princesses of communist China are buying up property and inflating prices. We should not just focus on Russia when we talk about illicit finance.

[Bob Seely]

I thank the hon. Member for his very sensible point. There is absolutely a wider issue. As well as shell companies, there are vast developments on the south side of the river, around the US embassy, where entire blocks are being bought up as investment options rather than being used to provide housing for Londoners. That is shocking, especially because we have a housing shortage. There is a wider argument on reform of our housing in the UK for giving options first to allow ordinary folks to be buying it, rather than—as much as we love them—Hong Kong, Chinese or Indonesian investors to block buy endless numbers of flat and rent them out or never have them occupied.

I was going to talk a bit about the Azerbaijani laundromat. Between 2012 and 2014, about £3 billion went through UK shell companies as part of the so-called Azerbaijani laundromat; funding was dispersed from Azerbaijani officials to various outlets in this country. As well as that, London’s open economic environment has been a key centre for raising finance for companies or individuals over whom there are now very considerable question marks.

In 2017, En+ was floated on the London stock exchange, raising £1.5 billion from international investors in an initial public offering. We now know—well, we knew at the time—that En+ was very closely associated with Oleg Deripaska, despite his ownership of companies linked to supplying Russian military materials and sanctioned Russian shareholders. He himself is now sanctioned, I believe. En+ and Oleg Deripaska were part of a considerable lobbying effort by a former Member of the House of Lords—a former Conservative Minister, as much as it shames me to say it—to separate Deripaska from En+ in frankly pretty questionable circumstances.

Shortly after the Skripal poisoning, Russia continued to sell Russian sovereign debt in London, facilitated by the sanctioned Russian bank VTB. While our financial services provide anonymity to those who wish to invest, many UK legal firms have sought to further silence those who question the origin of investments.