Monday, October 14, 2013

UK ignores human rights to increase China trade deals

The British Chancellor of the Exchequer George Osborne and the Mayor of London Boris Johnson have both touched down in China to negotiate trade deals with the fast growing economy. They are set to announce a raft of deals during their separate trade visits to China, including a partnership to develop Manchester Airport.

Criticism

However their visits do not come without some criticism and controversy with some media commentators questioning the double standards Britain plays especially concerning China's appalling human rights' record and lack of freedom.

In one grilling interview Sky's Dermot Murnaghan continued to push the London Mayor over why Britain was happy to ignore China's questionable attitude towards individual freedom and human rights yet lambaste smaller countries over their human rights' policies.

Johnson continually side stepped the questions saying he was merely in China to drum up trade and not debate the ethics of how another country was governed.

"My job as Mayor is not to have a foreign policy but to get on and promote the interests of the greatest city on earth which is what we're doing," he said. "There are many interesting foreign policy problems around the world I could get involved in, whether or not that would improve global hopes for a resolution, I have my reservations." [Sky News / Huffington Post / BBC].

Risks

Britain is one of the top ten nations to attract Chinese investment, more than double the investment of any other nation in Europe. However,in the long term there could be dire repercussions as such investment effectively becomes a takeover of British industry.

Chinese investment is concentrated in the UK energy sector, although Barclays Bank, BP, Diageo and Thames Water also have Chinese backing.

Some UK companies are already controlled by Chinese groups. Bright Foods owns a 60% stake in Weetabix, the Wanda conglomerate owns 92% of Sunseeker boats and Geely Automobile owns Manganese Bronze, the company that makes London taxis.

Speaking soon after an announcement that the Chinese would invest £800 million in Manchester Airport and surrounding businesses, George Osborne said he saw "China as a great opportunity" and "not a threat".

The development surrounding Britain's third busiest airport will include offices, hotels, manufacturing firms, logistics and warehouses. It is hoped that by attracting international businesses some 16,000 jobs could be created.

"I think it shows that our economic plan of doing more business with China, and also making sure more economic activity in Britain happens outside the City of London, is working," Osborne insisted [BBC].

Cyber risks

There have also been questions raised over security as tech firms such as Huawei incorporate more of their technology into Britain's telecommunications infrastructure.

The Chancellor is set to lead his delegation to the Shenzhen-based headquarters of Huawei, the world's largest telecommunications manufacturer, and TenCent, the world's third largest gaming and social media firm.

Huawei's growing footprint in Europe and America has caused controversy, with some suggesting that Chinese involvement in Western telecoms firms poses a security risk.

Despite that, Huawei has already pledged to invest £1.3 billion in the UK's broadband network over the next four years.

In 2012 a US congressional report was released suggesting that American firms should avoid doing business with two Chinese telecoms companies citing national security grounds. Huawei, and another company ZTE, were said to have close links with the Chinese government and its military and the congressional panel said they were not satisfied by statements from the companies concerned.

However, despite US concerns and some raised eyebrows in Britain within intelligence circles, the UK government has allowed the Chinese firm Huawei to build a large portfolio of customers in Britain, amongst them the Internet company Talk Talk [tvnewswatch: Mixed response to Huawei & ZTE 'security threat' - Oct 2012]

Uneven playing field

Britain has also been lucrative for Chinese exports. However Britain's exports to China are tiny in comparison, though there are indeed some success stories. Chinese imports into Britain has soared from £13.2 billion in 2005 to around £30 billion in 2012.  Britain's exports in comparison have only risen from £2.8 billion to £10 billion in the same period.

Such figures are an indicator as to how difficult a market place China is to enter. There are issues of bureaucracy, consumer taste as well as other cultural issues. More importantly there is the lack of competitive advantage due to manufacturing costs and currency fluctuations.

China has been a hard nut to crack not only for British businesses but other foreign enterprises.

Earlier this year Tesco, which saw its profits sink by some 23.5% in the first half of this financial year, announced it would combine its Tesco China business, which includes 134 stores, with the 2,986 stores held by China Resources Enterprise's Vanguard business [BBC].

Bryan Roberts, lnsights director at Kantar Retail, believes that the Chinese market is incredibly tough for any international brand to do business in.

Talking to BBC Radio 5 Live's "Wake Up to Money" in August, he said, "It's an incredibly difficult market and Tesco is just the latest in a long list of international retailers who've come away... with their tail between their legs".

Roberts cites the huge levels of bureaucracy encountered by foreign businesses trying to enter the Chinese market place as being one of the major obstacles to doing business in China. Corruption was also another issue where "palms need to be greased" in order to clinch deals.

Tesco is not the only firm that has struggled in China. While fast food outlets, such as McDonalds, KFC, Starbucks and Costa Coffee, have managed to firmly establish themselves in China there are many brands which have fallen by the wayside and withdrawn from the Middle Kingdom.

IP theft

Even where firms have managed to establish themselves there is a high risk of intellectual property theft. Shanzai [山寨] products, a term refering to Chinese imitation and pirated brands and goods, particularly electronics, are everywhere in China.

Often it is clear what is on offer, as far as the consumer is concerned, indeed some retailers will openly ask if the customer wants the real or fake product in some cases. The saving could be as much as 50% on a branded electronic item such as an iPhone or tablet PC. But the cost to the manufacturers can be very costly indeed.

Stolen technology can be and often is incorporated into China's growing infrastructure, be it transport networks, telecommunications systems or other vital systems. Having possession of valuable IP can save China a fortune since local firms can be given the contracts rather than foreign companies. Again foreign companies lose out and many years of research can be wasted.

Such IP theft has even forced companies into bankruptcy, even for some that never directly established a physical presence in China. Telecoms firm Nortel, for example, was systematically hacked over a period of years and the data gathered cost the company its research, technology and clients.

The Canadian firm Nortel was once a market leader in the telecommunications industry. But a simple security breach cost the company everything. Nortel went bust by 2009 after years of hacking which was traced to China. There were certainly mistakes within the company in that it failed to protect itself or take the advice of its own security team [CNET]. However such threats can be very sophisticated and smaller companies can be especially vulnerable [WSJ / Register / CBC / Naked Security / Financial Post / Washington Post / CBC].

China in the frame

GCHQ officials, talking to the BBC earlier this year, revealed that the know who is doing the hacking, but refused to reveal which nation state was behind the most prolific attacks.

BBC Security Correspondent Gordon Corera, who presented a series of programmes about the ongoing cyberwar, painted a dark picture of how Britain and other countries could well be losing out economically because of cyberattacks and IP theft.

Western companies face the wholesale plundering of their economic life-blood. Indeed some of the world's largest companies stand to lose millions from the theft of their intellectual property. "Britain is under attack," says Britain's Foreign Secretary William Hague. "Most countries are under attack and certainly many industries and businesses are under attack." But the Foreign Secretary remains tight lipped  as to who is responsible.

All fingers point to China, and there is certainly much evidence to show this to be the case despite official denials. Yet while China steals foreign intellectual property, buys up the cream of foreign industry, ignores WTO rules, and capitalises on its new economic strength, western companies and governments are queuing up to negotiate business deals.

Western countries certainly need an economic boost following the 2008 recession. But doing business with a country which has questionable business ethics, mountains of red tape, rampant IP theft and an uneven business playing field could prove to be just as costly in the long term.

Unnerving future

With China's growing economic status few seem to acknowledge such risks. However China's economic strength will heavily alter the political and cultural landscape of the world in the future.

In his thesis When China Rules the World: The End of the Western World and the Birth of a New Global Order, Martin Jacques debates China's future influence on the world [Foreign Policy blogs].

His appraisal is far softer than the potential outcome could be. China, after all it a totalitarian one party dictatorship with strict controls on the flow of information through its state run media, monitoring of its citizens and censorship of the Internet.

The future could be far bleaker than predicted.

tvnewswatch, Shanghai, China

1 comment:

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