Senior Tory Raises ‘Project Kowtow’ Fears Over UK’s Business Deals With China

By PA
July 15, 2021 Updated: July 15, 2021

Ministers have been accused of running a “project kowtow” by failing to block the sale of a British microchip manufacturer to a Chinese-backed company.

Conservative former leader Sir Iain Duncan Smith warned the Government is in an “unholy mess” over its approach to business deals involving China. Newport Wafer Fab, based in Newport, South Wales, has been the subject of a takeover by Chinese-owned Nexperia.

Business minister Amanda Solloway said the Government does not plan to intervene “at the current time,” although Prime Minister Boris Johnson has asked national security adviser Sir Stephen Lovegrove to examine the sale.

Speaking in the Commons, Duncan Smith was among several Conservative MPs to voice concerns—including over the lack of use of powers that enable ministers to intervene in business deals that may pose a national security risk. He said: “I think the Government is in an unholy mess over this.

Conservative MP Iain Duncan Smith
Conservative MP Iain Duncan Smith leaves 10 Downing Street in central London, England, on October 22, 2019. (Daniel Leal-Olivas/AFP via Getty Images)

“It is no good the Government telling us that there is a very clear definition between what is strategic and what is not strategic.

“I wonder in the course of this failure to make a decision, did they look at what China thinks of semi-conductors?

“China is the biggest exporter in the world and is busy buying up semi-conductor technology everywhere it can find it.

“They have identified semi-conductor technology as one of the key areas that they need to dominate globally and they are busy stealing technology, getting other people’s intellectual property rights, and buying up companies.

“The idea that a semi-conductor is not strategic when the technology in there will be used in almost everything we do, everything that we produce that is electronic, my simple case is this: Are we now in the position of a kind of project kowtow, where we simply say ‘We just have to do business with the Chinese no matter what?’

“This is outrageous and I simply say to [Solloway] that she must take back to her right honourable friends that this is not going to pass, we should have used this [National Security and Investment Act] and blocked this deal.”

Solloway replied: “The Government has looked closely at this transaction and doesn’t consider it appropriate to intervene at the current time.

“And the Prime Minister has made it clear at the Liaison Committee last week that he has asked the national security adviser to review this.”

For Labour, shadow business minister Chi Onwurah said: “The Government has consistently outsourced British national security and economic interests because ministers have prioritised market zeal over British security.”

Earlier, Conservative Geoffrey Clifton-Brown asked why the Government has not intervened in this matter of “such importance to our national security.”

The Cotswolds MP, who secured an urgent question on the issue, said: “In this particular case the security issue should be paramount.

“China considers this matter as vital for their national security, as do other countries such as our allies the United States, so why is our Government not taking the same view?”

Solloway said: “It is right that commercial transactions are primarily a matter for the parties involved.

“The Government has been in close contact with Newport Wafer Fab but it does not consider it appropriate to intervene in this case at the current time.

“We will continue to monitor the situation closely and, as part of this, the Prime Minister has asked the national security adviser to review this case.

“Separately, work is under way to review the wider semi-conductor landscape in the United Kingdom.

“As I am sure the House will appreciate, I will not be able to comment on the detail of commercial transactions or of any national security assessment on a particular case.”

Tom Tugendhat, China
Conservative MP Tom Tugendhat takes part in a meeting of a conservative research group in Westminster Hall in London on April 9, 2019. (Tolga Akmen/AFP via Getty Images)

Commons Foreign Affairs Committee chairman Tom Tugendhat has written to the Prime Minister to ask why he had taken the unusual step of asking the national security adviser to look at the sale rather than the usual review process.

“The new National Security and Investment Act is supposed to put in place mechanisms ensuring that screening is routine, yet the Government’s refusal to use even existing powers under the Enterprise Act 2002 casts serious doubt upon their willingness to call in similar high-risk transactions, regardless of the legislation in place,” Tugendhat said.

“No financial investment outweighs the security of the country.”

By Richard Wheeler and David Lynch

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