UK Will Be More Skeptical of Chinese Investment After Steel Rescue

(Bloomberg) -- The UK government will take a more skeptical approach to future Chinese investment in sensitive sectors of the economy after it was forced to rescue the country’s last primary steel manufacturer, Business Secretary Jonathan Reynolds said Sunday.

Asked on Sky News whether the move to take control of Jingye Group’s British Steel has resulted in a “high trust bar” for UK-Chinese co-operation, Reynolds agreed, saying: “We’ve got to recognize that.”

Parliament passed an emergency bill Saturday to take control of the steelmaker, after talks with its Chinese owner broke down. Reynolds said Jingye had been seeking more than double the £500 million ($654 million) offered by the government to sustain the operation, and planned to close the unprofitable furnaces and import steel from China instead.

A full nationalization of British Steel is still “the likely option,” Reynolds said, though the government would still prefer to find a partner for the business. But that partner is unlikely to be Chinese. 

“I think that you’ve got to be clear about what is the sort of sector where actually we can promote and co-operate and ones, frankly, where we can’t,” he said. “I wouldn’t personally bring a Chinese company into our steel sector.”

The move is the latest instance of the UK government falling out with a Chinese company over investments in critical national infrastructure. In 2022, the then-Conservative administration announced it was buying out China General Nuclear Power Corp.’s investment in the Sizewell C nuclear plant in Suffolk. In recent years, Britain has also excluded Huawei Technologies Co. from supplying next-generation technology to its 5G wireless networks.

Prime Minister Keir Starmer has sought to thaw ties with China after the relationship soured under the previous Conservative governments. On Sunday, Reynolds played down suggestions that the Chinese government had been involved with Jingye’s decisions.

“I’m not accusing the Chinese state of being directly behind this,” he said. “They will understand why we could not accept the proposition that was put to us, in terms of losing that essential national capacity, so I’m not alleging some sort of foreign influence.”

He also said that a lot of UK-Chinese trade is in non-contentious areas such as agricultural products, life sciences and the automotive industry.

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