Safeguarding our systems

The UK Government should welcome inward investment from China, but ensure the national security of key infrastructure remains protected, our new report warns. “Safeguarding our Systems: Managing Chinese Investment into the UK’s Digital and Critical National Infrastructure”, described by Sir Malcolm Rifkind as “authoritative and spot on”, analyses how large Chinese buy-outs of strategic assets are driving a debate among Western allies on the need to balance economic growth with national security.

The report findings include: China’s investment into Western advanced economies – including that of the UK – is increasing and changing in scope. It has moved away from commodities in developing economies and moved to targeting key high-tech sectors and critical national infrastructure. China’s own stated economic strategy, Made in China: 2025, might threaten the long-term survival of UK businesses unless some sort of Government protection is afforded them or unless China affords British businesses more access to China’s home market.  Because of cyber vulnerabilities, critical national infrastructure will be at the forefront of any future war.

A formal investment screening regime is both necessary and desirable, both to protect the UK’s economic interests and its national security. Any new regime should be adequately resourced to carry out the difficult task of tracking FDI into the sensitive parts of the UK’s economy. The new regime should begin to coordinate more closely with the UK’s closest military and intelligence-sharing allies, including the Five Eyes partners and NATO member states. This review body should use a clear matrix to screen investment, perhaps using the three threat types identified by Theodore Moran for the Committee on Foreign Investment in the United States Any new regime should carry out its review process in a judicious but swift manner, so that foreign investment in the UK is not hampered or harmed.

This report suggests that the regime should be able to sufficiently pass its decisions within 30 days of receiving inquiry. Ideally, any regime should be overseen by a special committee in Parliament that ensures that it is adequately funded and resourced to carry out its activities, and that it is carrying them out in a legal, expedient, and sufficient manner.

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