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Britain accused of going soft on rights to woo China

British Prime Minister David Cameron delivers his keynote speech at Manchester Central on October 2, 2013 in Manchester, England.
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British Prime Minister David Cameron delivers his keynote speech at Manchester Central on October 2, 2013 in Manchester, England.

Britain has been accused of softening its stance on human rights in China to attract foreign investment, despite doubts over the credibility of some of the groups who have offered to fund big projects.

As David Cameron, prime minister, prepares for a long-awaited visit to Beijing, a Financial Times investigation has raised questions about a project with Chinese backing in northwest England.

(Read more: UK's Osborne woos China with shared investment)

The FT has identified several anomalies with Sam Wa, a Chinese company that has proposed an investment in the £175 million development on the Wirral. The investment has been championed by UK Trade and Industry.

Stella Shiu, Sam Wa's chairman, was declared bankrupt by a Hong Kong court in 2008, after which she changed her name, it has emerged. Several companies registered on the Chinese mainland under her previous name have since been dissolved.

Richard Ottaway, chairman of the foreign affairs select committee, told the FT: "UKTI has got to justify its actions, it has got to explain why it recommended investment from this group."

The deal between Peel Holdings, the company leading the Wirral redevelopment, and Ms Shiu's company was originally signed in the presence of senior UKTI officials, including Lord Green, trade minister. It was touted as an example of the kind of deal that is being promoted by Mr Cameron as he focuses Britain's relationship with China firmly on securing trade between the two countries.

The prime minister will travel to China next week for the first time since the new Chinese leadership took over, ending a year-long diplomatic stand-off over his decision to meet the Dalai Lama in 2012.

(Read more: Alibaba London listing on the cards)

He will take a large trade delegation with him, including dozens of executives from blue-chip companies and others from small and medium-sized businesses.

But the trip comes amid mounting concern that Britain is so keen to sign new deals that it is failing to carry out enough due diligence on prospective investors.

One of the biggest projects to have attracted Chinese backing is a £1 billion property development in London's docklands. But Advanced Business Park, a Chinese company planning an office complex on the site, has only one completed project to its name: a development located on the far outskirts of Beijing in the city's least affluent district.

John Spellar, a Labor member of the all party group on China, told the FT: "UKTI and the Foreign Office have to be careful and undertake due diligence to make sure of the bona fides and assets of any potential investors."

(Read more: Banks and trust: No honor system here)

Senior diplomats in China believe Britain may be going too far in trying to encourage inward investment into the country.

More from the Financial Times:

Questions raised on Mersey 'China fever'
Manchester trumps Merseyside in China deals
Small business seen as vital to UK trade

"Total capitulation" was the way one senior Beijing-based Asian diplomat described Britain's climb down over the Dalai Lama debacle.

"The whole situation has been poorly handled – 18 months ago Mr Cameron was the great defender of human rights speaking truth to China and saying the UK will act on principle but now it seems to be about business and nothing else," said Kerry Brown, an associate fellow at Chatham House and a former British diplomat.

"There's a strong case to engage with serious Chinese companies and to welcome their investment but some of the companies people like Boris Johnson are talking to have no record abroad at all. It all seems extremely unsophisticated."

One senior European diplomat said it was clear from internal European meetings that Britain had downgraded human rights as an issue when dealing with China, a move which has made it harder for other countries to talk tough on the subject.

(Read more: UK opens doors to Chinese banks with special terms)

Most of the dozen or so senior diplomats who spoke to the FT on the matter said Britain's willingness to downgrade human rights was unlikely to help it in dealing with Beijing, which would only sense weakness in London's about-face.

Another European diplomat said that by agreeing to allow more Chinese investment in its telecoms, nuclear and banking sectors as a way of getting back in Beijing's good graces, the UK had given far more than any other European country would consider.

"It certainly appears that they have sold the store and what are they actually getting in return?" asked one senior diplomat in Asia.

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