UK launches inquiry into possible Chinese asset stripping

The UK has launched an emergency House of Commons inquiry into possible Chinese asset-stripping of hi-tech firms. The inquiry was announced following an aborted takeover of graphics chipmaker Imagination Technologies by an investor with links to the Chinese state.

Earlier this week, the company held an emergency board meeting to push through the appointment of four new board members, each with links to China Reform Holdings, a $30-billion venture fund controlled by the Chinese government.

The meeting, however, was cancelled after UK Culture Secretary OIiver Dowden stepped in to demand a meeting with the company's chairman Ray Bingham in order to gain more information on the issue.

The government was also alerted to the move following the resignation earlier this week of Imagination Technologies CEO Ron Black. The Financial Times reported seeing a letter written by Black to his 600 employees in which he explained that his resignation came after the assurances that China Reform was a limited partner and a passive investor, had "proven to not be the case".

He added in the letter that the boardroom coup would enable the Chinese investor to "assert its control" over the company.

The episode is indicative of a growing unease about the amount of Chinese business investment in the UK, which has increased greatly in the wake of the Chinese government's handling of the Covid-19 outbreak.

Tom Tugendhat, who chairs the UK's Foreign Affair Select Committee, wrote to Ray Bingham, chair of Imagination Technologies, demanding to know what assurances his firm had received when China Reform Holding took over in 2017, and whether he knew of any plans to relocate all or part of the business or its intellectual property overseas.

Following the government and select committee involvement, both Black and Bingham have been reinstated.

Imagination Technologies was sold in 2017 to Canyon Bridge, a US-based venture company backed by Chinese money, for £550-million, following an announcement by Apple that it would no longer use its chip technology and the share prices collapsed as a result. 

The Canyon Bridge bid was approved by the UK regulatory authorities and Apple signed a new deal with the company.

Tugendhat argued that it was legitimate to take a look at the role which the Foreign Office could play in preventing Chinese asset stripping of the building blocks of the future UK economy. 

With the UK Parliament currently in recess and no confirmation on how operations will continue when the recess is over, Tugendhat indicated that the inquiry continue with online evidence-taking or as a paper-based investigation.

The issue also highlights growing scepticism about the global role of China when the coronavirus crisis ends. 

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