UK firms fear China’s revenge over Huawei and Hong Kong

Mr Rous said many of the Council’s members felt the Government had not fully explained the reasons behind its U-turn on Huawei. “It is the sovereign right of any government to change policy but we want to understand, what is the evidence base for this?” he said. Dominic Raab, the Foreign Secretary, has blamed US sanctions.

A source in the business community in Beijing said there was concern among businesses about the potential impact on the UK-China relationship of “very negative” language coming out of Westminster. “British businesses as much as anybody want to have a robust conversation on the relationship between the UK and China,” the source said. “But a relationship needs two sides. Unfortunately at the moment it seems there is one side dominating.”

Aside from the business impact of potential retaliation in China, the tensions put UK businesses in an increasingly uncomfortable public position. Despite private concern about China’s actions in Hong Kong and human rights abuses against Uighur Muslims in Xinjiang, sources suggested there was “no upside” to speaking out.

That tension bubbled into the open this month when the City of London Corporation, governing body of the Square Mile, declined to issue a formal statement over China’s crackdown on democracy campaigners in Hong Kong, citing concerns about retaliation against HSBC and others.

HSBC, which makes 80pc of its profits in Hong Kong and mainland China, had already sparked anger by backing the Hong Kong security laws. Mark Tucker, its chairman, drew further criticism from Sinosceptic MPs after The Sunday Telegraph revealed he had warned the Government against ousting Huawei, again citing retaliation.

Yet despite the tensions, UK firms may be saved by China’s more pressing need to boost an economy which is reeling from coronavirus, and is helped by foreign investment. “It’s about jobs,” says Dr Yu Jie, senior research fellow at the think-tank Chatham House. “China this year has around nine million fresh graduates and there is mounting pressure on the government over the economy. I would say domestic economic revitalisation is a much bigger headache for China than relations with the UK.”

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