China's investment spree in UK gave it access to military-grade technology, BBC told

China has invested tens of billions of pounds in UK companies and projects this century, some of which have access to military-grade technology, according to BBC Panorama.

This spending spree, worth £45 billion ($59 billion) at 2023 rates, was at its peak following a 2015 Chinese state directive aimed at making the country a global leader in high-tech industries. According to US-based research firm AidData, the United Kingdom has been the top destination for these investments relative to the size of its population and economy.

Panorama has investigated how this resulted in cutting-edge technology and skills being exported to China. According to a former GCHQ chief, the UK was "far too free" in allowing access to strategically important industries.

The BBC was granted early access to data collected by AidData, a research group at the College of William & Mary in Virginia. AidData is a leading expert in monitoring how governments invest money overseas, supported by governments and charitable foundations around the world.

According to Dr Brad Parks, AidData's executive director, some government-backed Chinese investments were strictly commercial, but others aligned with Beijing's strategic goals.

'Made in China 2025'

These goals were laid out by China's communist leaders ten years ago in a strategic plan titled 'Made In China 2025'. It set ambitious targets for the country to become the industry leader in ten high-tech sectors, including aerospace, electric vehicles, and robotics.

According to Professor Keyu Jin of the Hong Kong University of Science and Technology, this was a far-sighted decision. "It's the longer-term strategic thinking that China has always had, and I'd say that many other nations should have," she said.

Using AidData's report, the BBC explored how the purchase of certain UK companies has resulted in military technology being moved to China.

One of the companies investigated was Imagination Technologies, a Hertfordshire-based business. Its main business is semiconductor chip manufacturing—designing the tiny electronic circuits inside chips that power electronics such as computers and smartphones.

The Sale of Imagination Technologies

In 2017, Imagination had recently lost Apple as its most important client and had seen its stock plummet. It was snapped up for £550 million by Canyon Bridge, a private equity company headquartered in California.

However, the largest stakeholder in the Canyon Bridge fund was China Reform, a state-backed investment group. This group reports to the State Council, the body in charge of implementing Chinese Communist Party policies and laws.

Two months prior to the UK deal, Canyon Bridge had attempted to purchase a semiconductor firm in the US, but the transaction was refused by American investment-screening regulators.

Imagination's greatest value lay in its intellectual property and the experience of its engineers, amassed over decades. A potential buyer would be interested in this expertise. Furthermore, the algorithms behind its designs, although intended for consumer electronics, could be adapted for military uses in missiles and drones.

Ron Black, the former CEO of Imagination, says the UK government vetted the transaction, and Canyon Bridge told him "unequivocally" that China Reform would be a passive investor interested only in financial returns.

However, in 2019, Mr Black claims he was summoned to a meeting in Beijing. He alleges that the purpose was to discuss monitoring the wholesale transfer of Imagination's technology and expertise to China.

"I think [the China Reform representative] said specifically: 'From the heads of the British engineers to the Chinese engineers... lay off the British developers, and you'll make a lot more money,'" says Mr Black.

He refused. However, he claims that several months later, China Reform attempted to appoint four new directors "with no knowledge of semiconductors" directly onto the board of Imagination Technologies.

"Their only attribute seemed to be a friendship with China Reform," he says.

Convinced that Imagination's technology could be used for military purposes, Mr Black began contacting figures in the UK government. He was given a sympathetic hearing but was told it was a private company matter and there was nothing anyone could do.

As the UK government began to show concern, China Reform suspended its attempts to install new directors. However, Mr Black was dismissed three days later. An employment tribunal later found that he had been wrongfully dismissed. According to reports, some of Imagination's technology was moved to China after he left the company.

Company Response

Imagination maintains that its technology is not used in military equipment.

"Imagination has always adhered to effective export and trade compliance regulations in respect of its commercial licensing of semiconductor IP technology and related activities," the company told Panorama.

Canyon Bridge stated: "The Imagination transaction was exclusively initiated and led by Canyon Bridge and its consultants."

Panorama contacted China Reform, but it has not commented on Mr Black's allegations. The Chinese Embassy says that the government has always required Chinese enterprises operating abroad to strictly comply with local laws and regulations, and that these companies contribute actively to local economic growth and job creation.

'The Trillion-Dollar Question'

In 2017, the UK had limited power to prevent the sale of an asset like Imagination to Chinese owners. During a state visit two years prior, China's leader, Xi Jinping, had been welcomed by David Cameron's Conservative government, which lauded the start of a "golden era" in UK-China relations.

"We suspected China was really a very friendly government and there was a lot of money to be earned," says Sir Jeremy Hunt, who served as Health Secretary in 2015 and later as Chancellor and Foreign Secretary. "Under the surface, we were already seeing a much more assertive China."

The challenge of how to trade with China while keeping the UK safe remains unsolved. Sir Jeremy Fleming, a former head of GCHQ, calls this "the trillion-dollar question."

He argues that while the UK has benefited from trade and investment over the past two decades, it often forgot that this investment could be used against its own interests.

"Our personal view," he says, "is that we've been far too free in allowing access to strategically critical science and technology industries."

Sir Jeremy compares the UK's response to China's own protective measures: "They have been extremely organised and careful not to allow Western companies to invest or get involved in key areas of their market that are strategically critical."

John Bolton, the former US National Security Advisor, noted that during the early Trump administration (2017-18), Europe and some US firms were still unsure about China. "There was a reluctance to believe we were going back to some kind of Cold War," he says.

Some experts argue that Beijing did nothing wrong and that the UK was simply short-sighted. Professor Keyu Jin says the results, seen from China's perspective, have been "nothing short of spectacular."

"The ability to set multi-decade-long goals is one of China's main advantages," she says. "You do the planning. You do the investment. You set the strategy. You influence the financing. It's not a five-year thing."

Changing Tides

China has been the world's biggest overseas lender in this century, spending £1.6 trillion ($2.1 trillion) at 2023 prices.

According to Dr Parks, the peak for Chinese overseas investment was between 2016 and 2017. Following this, many countries began improving screening procedures on national security grounds. By 2018, the United States, Germany, and Italy had all increased vetting on foreign investment. The UK followed suit in 2022.

Sir Jeremy Fleming is cautiously optimistic that lessons have been learned. "We have a much more effective system in place," he says. "But would I say that the process is watertight? Absolutely not."

The Labour government elected in 2024 faces the same dilemma as its predecessors: the UK needs economic growth, and China can assist. Chancellor Rachel Reeves has recently indicated a willingness to seek foreign investment.

"There is one big issue in Europe, including the United Kingdom: there isn't enough investment and support," Professor Keyu Jin says. "China is more than able to finance any of these projects. And there are several areas in which there is no credible threat to national security."

However, some Labour MPs are concerned that the government hasn't disclosed its China audit, which was carried out as part of an election manifesto pledge.

"I was told by the Foreign Secretary that it would be published," says Dame Emily Thornberry MP, chair of the Foreign Affairs Select Committee. "We now know that the China investigation has occurred, but we are not going to be told about it, and we are only going to get a few lines."

The Foreign Office told Panorama that it did not release its complete report due to security classifications. It stated that it takes "a consistent and strategic" approach to China, the UK's third-largest trading partner, and will use its powers to safeguard UK interests.