Economics and ‘national security’ often pull in different directions. This is especially true when we look at relations with China.

Consider the strange case of the Scottish wind turbine project.  At the end of March, the UK government blocked a planned Chinese investment in the Scottish Highlands to manufacture wind turbines on ‘national security’ grounds. The issue got lost in the fog around the Scottish parliamentary elections. But it hasn’t gone away. The Chinese have indicated that they will switch the plant from Scotland to Spain. The British partners who spent years negotiating the project, in good faith, are furious and are questioning the capricious nature of UK government decision making around ‘security.’

The planned Chinese investment, at Ardersier, to manufacture wind turbines was potentially the largest turbine factory in the world, employing 1,500 people with more in the supply chain. For British partners and the Scottish government, utilising China’s impressive ‘green’ technology was thought to be a safe and sensible form of collaboration. The project involved making the most technically sophisticated bit of the turbine – the nacelle – in Scotland.

I don’t normally warm to the Scottish National Party but I have some sympathy with the then Scottish Deputy Chief Minister and Economics Minister, Kate Forbes, who said the decision was: ‘simply, sabotage of Scotland’s industrial future’. 

The £1.5 billion project involving the Chinese company Ming Yang was to be on a site on the Moray Firth once used to employ 4,500 people for oil and gas platform assembly. Ming Yang is recognised as one of, if not the, leading company in the world for wind technology where China is the dominant producer with 70% of global wind capacity. Ming Yang is already a trusted partner of Octopus Energy, a reputable and popular British energy supplier.

Political dinosaurs in Britain and the USA may regard wind power as a ‘woke’ response to the ‘climate hoax’. But the Chinese long understood and planned for its development as a source of cheap, secure and clean energy. They are now being vindicated, not least by the disruption to oil and gas supplies from the Gulf.  So, why is it a problem to utilise Chinese investment and technology to develop our own wind-power sector? 

‘National security’ was given as the reason for vetoing the investment.  What exactly was involved is unclear but the Scottish Conservative leader attempted to explain: ‘the Chinese will spy on British seas, defence submarines and the layout of energy infrastructure’. But the undoubtedly sensitive submarine naval base at Faslane is on the other side of Scotland. Satellites and container ships can see far more than static towers in the North Sea.  And there are far more obvious ways of engaging with Britain’s energy system including the (minority) Chinese stake in our new nuclear power stations. If there were worries about ‘killer switches’, the project could have been approved subject to security inspection or subject to the most sensitive components being reserved for Western suppliers.

There are ominous similarities with the story of Huawei which was excluded from the UK for equally murky reasons, also rationalised as ‘national security’. Huawei was a key supplier of telecoms technology and hardware to the UK. When Secretary of State, I queried the use of Huawei in sensitive installations but was reassured that any hypothetical Chinese attempt to create ‘back doors’ into secure systems could be monitored and managed. The benefits of Huawei’s (apparently) superior products outweighed the risks. 

Theresa May was given the same advice which led to the sensible compromise on 5G: that Huawei be excluded from the most sensitive work but used for peripheral hardware. After American intervention, however, this decision was overturned, and Huawei products were ripped out of the system at considerable cost to British consumers and companies. 

Alleged Chinese security ‘threats’ are now appearing frequently, with alarming headlines about of Chinese ‘spies’ lurking in universities, parliament, science labs and Chinese-owned business. Some politicians and, perhaps also, individuals in our security services appear to be obsessed by this Chinese ‘threat’ beyond any plausible risk assessment. Since security advice is not, for obvious reasons, in the public domain it is difficult however to judge how much is prudent caution and how much is simply paranoia.

Of course, there are risks and security issues. It is right to be careful. There is plenty of evidence that Chinese entities have been involved in cyber-attacks. When travelling to China on official business dealing with sensitive issues it is sensible for ministers and others to surrender their mobiles (as I did when in office). Common sense also suggests that any Chinese investment in politically sensitive sectors should involve British inspection and surveillance of any potentially suspect hardware and software. 

There are threats, but also opportunities.  Many of these opportunities lie in the fields of renewable energy and associated manufacture.  As a result of foresight not matched in the West, China now dominates production and technology in the sector: wind and solar power and their manufacturing supply chains; high-voltage transmission; electric vehicles; batteries. 

Whilst Britain has made good progress in wind power development at competitive cost – helped by lifting the absurd fatwa outlawing cheaper onshore wind – the manufacturing supply chain is less developed. In the Coalition years, one big success of the Industrial Strategy was attracting Siemens to make turbines in Hull. There are now 27 (foreign owned) factories in the UK. But only the Chinese are willing to make the high-tech and high-value nacelles (the ‘brain’ and ‘engine’ of the turbine) in the UK. Or were, until banned.

The same issue will arise with EVs if we adopt the template of the UK government in the early 1980’s, to competition from Japanese car imports: that was to embrace UK production by Japanese companies.  We should demand that BYD and other Chinese companies make their cars and batteries here. China has grown through demands for technology transfer (including theft). We should learn from them. We should welcome Chinese manufacturers as we welcomed Nissan, Toyota, and Honda. I was pleased to see that Nissan has agreed terms with the Chinese company Chery to make EVs in Sunderland.

I am reminded of advice I heard thirty years when working in a British multinational on prospective investments in China: ‘only the naïve ignore the threats; only fools ignore the opportunities’. Let this be the last time folly prevails.

* Sir Vince Cable is the former MP for Twickenham and was leader of the Liberal Democrats from 2017 until 2019. He also served in the Cabinet as Secretary of State for Business, Innovation and Skills from 2010 to 2015.