The reason that the sixties Hollywood comedy ‘The Russians are Coming, The Russians are Coming’ did not find a Chinese sequel is that the Chinese are here already, they turned up before anyone knew. And unlike the chaps in that film, they came to stay. In just about every destination outside of China. The newest step into Britain comes from the company Jingye to take over the loss-making British Steel.
Previous owners Greybull Capital were prepared to risk as much as 20 million pounds more into the loss-making company, but stopped short. The Turkish firm Ataer took a good look at British Steel and then looked the other way. The sharpest managers born and brought up in the steel business, the keenest investors, couldn’t see British Steel’s numbers add up to profit. Jingye announced an investment of 1.2 billion pounds over ten years. They have seen in British Steel what others didn’t – or they plan to do with it what others can’t. And what might that be? Britain’s world of steel is guessing furiously.
This new inroad, or ‘in-rail’ comes after Chinese steel ran into a Stop sign into the EU in 2016 when the EU took tough anti-dumping measures against China, with up to 75 percent tariffs on steel import from China. Any back-end production support that Jingye can draw on – it’s hard to see that they won’t – could open up new routes past that Stop sign. Could this become a story of ‘Made in China’ stamped ‘Made in Britain’? Even with some remaking in Scunthorpe itself? British Steel makes what are called long products such as railway tracks. The model they have in mind would seem to extend those rail tracks into China itself. We do all carry immovable if reluctant faith that the Chinese never get it wrong. And so that question steel managers are asking, what they could be getting right that no one else can.
Steel-making in Europe is not currently the juiciest business on offer. Steel hasn’t been having an easy year in Europe, despite the protective tariffs. The ArelorMittal of India’s man of steel Laxmi Mittal has been hit by declining demands and prices together with high raw material costs, just like Europe’s other steel makers. Scunthrope is celebrating when it wasn’t expecting to. More than 400 workers, most of them at any rate, hope to save their jobs, who cares for the mystery of the business model so long as it delivers here and now.
FBI’s thousand cases, and counting
Invariably accompanied baggage to the arrival of Chinese investment is some or other conspiracy theory. Britain’s business secretary Andrea Leadsom, a particularly enthusiastic Brexiteer who would like to see more of this sort of thing happen between Britain and the rest of the world outside of the EU, has sought to calm some of these theories. “There aren’t any national security issues with this acquisition,” she reassured Britain’s skeptics. Which is to say, none that she or anyone else has spotted straightaway anyhow. She hasn’t stopped theories surfacing over this acquisition.
The steel buzz in Britain suggests there would be intellectual property assets to be acquired as a part of this deal. The Jingye move comes soon after the Federal Bureau of Investigation announced that it has opened a case in the US against a Chinese man over stealing protected information on manufacture of locomotives. Locomotives do position themselves around rail tracks. These would in any case be only a part of what is, let’s say, this growing Chinese hunger for information that others have and that it considers useful for itself. FBI Director Christopher Wray announced in July that the FBI is investigating more than a thousand cases of theft of intellectual property, almost all leading back to China. “There is no country that poses a more severe counter-intelligence threat to this country right now than China … and I don’t say it lightly,” Wray told the US Senate Judiciary Committee.
A thousand cases of theft? China does run an official ‘Thousand Talents’ programme to reward its citizens who can bring back useful information from abroad that is not ordinarily available. And didn’t Chairman Mao say earlier, “Let a thousand flowers bloom”? No he didn’t, he’d said, “Let a hundred flowers blossom.” But given the growth of the Chinese economy since then, it adds up. It’s grown more than tenfold. Maybe even a thousand-fold, since that’s the style these days.
London Eye is a weekly column by CNBC-TV18’s Sanjay Suri, which gives a peek at business-as-unusual from London and around. Read his columns