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CHINA of the ministerial-level UK-China Joint Economic and Trade Commission, which had not met since 2018.

While foreign investment is often positive, it also provides a legitimate route through which the CCP can acquire technology to which it may not otherwise have had ready access, and which it can transfer to China and use in ways which may be against the interests of the UK and its allies. When proposed investments are in high-tech industries with potential 'dual-use' (i.e. civilian and military) applications, this is of particular concern from a national security perspective.

In 2020, the JIC assessed that the main potential threats from foreign investment were that: our adversaries' defence and intelligence capabilities are thereby developed; CNI and related supply chains are interrupted; and ***. Investment can also enable espionage and be used to gain influence, credibility and leverage over the UK.

All of these considerations are relevant to Chinese investment in the UK. The assessment acknowledged that the majority of Chinese investment in the UK is almost certainly in non-sensitive sectors, but noted significant investments in sensitive sectors including ***. Furthermore, investments in areas not traditionally considered sensitive can also have national security implications.

The CCP views investment in UK companies as a legitimate means to access and transfer "strategically important knowledge" to China. This information is not restricted to the design of the technology in question, but often includes the knowledge needed to manufacture the product, including "physical skills (e.g. machine use), labour organisation, factory and machine design and construction, research skills and quality assurance procedures". As a consequence, "acquisitions by Chinese companies of UK defence and aerospace companies often include a plan to improve the production capability of the Chinese company and the construction of a new factory in China".

This is the 'added value' that China obtains from its legitimate investments. A 2019 Intelligence Community assessment paper noted:

"Foreign Direct Investment allows Chinese entities to master the complex interconnected systems involved in manufacturing a product from concept to production. There is a remote chance individual human experts or data acquisition alone could provide this level of insight in most cases."

While Chinese acquisitions in a broad range of sectors could be of potential national security concern, the risk is most acute in the defence sector. The Intelligence Community told the Committee that acquisitions of UK defence companies by Chinese companies