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British pension funds plough more cash into China

·3 min read
Xi
Xi

British pension funds are ramping up their investment in Chinese companies despite growing tensions between the West and the Communist state.

According to a new report by Hong Kong Watch, a pro-democracy advocacy group, the amount of cash invested by Western pension funds and other institutional investors in China has hit a record high in recent months.

It comes amid rising criticism in the West about China's human rights record, including its brutal treatment of Uighur Muslims and its suppression of democracy campaigners in Hong Kong.

The report highlights considerable investment by UK pension funds into Chinese firms which have "troubling human rights records", according to the think tank.

Workers walk by the perimeter fence of what China calls a 'vocational skills education centre' thought to be an internment camp in Dabancheng in Xinjiang Uighur Autonomous Region. - REUTERS/Thomas Peter
Workers walk by the perimeter fence of what China calls a 'vocational skills education centre' thought to be an internment camp in Dabancheng in Xinjiang Uighur Autonomous Region. - REUTERS/Thomas Peter

Johnny Patterson, policy director at Hong Kong Watch, said: "There is a clear knowledge gap between financial professionals who know that enormous amounts of the money ... is being invested in China, and the members of the public and policy makers who would have serious ethical reservations about what seems to be a reckless and problematic course of action.

"This information gap has provided cover for financial institutions to pursue profit without regard for the social impacts of their ties with firms that are closely affiliated with egregious rights abuses in Hong Kong or Xinjiang."

The report cites the Universities Superannuation Scheme (USS), one of the UK's largest private pension schemes, and Legal & General, Britain's biggest pensions manager, as two British firms with "problematic" investments in China.

It found that L&G's China fund was previously investing UK pensions in Zhejiang Dahua Technology, which is alleged to produce facial recognition software for the Communist Party that detects the race of individuals and alerts the police when it identifies Uighur Muslims.

L&G has since divested from Zhejiang Dahua Technology.

Uighur children watch policemen pass their home as they head to face protestors - Guang Niu/Getty Images
Uighur children watch policemen pass their home as they head to face protestors - Guang Niu/Getty Images

Meanwhile it also found that USS was heavily invested in Chinese tech giants Tencent and Alibaba, with almost £800m collectively invested in the two firms at the end of March this year.

Hong Kong Watch said this undermined USS' commitment to responsible and ethical investing as "Chinese technology companies of their size cannot divorce themselves from the Chinese state which is increasingly using a mixture of surveillance and technology to oppress and target minorities within its borders".

The report comes after Rishi Sunak, the Chancellor, encouraged British firms to do more business in China earlier this year, hailing the Communist state as "one of the most important economies in the world".

In a speech at the Mansion House in July, he added that the UK's relationship with it "lacks nuance".

Last month, The Telegraph revealed that L&G was plotting an expansion into China as the regime seeks to lure Western money managers to the country.

In the report, Hong Kong Watch called on the Government to work multilaterally to create consistent global environmental, social and governance standards and to introduce legislation to halt investments in firms tied to human rights abuses.

L&G and USS were contacted for comment.