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UK Blocks Takeover of Electronic-Design Firm on Chinese Security Fears

·2 min read

(Bloomberg) -- The UK government blocked the takeover of an electronic design company by a Hong Kong-based firm, the latest example of Britain’s increasing hostility to Chinese investment.

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Business Secretary Kwasi Kwarteng, who is the front-runner to be the UK’s next chancellor, ruled that stopping the acquisition of Bristol-based Pulsic Ltd, whose software can be used to build circuits, by Super Orange HK Holding Ltd was “necessary and proportionate to mitigate the risk to national security.”

Pulsic’s intellectual property and software “could be used to build defence or technological capabilities,” the UK’s Department for Business, Energy and Industrial Strategy said in a statement. Its products could “facilitate the building of cutting-edge integrated circuits” used in a “civilian or military supply chain,” the statement said.

Kwarteng’s decision demonstrates the UK’s increasing aversion to Chinese involvement in its economy, spurred by deteriorating ties between the two countries over human rights, defence and security concerns. Tory leadership favorite Liz Truss has vowed to crack down on Chinese-owned companies such as TikTok Inc. and warned Britain shouldn’t be strategically dependent on China.

China Relationship Is Casualty of Truss-Sunak Battle to Lead UK

Stopping the Super Orange HK acquisition is a continuation of a recent trend: The British government worked to end China General Nuclear Power Corp.’s involvement in UK nuclear power projects and Boris Johnson’s administration also blocked Huawei Technologies Co. from participating in Britain’s 5G network.

And there are similar decisions for the UK government in the pipeline. Britain is probing a Chinese-led takeover of Newport Wafer Fab, which owns the UK’s largest semiconductor plant, with a decision due in September, and MPs are also calling for a ban on the sale of closed-circuit television cameras from the Chinese firms Hangzhou Hikvision Digital Technology Co. and Zhejiang Dahua Technology Co.

Kwarteng’s ruling is one of the first cases of Britain’s National Security and Investment Act being used to stop a transaction, a law passed in January that lets ministers prevent, impose conditions on and even pull-apart deals retrospectively where there’s a legitimate national security concern. Kwarteng also stopped the acquisition of technology by a Chinese firm in July.

Pulsic, which also has offices in San Jose, Newcastle and Tokyo, did not immediately respond to a request for comment. Super Orange HK could not be reached for comment.

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