U.K. Spy Scandal Could Shift China Policy

Welcome to Foreign Policy’s China Brief.

The highlights this week: A U.K. parliamentary aide is arrested on suspicion of spying for China, China’s defense minister is missing from public, and Beijing plans an iPhone ban across government bodies and other state organizations.

News broke over the weekend that a U.K. parliamentary aide had been arrested in March, along with another individual, on charges of violating the Official Secrets Act on behalf of China. British lawmakers have reacted angrily, because of both the six-month delay in the announcement of the news and the intrusion into Parliament. The man, 28, was a parliamentary researcher for the Conservative Party, a position that allows access to some sensitive information. (The researcher was released on bail and has denied the charges.)

The scandal is the most notable public espionage case involving China and the United Kingdom in years, and it comes at a time when the ruling Conservative Party is trying to reset its relationship with China. The COVID-19 pandemic, Beijing’s aggressive diplomacy, and public pressure to act against China’s human rights abuses have strained bilateral relations. The end of free speech in Hong Kong, a former British colony, is also a sore spot, especially since the U.K. has acted as a refuge for democratic activists.

British leaders have been reluctant to give up on the dream of Chinese markets and investment, especially as the U.K. scrambles to navigate a post-Brexit future. The Tories appear set for a major loss in the next U.K. general election, which is expected to take place before January 2025, and they are desperate for any economic good news.

British Prime Minister Rishi Sunak took a more hawkish stance toward China during his first bid for the job last year—which he lost to short-lived leader Liz Truss. Sunak and his team have backed down from that position since the prime minister took office last October. British Foreign Secretary James Cleverly, on a trip to Beijing last month, called isolating China a mistake, while Kemi Badenoch, the secretary of state for business and trade, insisted that China was a “challenge” and not a foe.

The U.K. often aligns itself with the United States, but London’s relationship with Beijing hasn’t reached a nadir, as Washington’s has. (For example, flights between the U.K. and China have nearly returned to pre-pandemic frequency, while U.S.-China flights are back to just 16 percent of the 2019 figure.) Since shifting back to advocating for engagement, Sunak has faced critics in the Conservative Party, including British Security Minister Tom Tugendhat, former party leader Iain Duncan Smith, and Truss, who planned to attack Sunak on his previous calls for engagement with China during the party leadership campaign.

Most of the British press has avoided naming the parliamentary researcher. The Times of London, however, named him as Chris Cash. Cash once worked for the China Research Group—a moderately hawkish group co-founded by Tugendhat—and also spent two years in Hangzhou, China, working for the British Council, an overseas cultural body. The other individual arrested alongside him has not been named.

Cash’s previous work in China raises the possibility that he could have been recruited while living there and instructed by the Chinese Ministry of State Security (MSS) to get a security-related job back at home. The MSS has used that technique against the United States in at least one case and, according to U.S. security sources, in other cases that were not made public. According to activist Luke de Pulford, Cash briefed Parliament against the Inter-Parliamentary Alliance on China, a human rights lobbying group, and also intervened to help block human rights-related actions.

Meanwhile, China said last month that it had arrested two CIA spies in August, and it announced this week the sentencing of a U.S. citizen to life imprisonment on espionage charges several months ago. China provides little detail about espionage cases, which are often used as a political tool, but U.S. intelligence regularly attempts to recruit sources in China—sometimes at great cost.

Much of the fallout in the U.K. will center on why it took so long for Parliament to be informed of the alleged spy as well as accusations that the country has been slow to respond to more aggressive Chinese espionage. I would not be surprised if the U.K. intelligence services—which have internally taken a harder line on China—begin to discreetly leak other potential scandals, as Canadian intelligence officials did when they felt Canadian Prime Minister Justin Trudeau had failed to act on Chinese electoral interference.

Late on Tuesday, the Times broke the news that two potential Conservative Party parliamentary candidates were dropped from candidate lists due to concerns over their ties to Chinese intelligence. The political mood in the U.K., both among members of Parliament and the public, is likely to swing sharply against China soon.

Another missing minister. Following the removal of former Chinese Foreign Minister Qin Gang in July—after a disappearance from public view—and purges within the People’s Liberation Army (PLA) Rocket Force, Chinese Defense Minister Li Shangfu hasn’t been seen in public for more than two weeks. Such public absences in China often provide grist for the diaspora rumor mill and then don’t amount to much.

However, given the context of the current political situation, speculation about Li’s disappearing act seems more credible. Li’s background is in military procurement, logistics, and rockets—he headed the Xichang Satellite Launch Center for a decade; there is a decent chance he is connected to the graft scandals inside the PLA Rocket Force. He was also sanctioned by the United States in 2018 for weapons deals with Russia.

If Chinese President Xi Jinping is busy putting out political fires at home, he will be less likely to attend scheduled meetings abroad, such as the Asia-Pacific Economic Cooperation Leaders’  Meeting in San Francisco in November. He skipped the annual G-20 summit in India last weekend.

Cultural crackdown. A Chinese draft law that would allow police to detain for up to 10 days anyone who “hurts the feelings of the Chinese people” or “damages the spirit of the Chinese nation” by wearing the wrong clothes or saying the wrong words has drawn big public pushback. There are already laws on the books used to go after people who criticize Chinese Communist Party (CCP) heroes, as well as charges such as “picking quarrels and provoking trouble,” used against dissidents of all stripes.

The latest draft law seems related to a cultural panic that began last year about people wearing traditional Japanese clothing as well as officials responding to Xi’s emphasis on a single interpretation of Chinese culture. It is also tied to a wider crackdown on unconventional gender expression and LGBTQ culture. The criticism of the draft law, which has even come from some conservative commentators, might stop it for a while, but it’s likely to come back in another form.

• Deterrence in Taiwan Is Failing by Hal Brands
• Prigozhin’s Assassination Was Business, Not Revenge by Dmitri Alperovitch
• Xi’s Policies Have Shortened the Fuse on China’s Economic Time Bomb by Zongyuan Zoe Liu

Apple in trouble. Apple shares fell last Wednesday after news that the Chinese government planned to ban the use of iPhones across government bodies and other state organizations, expanding an existing ban on their use in sensitive security areas. Apple’s relationship with Beijing is complicated: China is one of the company’s largest markets as well as its main manufacturer, and Apple has done plenty to placate the CCP, including handing over data on Chinese customers.

But Apple’s status as a flagship U.S. firm means that it will never be fully trusted in China. Chinese officials tend to be skeptical that the U.S. government won’t use Apple’s global reach to its advantage, especially since Beijing is used to bossing its own tech firms around. Although Chinese leaders keep saying they are open to foreign investment, the government’s actions are increasingly signaling that it is a risk.

Property market contagion. As the Chinese real estate sector continues its drawn-out collapse, one big question is which sectors beyond Chinese borders might experience the ripple effects. The answer may be markets in Southeast Asia, where big Chinese developers had significant investments. Chinese property developer Country Garden has a $100 billion project in Malaysia that looks set to become a ghost city of abandoned construction.

Another answer could be the remnants of the cryptocurrency market. Major players such as so-called “stablecoin” Tether were backed by some securities linked to China Evergrande Group and other troubled Chinese firms. The companies say they’re no longer supported by Chinese commercial paper, but given the fraud in the crypto industry, there may still be significant exposure to China’s property market.