Why is China protesting about the nationalisation of British Steel? | International Trade News
UK Government’s Nationalization of British Steel Sparks Conflict with China
A Chinese firm is seeking compensation from the United Kingdom government for financial losses following last week’s nationalization of British Steel. The request comes amid a significant political shift in London.
Jingye Steel on Sunday urged the UK to cease what it described as violations of international investment agreements and demanded prompt and full compensation for losses stemming from the decision to nationalize British Steel.
The UK government assumed operational control of British Steel after Jingye Group contemplated closing the blast furnaces at its Scunthorpe plant. This facility is the last in the UK to produce “virgin steel” from raw materials.
Reasons for Nationalization
According to government officials, the nationalization aimed to safeguard the nation’s steelmaking capacity and protect jobs amid fears that the Chinese owners would halt operations at the plant. The Department for Business and Trade announced the move on Thursday, stating that it would preserve thousands of jobs and secure a supply of domestically produced steel essential for major construction and defense projects.
“British Steel now belongs to the British people,” Business Secretary Peter Kyle said in a statement. “Our focus is on the future: stabilizing the business, supporting the communities that rely on it, and building a sustainable, competitive, and decarbonized steel sector for years to come.”
The nationalization occurs as Labour Party leader Andy Burnham is poised to become prime minister, potentially beginning his term with tensions between the UK and China, a key trading partner.
China’s Response
In its statement, Jingye Group criticized the UK’s actions as dismissive of their investments and contributions, alleging they received “almost zero compensation.” The company noted that the UK had spent £377 million ($507 million) to operate British Steel by the end of January, a figure expected to exceed £600 million ($807 million) by June and potentially reach £2 billion (£1.5 billion) by 2028.
China has stated it will closely monitor the situation and take necessary measures to protect its legitimate rights. The Ministry of Commerce accused the UK of undermining Jingye’s rights and eroding investor confidence in the British market.
The Ministry of Foreign Affairs reminded that the UK and China entered into a bilateral investment treaty in 1986, which includes protections against arbitrary expropriations without compensation—an issue central to Jingye’s claims.
Background on British Steel
British Steel has been an essential contributor to the UK economy, primarily through its capability to produce steel from raw materials rather than recycled scrap. The Scunthorpe plant employs nearly 2,700 workers and has an annual production capacity of about three million tonnes of steel, although it has struggled financially.
In 2016, Tata Steel sold the company for a symbolic £1 to Greybull Capital, which subsequently renamed it British Steel. Facing a financial crisis in 2019, the UK government intervened, and the company was sold to Jingye the following year.
The government has indicated that British Steel was losing substantial amounts daily and relied heavily on state support. Officials warned that continued financial losses could lead to the UK depending entirely on international sources for critical construction materials.
“British Steel is part of the fabric of our nation and a cornerstone of Britain’s industrial strength,” Prime Minister Keir Starmer told Parliament.
