Chinese takeover of tech company blocked over security fears

Kwasi Kwarteng - JEFF OVERS/BBC
Kwasi Kwarteng - JEFF OVERS/BBC

The Government has blocked the takeover of a Bristol-based electronic design company by a Hong Kong rival in a fresh sign of Britain’s increasing hostility to Chinese investment.

The Business Secretary Kwasi Kwarteng, who is tipped by some Conservatives to be the next chancellor, ruled that stopping the acquisition of Pulsic, whose software can be used to build circuits, by Super Orange HK 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,” said the Department for Business, Energy and Industrial Strategy (Beis).

Its products could “facilitate the building of cutting-edge integrated circuits” used in a “civilian or military supply chain,” Beis added.

Mr Kwarteng’s decision signals 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 frontrunner Liz Truss has vowed to crack down on Chinese-owned companies such as TikTok and warned Britain should not be strategically dependent on China.

Stopping the Super Orange HK acquisition comes as Westminster works to end China General Nuclear Power’s involvement in UK nuclear power projects.

Boris Johnson’s administration also blocked Huawei Technologies from participating in Britain’s 5G network.

The Government is also 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 calling for a ban on the sale of closed-circuit television cameras from the Chinese firms Hangzhou Hikvision and Zhejiang Dahua.

Mr 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 is a legitimate national security concern.

The minister 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 reply to a Bloomberg request for comment. Super Orange HK could not be reached for comment.