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A Chinese state-owned bank has been underwriting key British infrastructure companies, raising concerns that China’s interest poses a financial security risk.
Emails and financial records obtained from the London office of Industrial and Commercial Bank of China (ICBC), the world’s biggest bank, show how the Chinese financial institution issued nearly $1.7 billion (£1.26 billion) in loans and borrowing options to UK water and energy infrastructure companies up to July 2024.
Borrowers included major offshore wind projects crucial for delivering the UK’s net zero ambitions viewed as a “strategic” investment, and British energy transmission networks.
The findings, following an investigation by The Times and the International Consortium of Investigative Journalists (ICIJ) also showed examples of cases where concerns of internal due diligence officers were overruled by bank staff in Beijing.
In one case, ICBC moved $1.3 billion (£960 million) for Huawei from the UK back to China in the aftermath of the arrest of one of its key officials and indictment of the company, a decision which raised serious concerns for its own money laundering reporting officers.
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Martin Thorley, a China expert and author of All That Glistens, a book tracing China’s influence in Britain, told The Times that infrastructure projects faced additional risk because some in positions of power did not understand, or turned a blind eye to, how Chinese banks operate in practice.
“We think of companies as private entities. It simply doesn’t apply in the Chinese context. Chinese banks are effectively part of this what I would call a ‘latent network’.
“They have to make sure they operate within the party’s red lines; they understand that really, they are at the mercy of the party, so they have to second guess themselves with how they operate as it thinks the party might want.
“And ultimately, if the party wants to, it can also directly intervene, and it does directly intervene.”
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With total assets of about $8 trillion, ICBC is a cornerstone of the Chinese economy, playing a key role in President Xi’s “Belt and Road Initiative” (BRI).
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Beijing touts this as an economic win-win, with investments stimulating development in overseas countries and buying goodwill there, while in China BRI has been sold to help stimulate exports from Chinese companies to support these projects, boosting the economy.
But foreign policy experts say the scheme is also designed to ensure countries are economically dependent on China and can be leveraged to coerce them into toeing the country’s line on the international stage.
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The documents record $425 million (£315 million) in loans to National Grid, a company that plays a crucial role in owning and operating the UK’s electricity and natural gas transmission networks, as of December 2023.
The company said that while these loans were arranged, they constituted borrowing options that were never drawn.
According to the same document, another borrower was Drax Power, a company which provides about 5 per cent of the UK’s energy. The record listed loans of $143 million (£106 million) from ICBC, as well as trade finance guarantees worth a further $57 million (£42 million), as of the same date.
Four of the UK’s nine major water companies were ICBC customers as of July 2024, another document showed.
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ICBC recorded £235 million in loans and facilities for Thames Water, £25 million for Yorkshire Water, £146 million for Anglian Water and £35 million for Severn Trent. Yorkshire Water and Anglian Water said it has since repaid their loans.
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Many water companies in the UK are highly leveraged, with private owners borrowing heavily against relatively guaranteed incomes to maximise dividends. This model could leave water companies at risk should disputes arise over the debts.
Companies linked to Electricity North West, the main power network operator for the northwest of England, had arranged loans of $126 million (£93 million) from ICBC, with a further $52 million (£39 million) in loan facilities, according to the December 2023 report. Scottish Power, the operator’s owner, said those had been settled since it took ownership of the company.
Another borrower was the Dogger Bank wind farm project, poised to be one of the largest in the world when completed. It is recorded as having arranged loans of $168 million (£125 million) from the Chinese financial giant, as of 2023.
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The bank also accepted high risks for certain transactions that supported a key Chinese company and was investigated by its own anti-corruption officials.
Huawei, the telecommunications giant, was sanctioned in the US over its alleged links to the Chinese military, and its equipment was banned from UK infrastructure over security concerns stemming from the impact of those US sanctions.
In 2018, Meng Wanzhou, Huawei’s CFO and the founder’s daughter was arrested in Canada on a US warrant alleging sanctions violations.
The incident triggered an unprecedented diplomatic spat as Chinese authorities retaliated by detaining two Canadians on espionage charges. Meng has since been released, and all parties denied wrongdoing.
But in London, ICBC fulfilled Huawei’s request to transfer vast sums of money out of the UK and back to China just after the indictment.
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In February 2019, shortly after Meng was indicted on the US charges, a request was made to repatriate $1.3 billion of Huawei funds swiftly from Huawei’s ICBC account in London to its account in Shenzhen.
While not illegal, the transaction over the course of a weekend raised internal “anti-money laundering (AML) red flags” and was raised as an operational incident by the bank’s own AML officers.
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The records also showed how the bank continued to accept business from Russian and Belarussian clients.
Records included the phrase “China rationale” to explain why ICBC London would want to pursue a given deal, revealing the geopolitical nature of some loans.
“There is very little appetite to offboard high financial crime risk business,” one money-laundering reporting officer noted in an internal memo in 2019.
But for an important Russian client, the bank was willing to go against an internal policy forbidding dealings with clients linked to sanctioned people or entities.
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[UK's] Prudential Regulation Authority, which regulates overseas bank branches such as ICBC, declined to comment. The FCA declined to comment specifically on ICBC but said “we look carefully at all issues raised with us”.
Thames Water and Severn Trent did not respond to a request for comment. Nornickel and Huawei did not respond to a request for comment.