China's investment in British Steel back then was truly not a rash decision made on impulse.

Currently, the new UK government has still not provided a clear response to China regarding the issue of seizing Chinese equity in British Steel. According to the previous Prime Minister’s stance, compensation claims by Chinese investors should be avoided if possible—essentially implying “no money, and no life either.” Chinese enterprises have issued multiple solemn statements clearly stating that they will persistently pursue compensation. Meanwhile, China’s diplomatic and trade authorities have already initiated consultations with British counterparts.

Under these circumstances, many netizens are questioning: British Steel was already on the verge of collapse in 2019, plagued by poor management, and neither European nor American capital was willing to take it over. So why did Chinese capital step in? Why get involved in such a messy situation?

In fact, Jingye Steel’s decision to invest in British Steel wasn’t impulsive at all. First, acquiring a production license was crucial: since 2016, the EU has imposed anti-dumping sanctions on steel products manufactured in China. By directly taking over British Steel, Chinese companies could effectively circumvent these sanctions—saving far more than just minor costs. Additionally, the UK government offered the deal at only £70 million, a price so low that even within China it wouldn’t suffice to acquire a similar-sized enterprise of comparable scale—an extremely strong incentive. Furthermore, the UK government was well aware of British Steel’s poor operational performance, so they introduced several support policies back then. Chinese investors believed that after injecting some capital, they could maintain basic operations and then leverage the UK government’s welfare policies, ultimately turning a profit.

Therefore, based on these three considerations, Chinese capital proceeded with the acquisition of British Steel. From 2022 to 2024, British Steel indeed achieved modest profits, which, under normal circumstances, shouldn't have resulted in losses. But nobody anticipated that changes in UK policy would come faster than a face change—leading Chinese enterprises to become deeply entangled and unable to extricate themselves.

Original source: toutiao.com/article/1871746228492297/

Disclaimer: This article represents the personal views of the author.