China’s $200 billion sovereign wealth fund will be given the green light to invest in the UK, according to a report in the Financial Times. This decision leaves Britain’s markets far more open and unprotected than those of many other Western nations.

“Britain is open for business to investors of all nationalities,” said Kitty Ussher, the UK’s City minister. According to the Financial Times article,

Britain’s open-door approach contrasts with a more protectionist approach from Nicolas Sarkozy, French president. Angela Merkel, German chancellor, wants to shield her country’s companies from politically motivated foreign takeovers. …While some sovereign wealth funds have existed for years, they have started to attract criticism recently following the rapid growth of funds at their disposal to about $2,200 billion (€1,490 billion, £1,069 billion) and their increasing focus on investing in strategic industries, such as telecommunications, energy and financial services.Concerns about sovereign wealth funds’ poor transparency and their close links to national governments have triggered a protectionist backlash against them, such as the one that forced China’s cnooc to abandon its bid for Unocal in the U.S.

So while other nations are wary of these sovereign wealth funds, Britain has flung the doors wide open. Britain currently attracts more inward foreign direct investment (fdi) than any other European country—the city of London alone attracts more foreign capital than most European nations, including Germany and Spain!

Foreign direct investment is often seen as an absolute good by the British government. It does bring money into the country and has in some cases provided extra jobs. In the long run, however, high levels of fdi means that revenue from UK firms will leave the UK’s economy and put back into the nations investing in it. Naturally, big decisions will be made in favor of the company’s new owners, not the UK’s.

Far more important than the economic implications of high levels of foreign investment, however, are national security fears.

Having a large portion of your nation’s industries owned by foreign powers is not good for national security. The situation becomes even more dangerous when sovereign wealth funds are involved. These are usually less transparent and far more closely associated with foreign governments than other sources of investment.

It is true that Britain can block any attempt of a sovereign wealth fund to buy an industry that is deemed strategic, but Britain’s track record in this area is all but non-existent. The British government did not even move to stop the Kremlin from buying Centrica, a major gas provider, for example. Although the Russians decided not to go through with the sale, the case just goes to show how little the UK will do to protect its strategic industries.

Ultimately this mass clearance sale by the nation of shopkeepers will come back to bite Britain. As theTrumpet.com wrote earlier this year:

In times of peace and economic prosperity, foreign control of strategic industries and infrastructure may not be an immediate threat. But during major economic recessions—or, worse, times of geopolitical upheaval and war—the loss of ownership and full control of national industries can be catastrophic.

For more information on this subject, read our article “The Feared Foreign Corporate Invasion Has Begun.”