James Sassoon, the golden era dealmaker

James Sassoon, the golden era dealmaker
Image: Illustration by Ricardo Santos & Daniel Lee
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James Sassoon is a Conservative member of the House of Lords and president of the China-Britain Business Council.

Lord Sassoon has had a long career in finance and politics, much of it in or related to China. He is a member of the Sassoon family, nicknamed the “Rothschilds of the East” for their extensive investments across Asia—including the import and export of opium, which sparked two wars between Britain and China in the 1800s. He was formerly the executive director of Jardine Matheson, a British investment conglomerate based in Hong Kong.

Lord Sassoon was a longtime adviser to former UK prime minister David Cameron, whose government he joined as commercial secretary to the Treasury between 2010 and 2013—a period widely seen as having laid the groundwork for a whole-of-government, investment-focused approach to China known as the “golden era.” He is an international advisor to the People’s Republic of China’s sovereign wealth fund.

This interview has been condensed and edited for clarity.

Quartz: When was the first time that you went to China?

Sassoon: Let me answer that a different way. The first time China really got to me was in November 1966 when I was just 11, because my grandmother went on one of the first European art tours [there] and spent a month in China. Four stops on a plane to get there, no foreign press, the tour information said, ‘Try not to have any post sent to China because it won’t get through.’ So this was a very alien place. It was the period in which the early mass parades of the Cultural Revolution had started.

My grandmother comes back with extraordinary films of the parades in Beijing, and of being shown tractor factories. She said casually, ‘We arrived in Hangzhou and had dinner with the Red Guards.’ Nobody at that stage knew the deeply negative and awful underbelly to the Cultural Revolution. So I got the impression of a country that was extraordinarily backward compared to Japan, which I knew about even then, but that seemed extraordinarily exciting—a mass movement, vast numbers of people with bands on the streets of Beijing. She also came back with the first edition of Mao’s little Red Book. I hadn’t really a clue what it was, but as an impressionable 11-year-old, that got me to understand that there was a historic country going through something extraordinary.

What is the James Sassoon manifesto on China? 

Sassoon: Anything one says that is reduced to a few sentences is going to sound trite and naive. But I always come at it from a perspective of trade and investment. What I see in China is the world’s second largest economy and the fastest-growing economy in the world, Covid- or non-Covid-influenced. For me, the manifesto is very much around seeing how Britain and British business can prosper in a safe and appropriate way out of the huge opportunities which China gives. And it throws up some big challenges and questions.

What do you think of the British government’s current approach to China?

Sassoon: I think they face enormous pressures, mostly from members of my own party, although I wouldn’t have liked to have seen some of the twists and turns in the last 18 months. The Integrated Review,1 in as far as it addresses China, puts British policy in a perfectly sensible and good place. Less than six months ago, the UK government was talking about only doing trade deals with like-minded democracies2—an absurd position for any government. So I think, if nothing else, and very importantly with China, it has put trade into a proper perspective alongside other issues.

I was not in favor of Brexit, but so much of the story of the proponents of Brexit was on this opportunity for us to trade around the world without the heavy hand of the EU on us. Where is the greatest trading opportunity for the UK? Without any question, China. I don’t think we’re going to get a free trade agreement with China anytime soon, [and] we don’t need a free trade agreement with China to open up new untapped opportunities, which can be done through bilateral opening. But if you exclude China from the priority countries for opening up post-Brexit trade opportunities, you are limiting the prospects for increased jobs and prosperity in this country. And I’m glad the government hasn’t gone down that path.

You were in government when [former chancellor] George Osborne was launching the golden era. Can you talk to me about it?

Sassoon: I came on board with George about 18 months before the 2010 election, and [it] was quite clear that the UK was underperforming in its trade and investment relationship with China. George quite rightly saw that something needed to be done about this.

I had a background in China. I had worked as a civil servant in Gordon Brown’s Treasury. I’d been with Brown on trips to China, both when he was chancellor and prime minister. So I had some understanding of the recent flow of UK-China [relations] and George used what insights I had on that.

What are some moments that stand out to you about that era?

Sassoon: The defining part of the engagement for me in that period was the Economic and Financial Dialogue, which we had with then-vice premier Wang Qishan when he came to London in 2011.

We wanted to develop with the Chinese a greater flow of investment and other business. And we knew, from a Treasury perspective, that financial services were going to be a major plank in that.

So Wang Qishang comes to London in 2011 and he sits down with George on a one-on-one, and he has the most extraordinary historical understanding of the role of the City of London. As George Osborne and I and others were thinking about engagement with China, what we didn’t have a full appreciation of was that Wang Qishan and that group of technocratic officials had this very strong view of London’s role in the global markets.

After that Economic and Financial Dialogue, there’s a line that goes to early UK membership of the [Asian Infrastructure Investment Bank], for example, and helping to shape that institution.

Another important landmark in that period was the 2015 state visit to the UK of Chinese president Xi Jinping. You met him, right?

Sassoon: I did. I had an incredibly nerve-wracking four days or whatever it was, because the one thing I had to do in my role as chairman of the China Britain Business Council was to give the president a copy of this Belt and Road (BRI) report (pdf), which was the first report by any business organization in the world trying to explain what the opportunities of BRI 3 might be. And I had no hesitation then, or in retrospect, in thinking this was absolutely the right thing to do.

This spotlight on the bilateral relationship encouraged a lot of British businesses who were not otherwise focused on China to see what China could mean for [them]. Now China, depending on how you measure it, is the UK’s second or third largest trading partner. And that period contributed to a lot of the business that’s flown—and the Chinese’s very high regard for the UK, incidentally.

So do you stand by that golden era approach to China?

Sassoon: It was not a British invention to call it the golden era, and these tags are always difficult. I remember going to the International Department of the Communist Party in Beijing soon after the Xi state visit [and] the head of the department saying, ‘Golden eras don’t last forever, so what are we going to do to make the best of it for business while it does last?’

I think that the Cameron-Osborne government were quite right to take China as seriously as they did. It was very much a coalition effort with senior members of the Liberal Democrats in the government party to it. It wasn’t personalized to Cameron and Osborne perhaps as much as people now tag it.

People seem to have forgotten the difficult period we had between 2011 and 2013 after the Dalai Lama’s visit. I was in government at the start of that period and had great difficulty having any meetings. Practically the day after I left government, with my China-Britain Business Council hat that I was taking on, I could suddenly meet senior ministers in Beijing again. These things come and go.

A major criticism of that time is that it encouraged Chinese investment without putting up necessary safeguards.

Sassoon: A lot of things were discussed in private meetings—I was there—that touched on the sensitive issues that people now say that Cameron and Osborne and all of us in government didn’t raise. All of these sensitive issues were raised in the National Security Council.

This is not in any way to say that there [are] things in China which we would applaud, or think are in any way pleasant, or that we should turn a blind eye to. But I think this idea that we had a prime minister, a deputy prime minister, a chancellor, a trade secretary, who were all somehow naive about China and got it wrong, is a mischaracterization.

Do you feel like enough was done at the time to screen investment from China on national security grounds?

Sassoon: Let me give you a small anecdote which might or might not answer the question. I remember a visit [to London] by Lou Jiwei, who was tasked with setting up the Chinese sovereign wealth fund. He and I have a meeting with Gordon Brown in Downing Street. Lou asks through the interpreters about British limits on what a Chinese sovereign wealth fund could invest in in the UK. And Gordon Brown says we have restrictions on who could be a controlling person of the media, certain financial services, banks, and defense companies. End of story. The meeting carries on.

At the end Lou says to me, ‘Is this really true, that we could invest in anything we wanted in the UK except for controlling stakes in defense, media, and banks?’ And then we have a discussion about how it’s actually a more subtle landscape than that. But my point is that the Chinese could not believe that the UK was as permissive as it was. So I don’t think they’re at all surprised to see us tightening up the scrutiny of foreign investments.

I’m going to take that as a ‘no,’ the UK did not do enough on that.

Sassoon: I’ve been around a long time. And at one stage of an earlier Conservative government, there was talk about something called the Lilly doctrine, which was all to do with whether state-controlled companies in foreign countries should be allowed to take stakes in privatized British entities. Which country do you think we were aiming that at, back in the 1980s? France.

So this is a debate that’s come and gone in different respects for a long time. It’s very difficult to get the balance right. I think the UK should be and will remain one of the more open countries for foreign investment. It’s a shame that so much of this current debate is targeted at one country because, as I say, it was France in a different way 30 years ago, and now we talk about China. Trying to make it one-country-specific just means we’ll miss where the next threat, if it is a threat, is coming from.

Critics would say that during this golden era, little progress was made on human rights, be it in Xinjiang, Hong Kong, or Taiwan. In what way would continuing the same approach make those issues any better?

Sassoon: It’s very difficult to rewrite history. But I certainly see [nothing] that I can think of [that] the British government could have done differently that would have made much difference in any of those three cases.

I look at it, then and now, mostly through a business perspective. And if you take it from that lens, proper things were put in place to test out the safety of Huawei equipment, for example. I was part of a government that relied on the security services’ advice that this was the way to do it, and I believe that was the proper way to do it. And if Huawei’s software contained gaps, which [it] apparently did, I suspect it wasn’t just the Chinese security services, but other countries’ security services that could also exploit those weaknesses.

Going back before the start of the coalition government, I remember endless government-to-government discussions about protection of IP, and huge strides have been made by China as a result of relentless private engagement on that topic. So I think on areas where the UK can reasonably be expected to either protect its interests or to have influence, the engagement was sensible [and] proportionate.

Every UK government, we all get things wrong. But the fundamental insight, which was that the UK was punching far below the weight of Germany and France in particular in Europe, and that something needed to be done about it, was quite right. Occasionally that government, and other governments since, get diverted to think there are great opportunities in other countries, and then they get disappointed and they come back to China again.

Are you referring to India?

Sassoon: Yes. Malaysia 4 in a smaller way.

To turn it a positive way round as to why I think the opportunities in China are interesting in comparison to some of these other places is China’s business engagement is so often driven by their political priorities. And it’s quite easy to read China’s political priorities: They’re often to do with actual or potential existential threats to the Communist Party. You can look at the drive in recent years to clean up the air, the water quality, the quality of children’s food, medicines, it’s all laid out in huge granular detail in policy statements that come out of the state council. And that leads to business opportunity.

The other thing which the Chinese government is not afraid to do is to create new markets where markets don’t exist. India has an enormously powerful business sector that is supremely good at seeing off foreign competition. Why shouldn’t they? That’s what businesses do. My family did business in India. There’s been a very long, unbroken tradition of Indian business culture, [and] there’s a weak residual of a central planning system. In China, there is a relatively strong central planning system, very clear sighted—you can read from London exactly what the priorities are.

When you and I started our conversation today, the Commons were debating a motion to recognize the situation in China’s Xinjiang province as a “genocide.” Now the motion has passed, and it represents the will of the House. But I think you feel very differently about this issue, am I right?

Sassoon: I don’t know whether to be angry, sad, or shrug my shoulders. My mother’s family, fortunately, not many of them went to camps and died in the Holocaust, but some did. I’ve been to Rakhine state [in Myanmar]. I went to Cambodia as soon as people could get back in. My mother’s uncle chaired the committee that organized the British end of the Kindertransport.

I don’t know where the evidence is, but I’m not seeing it produced by the politicians who are calling what’s going on in Xinjiang genocide. It really upsets me that people are bandying genocide about, and I give credit to the British government that they haven’t jumped onto this. And tagging genocide onto trade bills is an abuse of parliamentary process.

What is going on in Xinjiang is not pleasant. I’m sure it’s a humanitarian tragedy. I don’t know what the scale of it is because there is so little evidence. The Chinese government is not reacting helpfully in the sense of credibly rebutting what is said in the West. But again, if only some of our politicians understood better the Chinese mentality, they’d know that backing them into a corner is not going to get a positive response.

You might say, well, why don’t I stand up in the House of Lords and say this? My style is to do practical, small things behind the scenes. And maybe I’m a moral coward. But the atmosphere has been so unpleasant in and around Westminster in the last year that I prefer to write to ministers on trade topics and do what I can in a small way to influence the direction of trade policy and the engagement of China, and trying to keep lines open to China—and keep out of this debate.

How are you feeling about the future of China relations?

Sassoon: I’m optimistic. First of all, because I think the business opportunities are huge and business is very sensible about engagement with China. It’s the world’s largest market. Those who disagree with me in parliament, there’s hardly one of them who would say we [must] stop trade with China. Nobody is that stupid, that I’m aware of.

China will develop at its own pace. Yes, there are things under the present leadership in China which have gone backwards. But I don’t think anybody who understood China ever believed that China was ever going to develop in a democratic way. There’s a huge ongoing challenge for China to understand what elements of being a global leader means. This year, one of the tests of that will be their continuing commitments on climate change. If we had more pressure on China, in as many areas as we can, to be—as they want to be—the global leader, that’s the way to get things in China to go in the direction we would all wish.