China envoy warns Britain over nuclear power station deal

August 15, 2016 10:30
National security concern, doubts about the new technology and price are some of the possible reasons why the UK postponed a final decision on the Hinkley Point nuclear power project. Photo: EDF

Beijing's ambassador to London has set off a political storm by saying that approval of a controversial nuclear power station, in which China holds a major stake, was a condition for bilateral cooperation in the era of Brexit.

In a letter to the Financial Times, Liu Xiaoming said that the China-UK relationship was at a critical historical juncture.

If the government approves the Hinkley Point project, "bilateral relations will maintain their strong momentum … I hope the UK will keep its door open to China and that the British government will continue to support Hinkley Point – and come to a decision as soon as possible," he wrote.

In late July, Beijing was enraged when the new administration of Prime Minister Theresa May unexpectedly postponed a final decision on the plant, which involves investment of 18 billion pounds. The final signing was due to take place on July 29. China General Nuclear Power (CGNP) has a one-third stake in the project. The government will announce its decision in early autumn.

Liu's intervention and its tone have caused concern among British politicians and the public. 

Meanwhile, the Australian government announced on Aug. 11 that it was blocking China's State Grid Corporation and Hong Hong-based Cheung Kong Infrastructure from bidding for a 50.4 percent stake in the New South Wales electricity group Ausgrid, the country’s biggest electricity network.

The same day, the US government announced an indictment against CGNP and one of its engineers, Allen Ho, for leading a conspiracy to steal secrets from the American power industry. Ho denies the charges and says his role at CGNP was one of a commercial consultant.

"May must drop Hinkley," said a commentary in Britain's right-wing Daily Mail newspaper, which is close to the ruling Conservative Party, last Friday.

"Security experts in the UK have been warning about China's predilection towards industrial espionage and questionable business practices. But the previous government was so busy bending over backwards, courting the Chinese in the so-called 'golden era' of inward investment that they turned a blind eye to the warnings. Or ignored them."

Beijing is angry that as a result of the June 23 Brexit vote Prime Minister David Cameron and Chancellor George Osborne lost their posts. The two were the most enthusiastic supporters of inward Chinese investment in Britain that Beijing has ever had.

National security is one aspect of the Hinkley Point project. The deal includes an agreement under which Chinese state-owned firms would design and build a second nuclear power station at Bradwell, Essex.

On Saturday, the Times reported that Britain's three intelligence services – MI5, MI6 and GCHQ – were engaged in an urgent security review of the nuclear deal with China.

"GCHQ is understood to believe that it can control the situation in the same way it monitors Huawei’s involvement in mobile phone networks across Britain," the British paper said.

Security is only one aspect of May’s review. Another is the fact that the model of reactor proposed for it by Electricite de France (EDF) is not in operation anywhere in the world. At an EDF board meeting on July 28, seven of its 17 directors voted against the project. It is a new technology.

The third aspect is the price. EDF has negotiated a price of 92.5 sterling per megawatt-hour for the 35-year period of the contract. This is far above the existing electricity price. Many say that the government should not commit itself to such high spending over so long a period.

So, for May and her colleagues, China's involvement is only one aspect of a complex and difficult project. But Ambassador Liu has chosen to make approval of it a condition of bilateral relations in the future.

He is counting on the fact that Brexit has weakened the UK in the global business environment. It runs the risk of losing free access to its largest trading partner and faces months, if not years, of uncertainty while its companies wait to see the new relationship with the EU.

So, Beijing believes, London will have no alternative but to depend more on Chinese capital and investment to compensate for what it will lose from its former EU partners. It is pushing for rapid approval of the Hinkley project at a time of British weakness and uncertainty.

The project is important for China's nuclear ambitions. The country wants to become the world's top builder of nuclear power stations. Hinkley Point and Bradwell would be its first and second projects in a developed country.

So, when May and her Cabinet colleagues make their final decision, probably in September, the stakes will be relatively high.

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A Hong Kong-based writer, teacher and speaker.