BY KEITH JOHNSON
OCTOBER 21, 201
China and its new “best friend” signed billions of dollars worth of deals during Xi’s state visit, including funding for a controversial nuclear power plant, further consolidating what many see as London’s troubling lurch toward Beijing.
Britain’s increasingly warm relationship with China is getting radioactive.
On Wednesday, Chinese President Xi Jinping and British Prime Minister David Cameron shook hands on a $9 billion Chinese investment to help build the first nuclear power plant in the U.K. in a generation. It was the shiny centerpiece of a $46 billion investment package the two countries agreed to during Xi’s four-day, red-carpet visit to his new “best partner in the West.”
Britain hopes to ingratiate itself with the world’s second-largest economy, while China hopes the deals, especially the massive investment in the controversial and hugely expensive Hinkley Point nuclear power station, will serve as a bridgehead for more multibillion-dollar nuclear deals. The two countries are talking about Chinese investment in two additional nuclear plants, including one that will use Chinese-built reactors.
The energy-sector investments are part of a broader British shift toward China, led by George Osborne, the chancellor of the exchequer, Britain’s top Treasury official. He touted London as Beijing’s potential “best partner” on a glad-handing trip through China last month. And Xi’s visit to London comes after months of explicit British government support for a growing Chinese economic role in the world, from joining the Chinese-led Asian Infrastructure Investment Bank, to supporting Beijing’s bid to transform the renminbi into a global reserve currency.
More worrisome for Washington, the rapprochement comes as top British officials, including Cameron, shy away from confronting China on contentious issues like human rights or the militarization of the South China Sea — even as the United States tries to craft a tougher approach.
That has plenty of observers in the United States and the U.K. fretting that Osborne’s courtship of China threatens the decades-old special relationship that has long served as the keystone of the trans-Atlantic alliance. While the White House publicly downplays the significance of the Sino-British embrace — “the United States welcomes strong relations between our allies and China,” press secretary Josh Earnest said Monday — many U.S. diplomats are privately said to be “incandescent” with rage at Britain. And many in Britain, from former officials to current opposition politicians, have excoriated what they see as a British sell-out to Beijing.
“There’s been no attempt to fully come to terms with what this might mean in the long term,” said John Bew, a historian who studies grand strategy at King’s College in London. “I wouldn’t describe it as a strategic realignment, but people understand in the U.K. that this is not a cost-free choice.” He likened Britain’s current approach to China with Australia’s efforts in recent years to maintain good ties with China, its top trading partner, while also deepening links with the United States, its main military ally.
The British drift toward China, capped by this week’s big investment announcements, underscores the degree to which the relationship is still transactional. Like Russia, Pakistan, and others, Britain sees in China a deep-pocketed investor who can help underwrite needed but costly infrastructure projects. Beijing is investing hundreds of billions of dollars to build railroads, pipelines, deepwater ports, power plants, and more from Central and South Asia to Europe.
“In essence, there is no geo-strategic rationale behind this, but there is a financial rationale,” Bew said.“In essence, there is no geo-strategic rationale behind this, but there is a financial rationale,” Bew said.
Nowhere is that clearer than with the Hinkley Point nuclear plant, a mammoth, 3.2 gigawatt power station estimated to cost about $38 billion and which the British government says is needed to avoid the threat of future electricity blackouts. Britain, along with the plant’s lead corporate sponsor, France’s EDF, had struggled to get Hinkley Point out of the starting gate due to its huge budget.
New nuclear plants in Europe, the United States, and elsewhere represent a decade-long, multibillion-dollar investment that is often hard to justify now that natural gas is fairly cheap and renewable energy sources are becoming increasingly affordable. That’s especially true with the nuclear technology earmarked for Hinkley: The European Pressurized Reactor, or EPR, has been plagued by budget and cost overruns in recent years. Under the terms of the deal, a Chinese firm will take a 33 percent stake in the project for about 6 billion pounds. (EDF says Hinkley Point will cost about 18 billion pounds, or almost $28 billion, but most nuclear experts agree its true cost will end up closer to 24 billion pounds, or almost $38 billion.)
Prime Minister Cameron said the Chinese nuclear investment would help create 25,000 jobs and act as a boost to the British economy; Energy Secretary Amber Rudd crowed that “the U.K. is open for business and this is a good deal for everyone.”
Hinkley’s opponents disagree. The British government had to offer investors guaranteed, high tariffs for the electricity produced by the power plant, which they say will cost British ratepayers billions of pounds every year for decades. That degree of state support for nuclear power has already put Britain at odds with Austria and other European Union countries. And Xi’s cash-fueled visit comes just as the bedrock of British industry, the steel sector, is reeling from layoffs caused in large part by unfair competition by Chinese firms. That has created terrible optics for Osborne’s panda hug.
“It is difficult to comprehend exactly what the chancellor thinks he’s doing,” said Paul Dorfman, an expert on nuclear power at the Energy Institute, University College London, and an outspoken critic of Hinkley Point. He criticizes the British decision to bet so heavily on nuclear power to avoid blackouts, given the reactor’s terrible track record so far. Experts estimate it could take another decade at least to come online.
“If you are worried about an electricity gap, the last thing you want is to build an EPR, because it simply won’t be there,” Dorfman said.
The Chinese nuclear investment is causing additional worries, including cybersecurity. Former British officials and opposition politicians are afraid that Chinese ownership of a nuclear plant will give Beijing the opportunity to plant “Trojan horse” type cyberdevices inside critical infrastructure, or threaten to shut down the power plant at times of tension between the two countries. The United States, for example, carefully scrutinizes all foreign investment in potentially strategic sectors, and in recent years has blocked some Chinese deals, even in seemingly innocuous things like wind farms.
“You can do deals with the new capitalist China, but strategic, nuclear infrastructure, now that’s something different,” Dorfman said.
For now, Chinese money is set to keep flowing into Britain, and commercial imperatives look poised to bring London and Beijing closer together. But, just as Australia had to learn how to walk a fine line between trade and security when it comes to balancing relations with China and the United States, Britain too may soon face a difficult choice between its long-time ally and the new rising power.
“I wonder how long this balancing act can keep on going,” said Bew.
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