The idea that trade and politics are distinct has always been false. Commerce and state-to-state relationships are intertwined. Sanctions and breaks in commercial relationships are convenient tools—far easier for governments to use when disputes arise than military force, but often with unintended consequences far from the original points of conflict. The deterioration of relations between London and Beijing, for instance, now threatens to derail the development of nuclear power in the UK and force a rethink of Britain’s energy policy.
A decade ago, China was the new strategic ally of the British government under David Cameron and George Osborne, a potential counterweight to dependence on either the European Union or the United States. Chinese investors were invited in—not least the fledgling Chinese nuclear industry, which sought to use Britain as a stepping stone to penetrate world markets. The stepping stone took the form first of an investment in the new nuclear plants being developed by the French state company EDF, including the Hinkley Point C project in Somerset, and then a Chinese-led project to build, own and operate a further nuclear reactor at Bradwell in Essex.
The intervening period has seen state-to-state relations sour. Under the leadership of President Xi, China has become an ever more aggressive power, determined to build its military and industrial strength. The country which will soon have the world’s largest economy has become, through investment and trade, a defining and often disruptive force in many global markets.
Under President Xi, international criticism of Chinese actions and policy has become unacceptable, and the subtle diplomacy for which China was once famous has been replaced by a sledgehammer approach which ruthlessly penalises international critics.
When Australia banned the Chinese company Huawei from its 5G networks and called for a full independent inquiry into the origins of Covid-19, China retaliated by imposing high tariffs and trade restrictions on Australian exports of coal, barley and wine, which it pretends is to remedy distorted trade. To date Australia has lost some $3 billion in export earnings.
Meanwhile, retail clothing businesses such as H&M and Nike find themselves facing boycotts in the huge Chinese market as they attempt to replace the cotton allegedly produced by forced labour in the Western Chinese province of Xinjiang.
China’s links to the UK’s nuclear ambitions are likely to be drawn into a similar conflict over the next few months. The decision by the Chinese authorities to impose what amounts to direct rule in Hong Kong, with all candidates for the Legislative Council approved on the basis of loyalty to Beijing, ignores the core provisions of the “one country, two systems” approach negotiated by Thatcher before the 1997 handover. The promise made then that Hong Kong would enjoy quasi-independence for half a century has been torn up. That is one unresolved source of tension which could lead to the migration of hundreds of thousands of Hong Kong citizens to the UK. The second source of tension is the decision to impose an arbitrary ban on a series of UK individuals, including prominent parliamentarians and organisations critical of well-documented Chinese human rights abuses against the minority Uighur community. That decision could in turn provoke retaliatory sanctions against prominent Chinese officials.
Given the divisions which have emerged, it is impossible to envisage the UK government now giving approval to the development of the Bradwell power station. The reason, of course, has nothing to do with the technology or the competence of China General Nuclear Power Group (the Chinese company involved). Having successfully commissioned dozens of nuclear plants in the last decade, China has become a leading player in the global nuclear power business. The problem is that nuclear power stations are part of the UK’s strategic national infrastructure, and China is no longer a friend to be trusted with such levers of power. China’s recent behaviour has compounded the doubts which already existed around the wisdom of giving it control of nuclear capacity and open access to the UK’s national grid.
China, however, would with some justification regard the postponement or cancellation of the Bradwell project as a breach of contract. If China decides that the link with EDF to finance a third of the costs of Hinkley and contribute to other French-led projects was conditional on Bradwell, CGNP could end its involvement and demand its money back.
For the UK government, the question is whether a new generation of nuclear power is as necessary as it seemed a decade ago. Financing challenges, rising costs and endless delays have all made nuclear less attractive, while the costs of alternative sources of supply such as offshore wind have fallen sharply. With the exception of the hope that the smaller scale modular reactors being developed by Rolls-Royce can provide some additional capacity in the 2030s and beyond, nuclear power is barely mentioned in the government’s recent statements on its plans for reducing the use of hydrocarbons and cutting emissions. For the immediate future, given that Hinkley is still the only new reactor under construction in the UK, everything depends on the reliability of the existing nuclear plants—most of which have been in operation since the 1980s.
What is clear is that the impact of any trade dispute over nuclear investment will matter more for the UK than for China. Excluding CGNP from Bradwell will not change Chinese policy towards Hong Kong or the Uighurs. Numerous other countries across Asia and Africa will happily accept Chinese nuclear technology. The need for an endorsement of China’s nuclear industry by Britain, which existed a decade ago, is no longer relevant. Trade and politics are inseparable; but in the end, commerce is secondary. What matters is power—and for the moment, as the Uighurs and the people of Hong Kong are discovering, that power is concentrated in Beijing.