A Chinese lunch to remember

Here’s a fine tale of diplomatic ineptitude and bungling on a grand scale.

On Friday, August 5th, I was bidden to lunch with the Chinese Ambassador, Liu Xiaoming.

He was furious. He had been putting his Industry Minister on stand-by to fly from Beijing and attend the grand signing ceremony for Hinkley Point C to go ahead. At the very last moment he learnt form the newspapers (no-one from any UK Ministry troubled to inform him) that the event was cancelled and that the UK Government wanted another month to consider the whole gigantic and troubled project before it went forward.

He wanted to know whether the new Government of Teresa May had some anti-Chinese bias, whether there had been a fundamental change of policy, whether the ‘contract’ signed by his leader Xi Xinping on his state visit last year, was now being broken, whether all talk of ‘a golden era’ of UK-Chinese partnership was now invalid and whether all the goodwill and friendship generated by that visit, and by the visit of George Osborne to China, was now history.

Had there been some kind of British coup. Liu felt that although he had been here six and a half years he knew more about American politics (he was previously in Washington) than the mysteries of British politics.

He wondered whether it was now time to re-consider all the Chinese links and investments being planned between the two countries – including the plan to make London the centre for the internationalisation of the Yuan, various major Chinese investments in Leeds, Manchester and other cities, co-operation on High Speed trains and so on?

Finally, to add insult to injury, he had been unable to contact ANY Minister in any of the departments concerned, being told they were all on holiday. He had still (August 5th) had no official word about the ‘postponement’ or cancellation (which was it?). A FCO official had however at last agreed to see him the following Monday (August 8th).

I tried to soothe him by addressing his worries on two fronts – one, the immediate diplomatic lapse which was clearly regrettable and were he was clearly owed an apology. I argued that there had been a rapid change-over of Ministers and Departments and somehow the matter had not been handled in a coordinated way.

Two brought me to the actual Hinkley C. project. I suggested that one had to view this whole affair objectively, that EDF clearly had many troubles, that thigs had moved on since the original Hinkley project was conceived – not least the collapse in oil and gas prices – and that it might anyway be time for the Chinese, the French and ourselves to look again at the whole situation. My own view was that while total cancellation would deal a terrible blow at the whole UK nuclear renaissance, a decision to go ahead with HALF Hinkley, (i.e one reactor instead of two) bringing it down on to the same size as the EDF Flamanville project (which I had recently visited) would ease many of the pressures, make it financially manageable for EDF and maintain good Chinese involvement.

This did not go down too badly, although there was no agreement. Obviously the Chinese benefits from participation in the project as it stands are huge. Their officials had previously described it as ‘a Chinese Victory’, since it offered not just financial involvement in UK nuclear but the prospect of China building its OWN nuclear station (at Bradwell), and this getting a toehold into European nuclear business generally – this being a time when China, South Korea, Japan and even Russia are all locked I intense competition to build and sell their own designs round the world.

So any re-opening of Hinkley – a truly sweet deal for China, although of course a rotten one for British consumers - is bound to be looked on with dismay by the Chinese.

I pointed out to the Ambassador that all along the whole Hinkley C. project had been bedevilled by problems. Areva, the main supplier was in deep trouble. The cost was bigger than EDF’s market capitalisation. No successful model of this design had yet been built. Finland was a disaster, Flamanville was three times over budget and five years behind original completion. Even the two being built in China were delayed. With increasing interest in small modular reactors (SMRs) it looked increasingly as though the giant Hinkley C plant was a project out of time and with the wrong design.

None of this went down very well. The Ambassador wanted to know what the mood of Parliament was and whether Parliament could ever change anything and have influence. He felt that under the British system it was very weak. I explained that that depended very much on the arithmetic. A small majority, as at present, could give backbenchers a lot of power.

Since Friday I have contacted several Ministers and urged early contact with Liu Xiaoming. This may have happened. The project itself is so far down the line that it is hard to see what can change over another month, unless EDF either changes its mind at Board level, or they downsize the plan, as I suggested. The clumsy handling just makes the whole thing even worse.

I reflected (not to the Ambassador) that the Uk had now succeeded in offending both the Japanese AND the Chinese (the third and second largest economies in the world). Seichi Hayashi – the outgoing Japanese Ambassador, had had me to lunch (twice) only three months before to complain bitterly that the UK was over-favouring China, was too eager to support their new development bank- AIIB - (which was a Chinese ‘cheat’), was too ready to work with them on trains, (which in the Chinese case were unsafe and had crashed) and had seemed to have forgotten that it was Japan, not China, which was our ‘best friend’ in Asia.

Most of this ‘car crash’ was utterly predictable – and predicted. Hinkley was a rotten deal for the UK from the start, put together by inexperienced Ministers who were in turn operating with a flawed UK energy strategy which has been totally wrong –footed by events. There were always FAR cheaper ways of moving along the low carbon path and making some contribution to combatting climate change. Hinkley C was not only the wrong project at the wrong time with the wrong design. It also became a first class diplomatic and international disaster for the UK.

Collective memory within British Government circles seem to have gone on holiday. Collective ignorance has taken over.

Ends

D. Howell 09.08.16

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