CRG Weekly: New report, Cambridge guidance and nuclear removal
News from the China Research Group
This week, we published a new position paper laying out what has changed in the last 18 months with the UK's relationship with China and what the UK should do now, with endorsements from two former foreign secretaries. Read here.
The Times covered the report, focusing on the recommendation for a review of all research partnerships and funding arrangements at universities. CRG chair Tom Tugendhat penned a Thunderer column stressing that the UK should move faster in reassessing its relationship with the world’s second largest economy.
In the press: CRG member Alicia Kearns MP was quoted in the FT on new guidance on international agreements from the University of Cambridge. Politico’s China Direct made mention of our new report.
Next event: The CRG will be welcoming the AidData team for an event on Monday 18th October to and discuss their new research on hidden debt in developing countries. They found that more than 40 lower- and middle-income (LMIC) countries have debt exposure to Beijing greater than 10% of their GDP. Register here.
The week in review
China has been struck by widespread power cuts that have closed factories, hitting production and global supply chains. Whilst the initial outage was mostly confined to the three northeastern provinces of Liaoning, Jilin and Heilongjiang - meaning that mobile phones were without signal, shops and local businesses had to be lit by candle, and gas leaks left dozens injured - the problem has spread rapidly, with as many as 20 provinces being ordered to ration power.
SupChina offered a comprehensive explainer on the causes of the shortage, focusing on government regulations to reduce China’s dependency on coal as it aims for carbon neutrality by 2060 (20 of China’s 31 provinces and regions missed their yearly coal targets) and the spike in global demand for energy.
The consequences of the energy cutbacks and factory shutdowns have been severe and wide-ranging. Several key Apple and Tesla suppliers have halted production at some of their Chinese facilities to comply with Beijing's tighter energy consumption policy, putting supply-chain continuity at risk during a peak season for electronics goods. Whilst Chinese vice-premier Han Zheng ordered state-backed companies to secure energy supplies “no matter the cost”, economists are forecasting that the crisis will weigh on China’s GDP growth for this year.
China’s crisis comes at a time at which the UK and continental Europe have been suffering from record natural gas prices amid the prospect of severe shortages this winter. It also comes during a week when it was reported that the UK government was exploring ways to oust Chinese energy giant China General Nuclear Power Corporation (CGN) from its 20% stake in the proposed Sizewell C nuclear plant in Suffolk.
The UK has maintained that net zero will be hard to reach without nuclear but plants are expensive and take years to build - the government made a commitment in December to finance at least one large-scale nuclear project by 2025. However, future projects are unlikely to feature Chinese involvement after it was revealed this week CGN’s minority stake will be sold to institutional investors or floated on the stock market after 10 months of talks with EDF, the French energy group, which holds the remaining 80% stake in Sizewell.
EDF are reportedly eager to use a financing model called the “regulated asset base (RAB)” for the construction of the 3.2 gigawatt plant. This model would dictate that households start contributing towards the cost of the plant through their energy bills long before it generates any electricity. Simone Rossi, chief executive of EDF, said on Wednesday that: “we can make it work in any way”. Bloomberg reported that the government plans to legislate for a funding mechanism to spur the construction of new nuclear plants as soon as next month.
The decision to remove CGN from Britain’s civil nuclear programme comes on the back of concerted parliamentary pressure over Chinese involvement in UK Critical National Infrastructure since the government removed Chinese telecoms equipment maker Huawei from its 5G mobile phone network last year. At the Labour conference this week, Shadow Foreign Secretary Lisa Nandy warned that Britain needs to be warier of the risks of Chinese investment in key industries like nuclear energy. If a mobile network was considered too sensitive, it’s hard for the government to argue a nuclear power station isn’t.
The UK government has recognised that building modern nuclear reactors on British shores will be vital for reducing carbon emissions, levelling up the country, and ensuring energy security to avoid the kind of critical situations that have befallen both the UK and China in the past week. It’s now crucial that long-term, sustainable funding mechanisms are put in place for future energy plans that don’t compromise national security.
In brief
A British frigate, HMS Richmond, sailed through the Taiwan Strait for the first time since 2008 as it headed towards Vietnam to rendezvous with the Vietnamese navy. China’s state mouthpiece, People’s Daily, strongly condemned the move as revealing the UK’s “evil intentions”.
Shortly after, the UK government announced it had agreed to commence formal negotiations on a Reciprocal Access Agreement (RAA) with Japan to deepen the defence relationship between the two countries. This Agreement will help enable the two countries and their militaries to work together to address global security challenges and counter shared threats.
China’s ambassador to the UK, Zheng Zeguang, called for “candid dialogue” to repair lost trust between the two nations. Only weeks after he was blocked from entering British parliament, Zheng also urged the two sides to step up communication on trade and investment, the pandemic and climate change.
The US and EU discussed global trade and tech cooperation at the inaugural Trade and Technology Council in Pennsylvania. The AP covered their joint statement, in which they agreed on the need to maintain investment screening and export controls, affirmed their intention to develop artificial intelligence systems that “respect universal human rights and shared democratic values,” and committed to partnering on a rebalance of semi-conductor supply chains.
In another first, leaders of the US, Japan, India and Australia came together for the first in-person Quad summit. The group of nations vowed to work together for a free and open Indo-Pacific region and to move ahead on a joint plan to provide Covid-19 vaccines around Asia and launched a climate initiative pledging to "decarbonise at pace".
It was a busy week of diplomacy for the EU, with the bloc's foreign policy chief Josep Borrell discussing Aukus, human rights, Taiwan, climate change, vaccine cooperation with Chinese counterpart Wang Yi in a video call on Tuesday. Borrell stressed the need for the two parties to maintain constructive dialogue despite disagreements.
Beijing 2022 - the Chinese government announced that those participating in the Winter Games who are fully vaccinated will enter a "closed-loop management system" when they arrive. Spectators from abroad will not be able to attend the Games.
China says it will reduce abortions for 'non-medical purposes'. The Government says clampdown is aimed at improving women’s reproductive health, but Reuters reported that it comes amid anxiety about the nation’s falling birth rate.
The Evergrande fallout continued to cause uncertainty amongst investors, with the embattled property giant missing another payment deadline to overseas investors, as detailed by the BBC.
Weekend reads
The west is the author of its own weakness. Philip Stephens of the Financial Times makes the case for the biggest danger to the liberal order being the “discrediting of democracy”, rather than China.
An OECD for a New Era. Rhodium Group analyse how a revival of the OECD could help market economies agree on a competition model with non-market statecraft again.
The Security Implications of Chinese Infrastructure Investment in Europe. In their latest report, the German Marshall Fund take a deepdive into how Europe can determine the right balance of security, openness, and economic resilience when it comes to China’s economic presence.
The Open Internet on the Brink: A Model to Save Its Future. Setting out frameworks for a global, open internet, authors from the Tony Blair Institute for Global Change submit that China is a growing competitor and adversary in many areas of internet governance yet remains an important partner in others.
Podcasts
Key Takeaways from AidData’s New Report on How China’s Finances the BRI. AidData discuss the nuanced story about Chinese overseas development finance on the China in Africa Podcast.
China Global - China’s Concept of National Security under Xi Jinping. Bonnie Glaser talks with Dr. Sheena Chestnut Greitens about the linkages between domestic security trends and Chinese foreign policy.
How the Chinese state handles labour unrest. On this week’s Sinica podcast, Manfred Elfstrom discusses his new book on the Chinese state’s dynamic approach to handling labour actions.