The row between Beijing and London over the supposed interference in Hong Kong affairs by the UK government has come at a difficult time for whoever will be the next prime minister.
The two Conservative Party leadership (and hence prime minister) candidates, Boris Johnson and Jeremy Hunt, have been appearing at a series of campaign events across the UK, and the result of the postal vote by Conservative Party members should be known around July 22.
Foreign Secretary Jeremy Hunt finds himself in the front line of the dispute and has refused to rule out imposing sanctions on China and expelling its diplomats. On July 3, China’s ambassador to the UK, Liu Xiaoming, accused Hunt of gross and unacceptable interference after Hunt urged China not to use the protests as “pretext for repression”. But the following day, Hunt ratcheted up the row by repeating his concerns and insisting the UK was keeping its options open.
The frontrunner in the race, Boris Johnson, has said that he will take the UK out of the European Union with or without a deal on October 31. That makes a no-deal Brexit look more likely, leaving the UK looking to strengthen trade and investment relationships with other countries around the world as it loses easy access to the EU single market.
The UK already finds itself caught in the middle of an argument between the Trump Administration and China over Huawei. The US has said that there will be implications for the UK, with which it has an exceptionally close intelligence-sharing relationship, if Huawei is allowed to participate in the build-out of the 5G network
That leaves the UK choosing between alienating the US, with which it would like to rapidly negotiate a free trade agreement, or China, which is a major overseas market as well as source of inward investment.
The UK and China have been deepening their areas of cooperation in recent years. The UK views China as an increasingly important trading partner post-Brexit, while there are growing financial services links such as London-Shanghai Stock Connect which went live in June.
And in the area of nuclear power, China is keen to construct one of its new-design Hualong HPR1000 reactors in the UK, as an important step forward for its export of nuclear technology as part of the Belt & Road Initiative.
The UK needs to build new-generation nuclear power stations, as most of its existing ones are scheduled to be retired over the next decade, and would like Chinese firms to come in backed by debt provided by Chinese state-owned banks.
China General Nuclear Power Corporation (CGN) is already involved as a joint venture partner with French company EDF, bringing with it construction finance, in the Hinkley Point C nuclear power station in Somerset, southwest England.
Construction costs are expected to be 20.5 billion pounds (US$25.65 billion). The two reactors will generate 3,200 MW. Work is well advanced, and the base for the first reactor, involving the final 9,000 cubic metres of concrete, was completed last month. For this project French-built reactors are being used.
The two companies are also working together on a proposal to build Sizewell C in Suffolk, on the east coast of England, also using French reactor technology. This is at the consultation stage.
From China’s point of view, the proposed Bradwell B project is of more importance, since the plan is to use the Hualong HPR1000 reactor. The site is near Bradwell-on-Sea, Essex, southeast England.
The 1170MWe Hualong HPR1000 is a generation III Pressurised Water Reactor, currently being deployed at three sites in China.
No final decision has been made on whether the Bradwell B project will proceed, but CGN and EDF Energy are currently in the process of carrying out technical assessment work in order to inform their emerging proposals. The timeline before the start of construction is estimated at between 5 and 7 years.
It is proposed that Bradwell B will be developed with a third-generation pressurised water reactor called the UK HPR1000. During the development phase of Bradwell B, CGN will take a 66.5% share and EDF Energy will take a 33.5% share in the project company.
The Generic Design Assessment (GDA) of the HPR1000 by the UK’s nuclear regulators continues to progress well, the company said in June. It is currently in step three of the four-step process.
Consents and permissions, separate to the GDA process, would be required to build the new power station, involving detailed public consultation taking place over several years. The hope is to move towards commercial operation to the early 2030s.
CGN and EDF Energy have a longstanding partnership spanning 30 years. Most recently, they were jointly involved in the construction of two reactors in Taishan, China.
CGN is the biggest builder of new nuclear power stations globally. EDF is one of the largest energy companies in the world, with a long track record in the nuclear sector. EDF owns and operates all the existing nuclear power stations in the UK.
In financial services, the London Stock Exchange is keen to boost its links with China, at a time when Brexit is creating uncertainty about trading and clearing equivalence agreements between the UK and the EU.
In June the long-awaited London-Shanghai Stock Connect project was launched, with UK Chancellor of the Exchequer Philip Hammond describing it as an opportunity to deepen “global connectivity”.
Under the Connect scheme, Shanghai-listed companies can raise new funds via London’s stock market while British companies can broaden their investor base by selling existing shares in Shanghai. Investors can trade across London and Chinese time zones.
The launch of Stock Connect was the centrepiece of the June UK-China Economic and Financial Dialogue (EFD) which saw the Chancellor of the Exchequer host Vice Premier Hu Chunhua and a Chinese delegation in London to discuss multilateral and bilateral economic issues, financial services cooperation, and trade and investment.
Launching Stock Connect’s first day of trading at the London Stock Exchange, Hammond described Stock Connect as a groundbreaking initiative, which will deepen the UK’s global connectivity as it looks outwards to new opportunities in Asia.
Should Boris Johnson succeed in becoming prime minister, Hammond is expected to be replaced as chancellor.
For the new–look cabinet, the relationship with China provides an early test even though the primary focus for the next three and a half months will be finding a solution to the Brexit impasse.