UK-China Ties Put to the Test Over Hinkley Point Nuclear Power Project

When Theresa May succeeded David Cameron as prime minister of the United Kingdom, China didn’t think that business as usual between the two countries would change overnight. Indeed, Chinese officials were somewhat taken by surprise when, in late July, May’s government delayed a final decision on the all-clear for a Chinese consortium to move ahead with the construction of a $23 billion nuclear power plant, the Hinkley Point C nuclear power station.

May’s decision was seen as the beginning of a broader rethink of Chinese investment in the U.K., rolling back the enthusiastic red carpet treatment doled out to Beijing by Cameron and George Osborne, the former chancellor of the exchequer. May’s decision was apparently predicated on concerns about China being able to meddle in the U.K.’s power infrastructure, posing a national security threat. While sudden, her decision appears to now have been prescient and based on real concerns.

An ongoing case in the United States, detailed in a 17-page U.S. Department of Justice indictment first unsealed earlier this year, vindicated May’s skepticism of the project. A U.S. investigation found a Chinese nuclear engineer at the China General Nuclear Power Company—a firm with a major stake in the Hinkley Point C project—to have conspired to illegally develop nuclear technology in China “with the intent to secure an advantage to the People’s Republic of China.” CGNPC is a 33 percent stakeholder in the Hinkley Point C plant.

Assistant U.S. Attorney General John P. Carlin provided additional details on Allen Ho, the implicated Chinese engineer earlier this year: “Allen Ho, at the direction of a Chinese state-owned nuclear power company allegedly approached and enlisted U.S.-based nuclear experts to provide integral assistance in developing and producing special nuclear material in China.”

“Ho did so without registering with the Department of Justice as an agent of a foreign nation or authorization from the U.S. Department of Energy,” Carlin continued. “Prosecuting those who seek to evade U.S. law by obtaining sensitive nuclear technology for foreign nations is a top priority for the National Security Division.” (Incidentally, Ho’s case is the second involving a U.S. citizen of Chinese origin acting as a Chinese agent to seize headlines in recent days; an FBI agent pled guilty to similar charges in early August).

The May government is currently in the middle of reviewing the Hinkley Point C project, with supporters and detractors of the project equally trying to influence an ultimate decision. Ho’s case, however, is strong evidence for the case being made by skeptics of Chinese involvement in the project.

A decision to stall or roll back the Hinkley Point C project would deal a blow to U.K.-China ties, which flourished considerably under the Cameron government. China’s ambassador to the United Kingdom described the upcoming decision as a “crucial juncture” for the relationship, not-so-subtly signaling that there would be consequences for a negative decision. “I hope the U.K. will keep its door open to China,” Liu Xiaoming, the Chinese envoy, wrote in the Financial Times.

The Hinkley Point C project involves complexities beyond the involvement of China’s CGNPC. EDF, the experienced French nuclear energy firm, is also a co-stakeholder. Moreover, the consequences of the U.K.’s referendum earlier this summer to leave the European Union may indirectly bear on the May government’s decision-making on the project. The U.K., at odds with other major European economies within the European Union, had stood in the way of retaliatory tariffs against China under the previous government. A negative decision on Hinkley Point C, compounded by a possible reversal on tariffs as a concession during the negotiation process for a so-called “Brexit,” would be an unusually harsh blow to China.

Complicating matters further for May, it’s unclear if the U.K. can risk a serious downturn in ties with China as it seeks to navigate a highly uncertain exit from the European Union. In the aftermath of the referendum in June, the British pound depreciated sharply and economic expectations for a post-EU U.K. are pessimistic. Indeed, several proponents of keeping Hinkley Point C on track have argued that the U.K. might not be able to do without Chinese investment and support.

May’s inadvertent prescience on the risks posed by the Hinkley Point C project now puts her in a bind. What was initiated as a mundane, impartial review by a new government of an ambitious energy project has now turned into a decision of great consequence for the U.K.’s relations with China. With the allegations against Ho resurfacing this week, it’s becoming more likely that Hinkley Point C may end up fizzling altogether, taking the U.K.-China bonhomie forged over the Cameron-Osborne years with it.