Powering China’s Nuclear Ambitions

China’s President Xi Jinping arrived in Kazakhstan on a state visit on September 14, ahead of his attendance at the 22nd summit of the Shanghai Cooperation Organization (SCO) in the Uzbek city of Samarkand. Although much of the media focus was on the SCO summit, and Xi’s bilateral meetings with other presidents, attention should also be paid to his state visits, particularly to Kazakhstan, and their relevance to China’s domestic policies.

In a letter published in Kazakhstan’s Kazakhstanskaya Pravda newspaper before his visit, Xi noted that China and Kazakhstan “are good neighbors, good friends, and good partners.” Kazakhstan, a country of around 19.4 million people and sprawling grasslands, plays a key role in China’s Belt and Road Initiative (BRI) and “periphery diplomacy.” Rich in oil and gas, Kazakhstan is also a major energy producer and supplier to China. As of 2019, China had around $14 billion invested in Kazakhstan’s oil and gas sectors. Following Xi’s visit to Kazakhstan, Chinese state media commented widely on China-Kazakhstan’s economic and cooperation. The Global Times noted in particular that the energy sector has been an important area in relations between both countries.

During Xi’s visit to Kazakhstan, both sides agreed to take measures related to energy cooperation, including the supply of the China-Kazakhstan crude oil pipeline and in various areas, including natural uranium. While details on these measures have not yet been released to the public, they fit into the broader context of economic and energy cooperation between China and Kazakhstan and Beijing’s nuclear energy ambitions.

Kazakhstan’s Uranium and China’s Nuclear Energy Sector

Kazakhstan, once used as a nuclear testing site during the Soviet period, is abundant in natural resources, especially uranium deposits. The country has approximately 15 percent of the world’s uranium resources and is the world’s leading uranium producer and supplier. Estimates suggest that Kazakhstan produces 45 percent of the world’s uranium.

Kazakhstan is also the world’s leading exporter of uranium. In 2020, the country produced 19,477 tonnes, generating an export value of $1.7 billion. That year, Kazakhstan accounted for over 50 percent of global uranium exports. In 2021, Kazakhstan produced 21,819 tonnes, generating an export value of $1.1 billion, totaling 33.7 percent of natural uranium exports worldwide. The majority of uranium exports are sent to China, while the remainder is exported to Europe, Canada, and the United States. While uranium exports from Kazakhstan account for approximately 20 percent of the annual demand for uranium in Europe and about 22 percent in the United States, for China, the percentage is likely to be much higher given that almost all of the uranium China uses for commercial purposes is imported.

China is currently the world’s biggest energy consumer. Most of the country’s energy is from fossil fuels, especially coal, which supplies over 60 percent of China’s energy. In contrast, nuclear power accounts for 2 percent of China’s installed power capacity and supplies a mere 3 percent of the country’s electricity.

Given Beijing’s push for renewable energy and the country’s climate goals, it is likely that China will continue to increase investment in nuclear energy. In 2021, Xi boldly stated his commitment to making China reach peak carbon emissions by 2030 and achieve carbon neutrality before 2060. The importance of the domestic production of nuclear energy has been reaffirmed by China’s top officials. In last year’s annual parliamentary meetings (the “Two Sessions”), Chinese Premier Li Keqiang stated that China would “actively” keep developing nuclear energy “in an safe and orderly manner.”

Aside from an 18 percent reduction target for CO2 intensity and a 13.5 percent reduction target for energy intensity (emissions per unit of GDP) by 2025 in the 14th Five-Year Plan, Beijing also aims to increase nuclear power generation from 50 GW to 70 GW. As part of this, Beijing aims to double its nuclear capacity by building more than 150 new reactors by 2035. If this is achieved, China will have built more nuclear reactors than the rest of the world has done in the past 35 years. (However, the country did not meet the target nuclear capacity of 58 GW set for the past five years, ending the period at 51 GW from 49 operational nuclear power plants.)

With an estimated 17 plants currently under construction, China is undertaking the world’s largest nuclear power plant building program and is expected to have the highest capacity globally by 2030. According to Luo Qi of China’s Atomic Energy Research Initiative, “By 2035, nuclear plants in operation should reach around 180 GW,” increasing the current nuclear power generation nearly four-fold over the past 14 years. By 2035, nuclear power is further expected to account for 10 percent of China’s total power generation. For this to be achieved, six to eight new nuclear power plants are expected to be approved every year from 2021 to 2025.

According to China Atomic Energy, as of June of this year, China had 54 nuclear power units. These power units have a total installed capacity of 55.78 million kilowatts, ranking China third in the world behind both France (placed second) and the U.S. (ranked first). Beijing aims to further increase domestic production by building more nuclear power plants.

According to Chinese media reports, the State Council approved four new reactors for the construction of two new nuclear power plants in southern China (Fujian and Guangdong provinces) this month. This means China has sanctioned 10 new nuclear power units so far in 2022, the highest yearly number in more than a decade. The recently approved projects are estimated to cost 80 billion renminbi ($11.5 billion).

China’s Uranium Procurement Strategy

Amid the current global energy crisis along with domestic power shortages, Beijing appears to be looking to secure alternative energy supplies for the long term. At present, China is believed to have sufficient supplies of uranium to meet domestic demands. Recent estimates from Reuters suggest that China has stockpiled 120,000 tonnes of uranium over the previous decade, enough to meet its nuclear demand for the next 10 years.

The country’s uranium procurement strategy is based on the national “two markets, two resources” blueprint. Under this strategy, Beijing aims to develop both domestic and international sources, avoiding risks linked to a high import dependency ratio. As noted in 2011 by Chinese academics, by 2020, Beijing aimed for one-third of China’s supply of natural uranium to come from domestic uranium production, one-third from direct procurement from foreign suppliers, and one-third from the overseas holdings of uranium production.

Internationally, China is using various measures such as foreign direct investment (FDI), joint ventures, and long-term contracts to secure more uranium supplies. Two large state-owned enterprises (SOEs) – the China National Nuclear Corporation (CNNC) and the China General Nuclear Corporation (CGN) – along with their subsidiaries are the main companies in charge of sourcing uranium overseas for China.

For Beijing, one of the countries with the greatest potential is Kazakhstan, given the countries’ friendly relations and their shared border, which allows for overland supply by railroad. In 2006, CGN’s predecessor company signed a strategic cooperation agreement with Kazatomprom, Kazakhstan’s state-owned national atomic agency and the world’s largest uranium supplier. This was followed by agreements in 2007 and 2008 on uranium supply, long-term trade, and fuel fabrication, as well as Chinese participation in Kazakh uranium mining joint ventures and on Kazatomprom’s investment in China’s nuclear power sector.

Since then, additional cooperation agreements and joint ventures have come into effect. Sino-Kazakhstan Uranium Resources Investment Co, a CGN subsidiary, invested in two Kazakh uranium mines (Irkol and Semizbai) through the Semizbai-U LLP joint venture. CGN’s raw uranium sourcing arm, CGN Mining Company Ltd., has also leveraged investments through the BRI to undertake joint ventures with Kazatomprom to access Kazakhstan’s Mynkuduk and Zhalpak uranium mines. More recently, CGN and Kzatomprom finalized a joint venture in 2021 to build the Ulba Nuclear Fuel Plant. Under the deal, CGN receives a 49 percent stake for $435 million and will buy 49 percent of the plant’s production yearly.

Aside from Kazakhstan, China also has interests in other uranium-rich countries, including Namibia, where Chinese companies own stakes in and operate various assets. According to the World Nuclear Association, Namibia has significant uranium mines capable of providing 10 percent of world mining output. For instance, CNNC owns a controlling stake in the Rossing mine. The Rossing mine is one of the world’s longest-running and largest open pit uranium mines. CNNC also has a 25 percent stake in Namibia’s Langer Heinrich mine, while the country’s Husab mine, one of the world’s largest uranium mines, is controlled by CGN. Elsewhere, China has provided interest-free “soft” loans to governments of uranium-rich countries such as Uzbekistan and Niger.

Implications and Challenges

By 2030, if not earlier, China will likely surpass the United States as the world’s largest nuclear power producer. This means that China is likely to become the world’s largest uranium consumer by a considerable margin.

As the leading uranium exporter to China, Kazakhstan is set to play an even more significant role in the country’s energy supplies by increasing its exports to China. At the same time, the Chinese SOEs will likely seek to increase China’s share of self-owned resources to give Beijing greater control of the supply chains at all stages.

At the same time, Kazakhstan has the potential to become a larger uranium supplier to the uranium-poor European Union and other countries aiming to reduce reliance on Russian energy supplies. This means there will also likely be (greater) competition between Chinese SOEs and foreign companies seeking to secure uranium resources.

Aside from the costs of building new nuclear reactors and high-level waste disposals, which may result in cost overruns, a pivotal challenge to Beijing’s nuclear ambitions is safety. While China has participated in regional nuclear security training courses and nuclear security summits and also helped developing countries improve technical levels of nuclear safety, there are still safety concerns at home. Following the Fukushima nuclear disaster in Japan in 2011, the Chinese government halted its nuclear power program to conduct safety checks on all operational nuclear power plants. Since then, the Chinese government has also shut down various nuclear projects and declined to give approval to others.

The recent State Council meeting that approved two new nuclear power plants emphasized the importance of safety. This follows the Taishan nuclear plant incident in 2021, where a reactor at a nuclear plant was shut down. The plant operator, CGN, had then said in a statement that it had shut Unit 1 due to fuel leaks after “lengthy” talks with technicians.

Beijing’s nuclear energy ambitions are a part of China’s broader renewable energy policies and climate change goals. The country’s push for greater energy security also fits with other national policies, such as greater self-reliance and the increasing localization of supply chains. While China seeks to strengthen its domestic nuclear energy production, it still relies heavily on foreign sources of uranium, particularly from Kazakhstan. However, the current energy crisis and current state of global energy markets pose another threat to China’s energy security and, by extension, the country’s stability. In this context, the new energy cooperation agreements between China and Kazakhstan, which cover uranium resources, suggest that Beijing is planning to obtain a long-term supply of natural uranium to safeguard its energy security.

Nonetheless, this is not without challenges. Aside from domestic concerns, including cost and safety, China may face growing competition from other countries worldwide, which also seek to establish or strengthen their nuclear energy programs. This situation presents opportunities for Kazakhstan and other uranium-rich countries to export more significant volumes of uranium and secure agreements with numerous countries and companies. As Beijing has plans to construct many more nuclear reactors than other countries and in a much shorter construction time, China’s long-term agreements with foreign countries and companies suggest that it already has the upper hand in a potential global scramble for or shortage of uranium.