Lord Mandelson: This is no time for us to be turning our backs on China

In Club News by Stephen Perry

Stalling over Hinkley Point is a far bigger issue if it means jeopardising our relationship with the Asian superpower

Theresa May and her new ministers are in danger of taking what may be the right decision concerning the Hinkley nuclear power project for the wrong reason — and causing huge damage to our relations with China in the process.

This plan is highly contentious and not just because of its mushrooming £18 billion cost.

The choice of France’s operator, EDF, to build and run Hinkley is controversial because of doubts about its technology. And the decision to ask China to finance a third of the new plant is questioned because of the alleged leverage this would give China in such a sensitive sector.

Despite this, in order to achieve the best long-term energy-supply mix, the Government, so far, has ploughed on with this hybrid partnership.

It’s a hugely complex project and as the costs of natural gas, solar and wind power have fallen — and with the revolution taking place in the energy-storage market — the electric power Hinkley will provide is looking very expensive.

But David Cameron and George Osborne firmly believed it was right to prioritise energy security over cost.

Once built, nuclear plants are solid and reliable sources of electricity, they rarely go wrong and need never be turned off. Renewing our nuclear-power capacity will also help Britain meet its tough international carbon-emission targets.

Days into office, however, Mrs May balked at the decision to sign off Hinkley. I do not blame her. It’s her job to ensure adequate value for money for the taxpayer, and a less breezy approach to policy-making is to be welcomed.

But in pressing the Hinkley pause button, No 10 raised wider questions than the future of energy supply.

They allowed the impression to be created that it was the China element they objected to most, and that it was Britain’s links with this burgeoning communist power that they most wanted to review.

Little was done to shoot down the media speculation that a fundamental rethink was in train about the Cameron government’s desire to make Britain “China’s best friend in the West”.

Not surprisingly, China’s leaders have been left wondering what on earth is going on. Britain has become China’s top investment destination in Europe.

For Cameron and Osborne there was no higher foreign-economic policy priority than attracting Chinese business.

When China’s President Xi made a state visit to Britain last year a “golden era” in economic relations was said to have been inaugurated. Now, it seems, Britain’s new premier is preparing to pour cold water over this important relationship. I think this was more clumsiness than design but there has been little attempt to repair the diplomatic damage.

When she initiated the Hinkley re-think, Mrs May was keener to address French sensibilities than assuage China’s feelings.

She rang President Hollande, whereas the Chinese first heard about the postponement from a junior British official in Beijing. It’s a strange way to treat a country that was not only being asked to pick up such a large price tab but was also being lined up to help build and operate two further new nuclear plants at Bradwell and Sizewell.

Cancelling the whole programme on cost or technology grounds is one thing. This would be a major about-turn and would throw Britain’s energy strategy into dramatic disarray. But what would add insult to injury is if Mrs May endorsed the suggestion that, Hinkley or no Hinkley, having China involved in any form poses a risk to Britain’s safety.

For years the US has been waging a campaign among its allies to freeze out Chinese infrastructure investment. This has worked in some countries but so far Britain has withstood the pressure.

The claim, largely undefined or explained, is that China cannot be trusted to operate in a purely commercial way and that, either in financing or operating a plant, China could expose us to nuclear blackmail.

Of course, the security question is a legitimate one and I am not naïve about China. As Europe’s trade commissioner I had many ups and downs with China about what I regarded as its unbalanced approach to international trade.

Those who argue that “China will do what it’s in China’s interests to do” are broadly right. But this does not set China apart from any other country. In the case of the nuclear investment, we have to ask what China’s motivation is.

If Mrs May reverses this judgment, there can be little doubt that the Government will pay a high price in its China relationship


The conclusion reached previously by British ministers was that China’s future growth and stability depends on winning and faithfully fulfilling international contracts like these and China is not going to run the risk of future boycott by using its investment to mount crude attempts to compromise other countries’ national security. In other words, even if it had the means, China would not take chances with its commercial reputation, and I think this is almost certainly right.

If Mrs May reverses this judgment, there can be little doubt that the Government will pay a high price in its China relationship. Concluding that China cannot be trusted to keep its word would be a sharp slap in the face and it is difficult to see how China could continue business as usual with Britain.

It would raise fundamental questions about other Chinese investment in British infrastructure. If China is unacceptable in power-generation, why is it more tolerable in water supply, or high-speed rail?

Presumably Chinese investment in football clubs can be viewed as harmless, but where do you draw the line?

The danger for Britain is that the perception is created that China is no longer welcome in Britain.

That would have implications for wider Chinese investment both in London and in the Northern Powerhouse, the Government’s welcome drive to rebalance the UK economy and bring fresh development opportunities to northern England.

One of the consequences of Brexit is the need to increase trade with major, fast-growing economies


China is now a major-league international investor. In the post-Brexit world, can Britain really afford to rebuff such an important trade and investment partner? One of the consequences of Brexit is the need to increase trade with major, fast-growing economies. Britain should not become a supplicant to any country, and we should not become desperate for trade deals at any price.

This means the Government should adopt a pragmatic rather than a blanket approach to Chinese investment.

But my message to the Government is this: post-Brexit, China is going to be a growing part of our economic life so we had better get used to it.

We are not going to get this relationship right by implying that, as an investor in our country, China is a threat to our security.

  • Lord Mandelson is president of the Great Britain-China Centre and a former EU Commissioner for Trade

This article was written by Lord Mandelson for the Evening Standerd (Monday 15th August 2016)