Is Bri­tain pre­pared to go nu­clear over China?

Bei­jing’s billions are help­ing to build Hink­ley Point, with it as a mi­nor part­ner, but its am­bi­tion for Brad­well gen­er­ates more con­cern ‘Even if you wanted to disen­tan­gle the two coun­tries, you prob­a­bly couldn’t now’

The Daily Telegraph - Business - - Business Comment - Ben Mar­low

The UK, we are led to be­lieve, can­not af­ford to in­cur the wrath of China. Well, it is al­ready too late for that. The ban on Huawei has in­fu­ri­ated Bei­jing. Re­tal­i­a­tion is al­most a cer­tainty. That will be a con­cern for com­pa­nies such as As­traZeneca, Glax­oSmithK­line, Burberry, and Jaguar Land Rover, with size­able in­ter­ests in the re­gion.

Yet that doesn’t mean China is about to un­leash a full-blown eco­nomic war on Bri­tain. Reprisals are likely to be mea­sured and pro­por­tion­ate, at least for now.

A great deal de­pends on how much fur­ther the Govern­ment is pre­pared to go in cur­tail­ing trade and busi­ness ties with the world’s sec­ond su­per­power. But what about the as­ser­tion that the loss of Chi­nese in­vest­ment would some­how im­peril the UK econ­omy? The Govern­ment has spent a decade court­ing China, and as a re­sult, it has be­come a sig­nif­i­cant trad­ing part­ner.

It is an in­creas­ingly im­por­tant ex­port mar­ket with £30.7bn of goods and ser­vices sold to the Chi­nese last year but again that’s only 4pc of all ex­ports, whereas ex­ports to the US at £58bn were nearly double, and 12pc of over­seas sales.

The UK is also the num­ber one Euro­pean des­ti­na­tion for Chi­nese for­eign di­rect in­vest­ment, and in the past five years China has ploughed more money into the econ­omy than it had in the pre­vi­ous 30 years. It is now our fifth big­gest source of FDI.

Chi­nese in­vestors have poured billions into the Lon­don property mar­ket, gob­bling up tro­phy as­sets such as the “Cheeseg­rater” and “Walkie Talkie” sky­scrapers in the Square Mile, though much of that has come from Hong Kong, as op­posed to main­land China.

In in­fra­struc­ture, its role in a new 5G net­work may be dead, but China has its eye on help­ing to build HS2; and has built stakes in other key as­sets such as Heathrow Air­port and Thames Water. Even if you wanted to disen­tan­gle the two coun­tries, you prob­a­bly couldn’t now. In­stead, the two sides must find a way to live with each other and there is no better test of that then the nu­clear in­dus­try. Thanks to the UK’s in­ep­ti­tude at build­ing its own crit­i­cal in­fra­struc­ture, China is at the heart of plans to build three nu­clear plants on UK soil. Sizewell C, the project planned for the Suf­folk coast, is now be­ing re­ferred to as “the next Huawei” in govern­ment but China’s CGN is only a ju­nior part­ner in that, pro­vid­ing 20pc of the funds, along­side France’s EDF.

It’s the same ar­range­ment the pair came to on Hink­ley Point C in Som­er­set.

But Chi­nese money is dif­fer­ent to Chi­nese tech­nol­ogy. If China wants to bankroll big projects, then let it. Be­ing a mi­nor­ity in­vest­ment part­ner isn’t the same as want­ing to build a nu­clear plant 50 miles from Lon­don us­ing an un­proved Chi­nese re­ac­tor. That’s the quid pro quo on Hink­ley and Sizewell: let­ting them build and op­er­ate Brad­well in Es­sex us­ing their own untested tech­nol­ogy.

That’s where the rub­ber hits the road – hand­ing Bei­jing a kitemark that al­lows the Chi­nese to sell their prized tech­nol­ogy around the world. If you’re a Sino­phobe and you’re wor­ried about China then who cares how much money they give us? Brad­well should be the main con­cern.

It’s not about whether we do busi­ness with China, it’s about where you draw the line.

Vac­cines hold the key to re­cov­ery

The stock mar­ket has de­cided that there’s only one way for the global econ­omy to re­cover: a Covid-19 vac­cine. Ev­ery pos­i­tive sliver of vac­cine news sparks a cor­re­spond­ing spike in world markets. If it’s neg­a­tive, stock prices head south.

Last week, the Nas­daq hit a record in­tra­day high af­ter the Food and Drug Ad­min­is­tra­tion granted “fast track” sta­tus to two coro­n­avirus vac­cine can­di­dates.

Shares in As­traZeneca have re­peat­edly hit new highs amid grow­ing ex­pec­ta­tions about the vac­cine it is de­vel­op­ing with Ox­ford Univer­sity re­searchers. That the UK, thanks also to Glax­oSmithK­line, is lead­ing the way in the fight against coro­n­avirus should be a source of pride.

But the vac­cine race is a re­minder of why this cri­sis is unique. Pre­vi­ous down­turns have al­ways been solved by eco­nomic pol­icy. But all the govern­ment stim­u­lus in the world can’t pre­vent fresh out­breaks, and when­ever there are re­lapses, the re­cov­ery will be halted.

Re­search from Deutsche Bank shows that in the US, where Covid-19 cases are surg­ing, restau­rant vis­its are down 60pc on the same pe­riod last year. In Ger­many how­ever, where the virus is con­sid­ered to be rel­a­tively un­der con­trol, the num­ber of people eat­ing in restau­rants is up 5pc year on year.

It is vi­tal then that the pan­demic is tamed but even coun­tries where the R rate is be­low 1 are sus­cep­ti­ble to resur­gences. As the markets have worked out, the re­bound won’t be de­cided by econ­o­mists and pol­i­cy­mak­ers, this time, it is in the hands of the world’s best sci­en­tists.

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