Is China the hitch for the Hinkley Point deal?

Philip Hammond with Chinese Vice Premier Mai Kai on July 22 2016 Image copyright Getty Images
Image caption Diplomatic ties: UK Chancellor Philip Hammond on his recent visit to China with Vice Premier, Ma Kai

Does Hinkley Point have a national security hitch?

While others may be professing astonishment over the British government decision to delay this deal on the eve of signing, the Chinese stakeholders are too polite - for now.

Despite putting up a third of the funding and sending a delegation to the UK to celebrate what they along with everyone else expected to be the final launch ceremony for the project, a statement from China General Nuclear Power Corporation or CGN expressed understanding today:

"We respect the new government's need to familiarise itself with a project as important to the UK's future energy security as Hinkley Point C and we stand ready to help the government in this respect…CGN remains committed to delivering this much-needed nuclear capacity with our strategic partners, EDF, and providing the UK with safe, reliable and sustainable energy."

In private, the Chinese team may be less polite. This kind of 11th hour reversal is not how things are done in China.

A source close to China General Nuclear Corporation (CGN) has told me the Hinkley Point delay came as a surprise and a pain, and added, everyone in the company is bemused by the way it's been choreographed. CGN has been given no real insight into the reason for the delay other than being told it was something the prime minister wanted.

The company was told this was a big investment in critical infrastructure and the PM wanted to be absolutely certain she understood all the issues and ramifications.

The firm is frustrated with the way the government has framed the reasoning for the delay. Considering all components of the deal is, the source said, a non-denial denial which allows the speculation about national security concerns to continue.

The source also said that the last minute notice of the delay was unhelpful and that a very senior delegation from China had been ready to attend today's planned ceremony at Hinkley Point.

But the source also said CGN had seen many false dawns before and had seen the Hinkley Point project go through lots of scrapes. So in the grand scheme of things if it ends up being just a six-week delay it will be neither here nor there.

Image copyright Getty Images
Image caption China will now want clarification from London over which components of the Hinkley Point deal it's worried about

From the British government no apologies or explanations of the upset; the Business and Energy Secretary Greg Clark said simply, "the government will now consider carefully all the component parts of this project and make its decision in the early autumn."

And unless and until the new British government tells us that national security questions are not one of the component parts that need considering, the question is out there because at least one senior official close to the Prime Minister seems to have a very different view on national security from that of the previous government. Nick Timothy is Theresa May's chief of staff and a long time adviser.

Criticisms

As recently as last October, just as the former Prime Minister David Cameron and his Chancellor George Osborne were preparing to unveil the Hinkley deal during a state visit by the Chinese President Xi Jinping, Mr Timothy expressed strong criticisms of the deal on the Conservativehome website:

"During Xi's visit to London, the two governments will sign deals giving Chinese state-owned companies stakes in the British nuclear power stations planned for Hinkley Point in Somerset and Sizewell in Suffolk. It is believed that the deals could lead to the Chinese designing and constructing a third nuclear reactor at Bradwell in Essex.

"Security experts - reportedly inside as well as outside government - are worried that the Chinese could use their role to build weaknesses into computer systems which will allow them to shut down Britain's energy production at will.

"For those who believe that such an eventuality is unlikely, the Chinese National Nuclear Corporation - one of the state-owned companies involved in the plans for the British nuclear plants - says on its website that it is responsible not just for 'increasing the value of state assets and developing the society' but the 'building of national defence'.

"MI5 believes that 'the intelligence services of…China…continue to work against UK interests at home and abroad'."

Image copyright EPA
Image caption Last year George Osborne talked of a 'golden decade' in which the UK would be China's 'best partner in the west'

It's important not to over-interpret these comments or to assume a new direction in government policy. Mr Timothy is an unelected adviser to the prime minister and what's more, they were made when he was not in a senior government role.

But the Cameron government which left office less than a month ago was particularly bullish on China. The Chancellor George Osborne talked of embarking on a 'golden decade' in which the UK would be China's 'best partner in the west'.

His successor Philip Hammond was in China only last weekend to take part in a meeting of G20 finance ministers and to reassure Chinese partners that post-Brexit, the UK was still 'open for business'. Mr Hammond raised the possibility of negotiating a free trade agreement with China once the UK leaves the European Union.

But Theresa May's views across the range of policy issues with China are less clear.

And until London clarifies which components of the Hinkley Point deal it's worried about, and until it expresses itself satisfied with Chinese involvement on both security and safety grounds, Beijing will wonder whether this cherished deal will fall victim to the UK's continuing political drama.

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