Looking to the Future.
China’s burgeoning nuclear industry’s relationship with the state places it in a unique position as it expands domestically and moves into the international market, and it will play a vital role in the country’s future development. The industry is led by two state-affiliated giants -China National Nuclear Corporation (CNNC) in the northeast and China General Nuclear (CGN, China Guangdong Nuclear until 2013) in the southeast. These two have been working together and independently to construct nuclear reactors across China, making it the country with the most reactors in development worldwide. In the past couple of years, they have begun moving abroad with major projects in development in the Middle East, Europe and beyond.
China is now taking significant steps to expand its nuclear industry domestically and internationally. While China still overwhelmingly runs on coal as its main source of energy, it is also the world’s leader in renewable energy production. Currently, nuclear energy only accounts for about 2% of total energy used in the country, with plans to double this figure by 2020. There are 21 nuclear reactors in China as of April 2014 and 28 under construction, the highest number around the world. This past fall, Beijing allowed CNNC to open on the Shanghai stock market in the hopes of raising further capital for expansion. CGN will list its IPO on the Hong Kong market, with a possibility of expanding to China’s mainland stock market in the future.
Both CNNC and CGN operate under the supervision of the State-owned Assets Supervision and Administration Commission of the State Council (SACAS). The government has in recent months obliged them to work together increasingly in order to streamline China’s nuclear exports including adopting common third-generation nuclear technology. Below is a brief review of their recent international bids and projects:
Currently, China is competing with a Japanese-French joint venture in a bid for the building of Turkey’s second nuclear plant. South Korea and Canada have both been dropped from the short list for the 5,000-megawatt nuclear power plant, which is planned for the Black Sea province of Sinop. The French company GDF Suez is officially placing a joint bid with Japanese companies in what is expected to be a $22-25 billion dollar investment.
In March 2014 it was reported that China’s main nuclear power companies were lining up to bid for a $93 billion dollar contract in South Africa to build six reactors by 2030. The Energy Minister said that this could promote nuclear power development across the region. In February the Nuclear Energy Corp of South Africa signed a skills development and training agreement with CGN and SNPTC, funded up to 95% by China.
China is currently in talks with Pakistan concerning a potential deal for Beijing to sell Pakistan three large nuclear plants for around $13 billion. These talks follow China-Pakistan nuclear cooperation on a $9 billion dollar project of two nuclear plants in Karachi.
In October, CNG and CNNC announced they will hold 30-40% of a new nuclear development project, Britain’s Hinkley Point nuclear project - the first nuclear project that China will be involved in with a developed country. The Chinese companies are teaming up with France's EDF in a 16-billion pound ($25.69 billion) deal to construct two third-generation European Pressurised Reactors (EPRs) in southwest England. Thus far, China is only slated to play a financial role in the project.
There are several problems facing Chinese nuclear companies at the moment, prohibiting them from expanding to their full potential. One detriment to Chinese nuclear companies in their bids for international projects is the limit placed on their technology. The companies cannot export the most modern reactors being built domestically because foreign companies such as Westinghouse and Areva own the copyrights for those designs. However, analysts say China’s own local designs are catching up with third generation models ready for export this year.
Another issue the government faces is lack of public trust, which has led to protests in areas of planned projects domestically, resulting in delays or relocation of future nuclear reactors. Negative news seen globally about Chinese industries and lack of adequate government oversight could discourage foreign nations from pursuing projects with China’s nuclear developers. Britain’s Hinkley point project will have China as a minor stakeholder only, stating the public’s need to adjust to the idea of Chinese involvement. In fact ,China has never had a nuclear event exceed Level 2 on the International Nuclear Event Scale (INES)—a globally accepted scale used by the International Atomic Energy Agency for prompt and effective public communications. The US, by comparison, had a Level 5 accident in 1979. However, negative impressions left by food and environment scandals will take some time to overcome.
Finally, the nuclear industry in China also faces problems with its structure and policy. China does not have an atomic energy law, despite it being in discussion since the 1980s. It also follows fewer international structures than most nuclear industries globally. For example, both the US and India have expressed concern about China’s planned projects in Pakistan because reactors are being built without the approval of the 48-nation Nuclear Suppliers Group, a multinational body concerned with reducing nuclear proliferation by controlling the export and re-transfer of materials. Some within the State Council Research Office have stated that nuclear safety governance in China is too fragmented and that its regulatory body, the National Nuclear Safety Administration, does not have a sufficient level of independence.
On the other hand, the affiliation of Chinese nuclear companies with the state allows them to work together and bid on projects with the vast financial backing of Beijing. By working together and reducing competition, CNNC and CGN are likely to win more international project bids. They seem to be on their way with their first foray in to the European market, with their future share in projects likely to grow. Their affiliation with the state has benefitted the Chinese nuclear duo in the recent bid in Turkey, mentioned earlier. Because of the enormous financing that can be guaranteed by Beijing, they were able to beat out South Korea by not requiring state guarantees for the project from Turkey. The recent bid in Pakistan has seen a similar situation in which CNNC was able to offer Pakistan a loan of at least $6.5 billion to finance the project if China wins the bid. This certainly gives Chinese companies a huge advantage over those entirely private companies trying to compete for international projects.