Having arrived in the UK on Monday, President Xi Jinping is set to have talks with Prime Minister Cameron in which nothing, it is claimed, will be off the table. Top of the agenda is likely to be the Franco-Chinese bid to build the C¥240 billion Hinkley Point C nuclear plant in Somerset, in England's southeast. In September UK Chancellor George Osborne announced £2 billion in financial guarantees for this project when he visited China. Co-operation may extend to include work on the nuclear plants proposed for Bradwell, in Essex, and the Sizewell B project in Suffolk. The latter would employ China's Hualong technology.
Xi Jinping has all the usual reasons to want to bring home such major infrastructure agreements. Beyond the financial boost, they would be a demonstration of renewed faith in the Communist Party's economic management. A British buy-in to his 'win-win' foreign policy narrative would be politically handy as well. [fold]
The power generation deals are at an advanced stage and announcements due later this week are likely to be framed in accordance with a policy known in China as 'international capacity cooperation'. The 'capacity' in question is productive capacity; its policy significance is best seen in terms of earlier policies, 'Going Global' and 'One Belt One Road.' We might well label it 'Going Global 2.0.' It seeks to ensure returns on investment (as opposed to ensuring resources by acquiring whole value chains), it de-emphasises majority stakes, and it draws on the legitimacy of local actors so as to offer a smaller target.
The Hinkley nuclear power station offers China its first opportunity to partner with an advanced industrial country (France) to deliver high technology infrastructure in a third country (UK). It is better than a good fit with China’s ‘capacity cooperation’ framework — it would be its flagship.
But such a project potentially combines, in addition to Chinese and British capital, the institutional risk factors generated by their systems of governance.
The risks of Hinkley have long been debated in the UK. Among the better-known commentators is Isabel Hilton, who happens to have expertise on environmental issues in China. Her objections to the Hinkley plant, however, are not solely environmental, as reactors built to the same design have almost invariably gone over time and over budget.
Less familiar is the domestic commentary in China on institutional risk. The Tianjin port explosion of 12 August was a signal event, allowing a wide spectrum of expert and lay society to comment candidly on what it brought to light. The concept of a 'risk society', originating in works of Ulrich Beck, a German sociologist, was repeatedly raised, as was 'organised irresponsibility', the subtitle of one of his books. These expressions, while somewhat emotive, rest on solid institutional analysis. They are features of the modern world: disasters in ancient times were generally acts of God; since the Industrial Revolution, they are by-products of technical advancement with distinct national forms.
Possibly the most persuasive of such views came from Professor Xue Lan, head of the School of Public Policy at Tsinghua University in Beijing and an adviser on emergency response to China's State Council.
Speaking at a colloquium that sought to draw lessons from the Tianjin disaster, Xue confirmed that while the term 'risk society' is applicable globally, it takes on particular characteristics in the Chinese context. Xue set up his account by revisiting the tragic lessons of New York's response to 9/11, when the jumbled communications between police, intent on counterterrorism, formed a familiar pattern that Tianjin was to repeat, albeit with significant differences. Leaving aside factors like corruption, endemic in many developing countries, over-centralised governance made its own special contribution. The non-federal structure played a major role by limiting local autonomy and resulting in long vertical chains of command ('silos') that were in permanent tension with quasi-feudal territorial divisions of authority ('tranches').
A cluster of such factors was implicated in the deadly explosion of sodium cyanate in Tianjin. Four levels of city government failed to do their jobs. Competent reports on the dangers, compiled by professional agencies, were ignored. Other supervising agencies turned out to be shareholders in Ruijin Logistics, the guilty firm, and so on.
The deep issue was thus not the competence of China's technical firms and experts, but the linkages between levels of management, the tendency of people to be 'recreant' (ie. to find reasons not to carry out their responsibilities), undisclosed interests, jumbled lines of control, and so on.
So for President Xi's trip and the Hinkley project, the deep issue is not a list of solely Chinese malpractice, incompetence, or the like, but of the potential additive effects of two jurisdictions, each with governance issues. Those interested in such projects are inclined to dismiss such cavils as driven by a sour-grapes mentality or worse, xenophobia. It is worth pointing out as forcefully as possible that there is nothing xenophobic about maintaining high standards.
Indeed, Chinese investment has, over the last two decades, shown a preference for jurisdictions that maintain high standards. These are jurisdictions that protect investments, minimise risks, and bring out the best in the agencies and firms willing to accept challenges.
These countries should never be tempted to lower those standards. Risk is a given. But when joint investments combine national risk cultures, standards of governance must rise, not fall.
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