Bought by China – how Chinese companies are creeping into the economy of Western countries by proxy…
Bought by China
by Dan Alexe
Chinese companies will be able to invest in the construction of nuclear plants in the UK, including having the option of eventually taking majority stakes. This was one of the main messages that the British chancellor of the Exchequer George Osborne conveyed to Chinese businessmen on a trip to southern China on 17 October last year.
This means that UK would be going one step further than France, where Chinese companies have been buying minority stakes in French industries for decades.
Slowly, the Chinese manage to creep into the economy of many Western countries, sometimes even by proxy. This will be the case with at least part of England’s energy infrastructure, where the Chinese can penetrate through their French partners. Thus, on Monday, 21 October, the British Energy minister Edward Davey announced that Britain awaits the signing with Electricité de France (EDF) next year, and the Commission’s approval, for the building of a nuclear plant, composed of two reactors close to Hinkley Point, in south-west England. It is expected that the plant would produce 3,260 megawatts, that is 5-6% of UK’s total consumption. It would be the first nuclear plant to be built in UK since 1995 and it is supposed to be functional in 2023.
The problem is that an important part of the money used to build it will be Chinese. The cost of the two EPR’s (Evolutionary Power Reactors) built by the French Areva will be as high as 16 billion Euros, which EDF cannot assume by itself. So EDF turned to the two Chinese nuclear giants CNNC (China National Nuclear Corporation) and CGN (China General Nuclear Power Group), with which the French company started working already three decades ago. The two Chinese companies will own together 30% to 40% of the shares in the British plant.
After investing heavily in large chunks of many African countries’ economy (to the point that there has been talk of a new kind of neocolonialism), Chinese state-controlled giant trusts are now looking to Europe. In September, it has been announced that Ukraine agreed to rent to a Chinese state-owned conglomerate a sizable swath of arable land, although initial reports that this would represent 5% of Ukraine’s surface, roughly the size of Belgium, have been disputed. The Chinese-administered territory would be leased for 50 years and would be cultivated to produce crops, meat and other agricultural products destined to China.
But the Chinese would not stop in Eastern Europe. In Sweden, the Zhejiang Geely Holding Group, owned by the billionaire Li Shufu, has already bought the ailing Volvo in 2010.
By entering a joint-venture with EDF in building the nuclear plant in England the Chinese would also enter the British energy market, where EDF is dominant, after having bought British Energy in 2009.
As the EDF case shows, Chinese companies have long invested in strategic sectors in France. The Chinese are present even in the French tourism sector. Club Med has allied itself with the Chinese Fosun conglomerate, whose operating activities include insurance, industrial operations, investment and asset management. China is thus on track to becoming the second biggest market for Club Med after France itself.
Airbus has allied itself with the Chinese Avic, in an effort to get onto the Chinese market. GDF Suez sold to a Chinese company (China Investment Corporation ) 30% of its gas-producing sub-branch.
Another big French company that the Chinese might soon penetrate, and which has a symbolic status in France, is Peugeot-Citroën. This family-run company offered the Chinese Dongfeng to buy half of a 3 billion Euros capital increase (the other half going to the French government), in exchange for 20% to 30% of the shares. The Chinese say they are still considering the offer, but this could simply be a bargaining trick, knowing that Peugeot-Citroën is making serious losses.
For Western countries, spreading the red carpet in front of the Chinese could have serious political consequences. Chinese representatives sit already on the Volvo board in Sweden, as they will in France if the deal with Peugeot receives the green light from Beijing. On top of being politically cumbersome, such intrusions would mean that the Chinese will also have access to technologies and obtain an inside picture of the functioning of key industries in some Western countries’ economies.
Criticising China would also become more difficult for elected officials on whom pressure would be applied from the industrial sector and lobbyists.
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