Saturday, 20 December 2014
Advanced search

China steps in to avert crisis

It reportedly came as a surprise to Prime Minister David Cameron when, during his trade visit to China last year, local companies and financiers expressed an interest in contributing to High Speed 2, the controversial project to build a new high speed rail line linking London, Birmingham, Leeds and Manchester. With the Chinese premier Li Keqiang now on a return visit to London, memoranda of understanding have been signed to pave the way for Sino-British cooperation on HS2, along with the upcoming nuclear new building projects in England and Wales.

The formal agreements that have been signed include a 20-year. £11.8bn deal for BP to supply gas to China’s state petrochemicals company, along with an agreement with Rolls-Royce to work with the Chinese nuclear reactor manufacturer SNPTC on civil nuclear projects: R-R makes diesel emergency generators and other safety-critical kit for nuclear power. Other deals are in the solar energy sector.

China

David Cameron discusses nuclear issues with Chinese representatives

But it’s the HS2 question which is receiving the most attention, and it’s far from clear what it actually means. Its terms are broad: it includes the possibility of participation in upgrading infrastructure, collaboration on R&D, station design, equipment supply and safety and environmental protection, along with supply of products and services to third markets.

Pretty much the whole shebang, then, which is fairly normal for MoUs; at an early stage, it’s not a good idea to rule things out. But, of course, this raises uncertainty. If part of the stated purpose of HS2 is to boost the UK’s rail sector — which it is — then all we should actually need from China is an open chequebook; anything else raises the prospect of jobs which could be done in Britain going to Chinese companies.

It could be argued that if HS2 is such an attractive investment, then why isn’t British finance investing in it? The general risk-aversion of UK banks when it comes to anything rather than financial engineering might answer that question, although it is now possible for other institutions such as pension funds to also invest in infrastructure — which, as yet, they haven’t done; but again, it’s early days.

Chinese investment in British industry and infrastructure is an new development, and it’s going to require caution. China isn’t the only country with dubious governmental practices to do business with Britain, so we can’t be too sniffy about that. And large-scale Indian investment in Britain, which was also a surprise when it happened, has turned out to be mainly beneficial for jobs and skills in the steel and automotive sectors.

So all that we can say for the moment is that caution is needed. Opponents of HS2 or nuclear won’t change their minds because of this development, but any further discussions must ensure that collaboration remains favourable for employment and skills development and retention in UK industry, and that any equipment imported for rail and nuclear as a result of these agreements passes the same stringent quality controls as any other equipment. Because when it comes to big-ticket projects like this, beggars can’t be choosers; and after the finance sector’s spectacular failure in the last decade, the UK has to follow the money.


Readers' comments (8)

  • Perhaps even more important than the investment and engineering colaboration (which is great!) is the political stability it gives between nations. If you are both tied financial then the likelihood of conflict is likely to be reduced.

    A concept that seems to be missed by those apposing globalisation!

    Unsuitable or offensive? Report this comment

  • There is a very good reason the Chinese want to invest, because they are seen as secure investments, with a good return. Much else they have invested in, in China and Africa for example has been far more speculative.

    Unsuitable or offensive? Report this comment

  • " then all we should actually need from China is an open chequebook;"

    Don't we all. But of course you have to give something relevant and significant back in return.

    Unsuitable or offensive? Report this comment

  • anything else raises the prospect of jobs which could be done in Britain going to Chinese companies.

    ...

    then you cite India as a good example... hasn't Tata been continually laying off jobs whilst retaining/increasing Indian ones the past few years???

    Unsuitable or offensive? Report this comment

  • Any investment in Nuclear energy is very welcome. As for HS2 we don't want or need it.

    Unsuitable or offensive? Report this comment

  • The Chinese companies are not altruistic. Money coming in from China now means money going out to China later. I am by no means opposed to globalisation or have a "little Englander" outlook but where are our investors? Why shouldn't our economy be supported long term rather than someone else's?

    Unsuitable or offensive? Report this comment

  • “The general risk-aversion of UK banks” covers up the impression at least that it is actually all sectors of the UK who are risk averse. Politicians (who btw backed the credit fuelled expansion which contributed to the financial bust of 2008) are risk averse, the readership of The Engineer seems in many cases to be risk averse, lacking the vision and ambition to carry out the types of projects which their forbears would have jumped at often in the name of ‘saving the planet’. Politicians do have a semi excuse in that many of the voters in the country side are anti HS2 – although it is the politicians’ job to lead and balance the interests of the whole country to deliver such projects and not equivocate.

    Without having to be a full on flag waver for UK bankers and financiers, with the cultural back ground from other sections of society also suffering from this ‘risk averseness’ they cannot take all the blame. At root is the trend for the whole economy to have become financialised over the past 40 years. Why invest in long term capital investments when investing in more liquid assets such as expensive art works or selling on & recycling debt makes more sense. Even car ‘manufacturers’ are often suppliers of credit so their products can be purchased. And as individuals with the unproductive buying and selling of decrepit old housing we as individuals are just as much a part of that game as the banks.

    Unsuitable or offensive? Report this comment

  • Financial links are likely to reduce the possibility for conflict? Brian M's post.

    I remind myself that the majority of soldiers on both sides at the Battle of Waterloo had boots made in Northampton...and that the Argentinean forces who invaded the Falklands did so with LMG's and artillery supplied by Royal Ordinance: that is apart from the weapons sold to them by our erstwhile allies?

    Unsuitable or offensive? Report this comment

Have your say

Mandatory
Mandatory
Mandatory
Mandatory

My saved stories (Empty)

You have no saved stories

Save this article