The useful map above is produced by The Mercator Institute for China Studies, the German think tank that is the largest in Europe with an exclusive focus on China.
There has been a sharp uptick in recent weeks in expressions of concern by US politicians outside the traditional China-hawks about Beijing’s long-term plans to expand its global power through infrastructure development and finance and by building up its military.
In February, The Mercator Institute published a report suggesting that Europe should have similar concerns about how Beijing is expanding its influence in Europe in support of those aims through the use of ‘sharp power’ — the offensive use of soft power tools aimed at political and economic elites, media and public opinion, and civil society and academia.
CHINA’S STATE-OWNED heavy engineering firms are getting a liking for European renewables. China General Nuclear (CGN) Corp. has beaten out several rivals to acquire a controlling stake in three U.K. wind farms being sold by the French utility EDF.
This follows China Three Gorges Corporation acquisition of wind-generation capacity in Spain and Portugal to add to that it has in Pakistan. The State Administration of Foreign Exchange (SAFE), which also supervises CGN, owns 49% of the portfolio of wind assets belonging to the Norwegian state owned electricity company, Statkraft. This stake is held through SAFE’s U.K. investment arm, Ginko Tree Investment.
CGN, which generates more than half of China’s nuclear energy and was known as the China Guangdong Nuclear Power Group until last year, paid an estimated $157 million for 80% of the three wind farms. EDF will retain the remaining 20% and continue to operate the facilities.
The three farms, all in eastern or north eastern England, are CGN’s first significant acquisition of onshore wind generating capacity outside China. It has a small interest in an Australian wind farm but set up a subsidiary earlier this year to acquire off- and onshore wind farms and solar projects in Europe. The U.K. government runs a subsidy scheme that requires energy utilities to buy a certain amount of electricity generated by renewables, which makes U.K. projects an attractive investment.
The generating capacity that CGN will be acquiring is relatively modest at 72 megawatts, sufficient to serve only 40,000 homes. By way of comparison, the group has installed generating capacity of some 7 gigawatts of solar, hydro and wind power in China plus 11.6 gigawatts of nuclear power.
Not that China’s nuclear companies are turning their back on nuclear despite industry’s post-Fukushima hiatus. CGN has another 3.9 gigawatts of capacity under construction in China and is involved in the negotiations over Hinkley Point C, a new $40 billion nuclear power plant EDF is planning to build in the west of England. That would be the first nuclear power plant built in Britain in a generation. CGN and China National Nuclear Corporation also want to build another nuclear plant in eastern England that would controversially use a Chinese built reactor.
Politics is complicating the trade dispute between China and the EU over solar panels. Meanwhile, the two are drifting towards a trade war neither wants.
Last September, the European Commission launched an anti-dumping investigation in to China’s $25 billion-worth of solar panel exports (2011 sales) to Europe. Beijing made a tit-for-tat response, threatening duties on EU exports of polysilicon, which is used in making solar panels.
Which is pretty much where things still stand. China’s leadership transition and the likely departure of trade minister Chen Deming in March has left everything in stasis.
Yet the trade disputes clock is ticking down. Beijing is to due to make a decision on polysilicon duties by the end of this month. The outcome of the EU investigation has to decided by mid-April so EU officials can make a formal recommendation in June to the European Commission on how to proceed.
These investigations overwhelmingly lead to the imposition of anti-dumping duties (only in one case over the past four years has it not), though EU leaders have shown no appetite to follow the U.S. in imposing duties on Chinese solar products. They don’t want any retaliation that might make recovery from Europe’s recession more difficult.
Yet there is no wiggle room in the European timetable. That will not leave much time for a new trade minister in Beijing to get his feet under the table, let alone negotiate a resolution to what is anyway a tricky trade dispute.
China’s contribution to the euro-zone’s would-be 1 trillion euro bail-out fund, the European Financial Stability Facility (EFSF), will likely be more token than substantive. The head of the fund, Klaus Regling, is in Beijing with his collecting tin, but while he will find his hosts wishing to be internationally cooperative, he will also find them risk-adverse and somewhat divided on how much China should contribute. Some would prefer to contribute through the IMF, where China could extract some political return, which will also be expected but more difficult to achieve if Beijing contributes directly to the EFSF. The are also still some burned fingers in Beijing from earlier foreign investments to diversify its foreign exchange reserves from U.S. government paper. The unresolved details of Europe’s plan gives Beijing the necessary excuse not to be rushed into committing itself to anything just yet and the time to work on some quid pro quo, probably on the trade and technology transfer fronts.
Two days after the E.U. said it was imposing its first countervailing anti-subsidy duties against China, on coated fine paper, the Ministry of Commerce says China will apply anti-subsidy duties in respect of E.U. subsidies given to potato starch products. Unlike many of the tit-for-tat trade retaliations between China and the U.S., both moves are commercially significant, and will exacerbate the political tension between the two.
China-E.U. trade has been growing rapidly, reaching $480 billion in 2010, but, as China’s exports start to move up the value-chain, under the E.U.’s newish hard-line trade commissioner, Karel de Gucht, Brussels is now focusing on what it perceives to be Chinese subsidies that result from a range of policies from direct state financial support to indirect assistance such as favorable borrowing terms and land grants. This could get very rocky.
Is the Chinese auto industry behind the alleged theft of industrial secrets from the French automaker, Renault? Bernard Carayon, the French lawmaker from President Nicolas Sarkozy’s conservative party who heads parliament’s working group on economic intelligence, thinks there is reason to believe so, citing “proven, diverse and reliable” sources. Sarkozy, himself, has reportedly put the French intelligence services on the case. Three Renault executives, reportedly including one of its management committee, are accused to selling proprietary technical information about the engines and batteries for the electric cars on which the carmaker has bet its future to the tune of a $5 billion investment with its partner, Japan’s Nissan. The three executives have been suspended and face legal action, the company says. (Update: Renault said at the weekend that it has lost no critical technical or strategic information, only design and cost details. Via Deutsche Welle.)
Clean technologies in general and electric cars in particular are seen as a market in which Chinese companies can establish leadership. In 2007, a Chinese student on work placement with Valeo, a French clean-technology industrial group, was jailed by a French court for obtaining confidential documents from the company. Valeo now builds the power trains for electric cars it is developing with Beijing Automotive.
China is widely suspected in the West of indulging in widespread state-backed industrial espionage, the dark side of Western multinationals’ private grumbling that Chinese companies are draining them of technology in return for access to the Chinese market. China’s industrial development may be moving long-term from imitation to innovation, but the old habits are dying hard.
What makes that more difficult for multinationals is the way nation states’ expression of hard power is becoming more dependent on economic strength. Rivalry between nations is increasingly being framed in terms of economic competition, trade and investment jockeying, cyberwarfare and corporate espionage. This is happening when the leading, most technologically laden multinationals are becoming more global and less rooted in the nations from which they were born.
There is also a domestic French political dimension to the Renault case. If China’s involvement is established, it is likely to set back Sino-French relations. They hit a low point two years ago when Sarkozy criticized Beijing’s policy on Tibet before President Hu Jintao’s visit to Paris bearing a raft of Chinese buying orders late last year restored the equilibrium. Another downturn would make for a rough year for Sarkozy’ presidency of the G-20. He needs needs Beijing’s cooperation on issues from global governance to climate change for the successful high-energy presidency that is seen as a necessary precursor for his reelection as France’s president in 2012.