On Friday, the Chinese premier Xi Jinping will have concluded his first state visit to Britain with a sizeable investment in UK plc. The Chinese government, who have foreign currency reserves of over $3 trillion dollars have unveiled a substantial investment package of £40 billion for Britain. Since 2005, Chinese investment in Britain has ballooned from less than £500 million to £29 billion, with last year alone China investing £8 billion in Britain. This is coupled with Britain being China’s preferred place to invest in Europe making this package a significant economic and political coup for the U.K government.
But what does the package entail? The main headline from the state visit is the conclusion of a nuclear power plant investment deal between EDF, the French energy giant, the Chinese General Nuclear Power Corporation (CGN) and the U.K government. The state-owned CGN will provide a £6 billion investment in Hinkley Point in Somerset. Hinkley Point will be the first nuclear power reactor to be constructed in the UK for several decades, and the Department for Energy argues this investment is crucial for securing Britain’s energy future. The CGN will receive a 33% stake in the reactor. Although the main partner EDF would still have a majority stake, the Chinese investment is significant achievement indicating China’s willingness to invest outside its own economy. Indeed Dieter Helm, Professor of energy policy at Oxford University, raised the point that China is showcasing it’s technological ability by wooing British regulators. As well as Hinkley Point, the Chinese CGN will be investing in older nuclear sites to develop and update such as Sizewell, in Suffolk, with the Chinese company will gain a 20% stake.
However, as good as this investment in Hinkley Point is, concerns have been raised about the cost of this investment to Britain. The U.K. Government has provided a guarantee for that the price of energy produced at Hinkley point. The price, set at £92.50 per kilowatt hour, is double the wholesale energy price meaning that energy generated from Hinkley point is twice as expensive as other nuclear sites. The Department for Energy argues that this is necessary for securing the deal between EDF and the Chinese Nuclear Corporation, as it incentives the two companies to invest in this huge infrastructure project. For consumers, this deal is likely to be lead to higher energy prices, as the high price the government has set for the energy at Hinkley Point will mean costs for households and businesses will increase.
The UK Government is also targeting China’s burgeoning middle class. During the state visit, the government unveiled a plan to reform the visa system between China and the UK dramatically reducing the cost for Chinese tourists to visit Britain. The reform would increase the time limit for visas from six month to two years, and reduce the cost from £324 to £85. This significant reduction is aimed at getting more Chinese tourists to Britain. Currently, the number of Chinese tourists visiting Britain has doubled in the past five years to 185,000, with each tourist spending £2,688 on average contributing £500m a year. The Conservative government hopes that by lowering the visa costs, more Chinese tourists will visit Britain and spend their money in U.K hotels, shops and restaurants.
China’s very British spending spree is likely to continue, with this current package highlighting the continuing economic investment China has been willing to make since 2005.