This article has been amended on October 16.
In Canada, Australia and the United States, the ownership of critical infrastructure by foreign companies is a controversial matter. In America, it is overseen by the Department of Defense. In Britain, China is about to build our next nuclear power station.
As this newspaper reports today, this is a matter of concern to British security services. A deal under which Chinese state-owned companies invest in the building of the new nuclear project at Hinkley Point C has been broadly agreed. A second deal, over a site in Bradwell, Essex, may be finalised during President Xi Jinping’s state visit to the UK next week. The Chinese would be minority investors in both, coming second to the French energy giant EDF, but could lead in terms of development and design at Bradwell. Clearly this has security implications.
According to one quoted security source: “There is a big division between the money men and the security side.” On the economic front, at least, the logic of the money men is impeccable. Britain needs new nuclear power stations and the costs are too vast for the state to bear alone. George Osborne has made much of his plans to boost economic ties between China and the UK. Chinese industries, which benefit from the helpful embrace of an autocratic state, are keen to show the rest of the world that they can operate in regulated, democratic markets as well.
Yet economic concerns are not the only ones that matter. Western intelligence agencies continue to regard China as a threat. Beijing has persistently denied carrying out cyberattacks on western targets, yet it is an open secret that the Chinese People’s Liberation Army includes the 2nd Bureau of the 3rd Department of the General Staff, otherwise known as Unit 61398, which employs thousands of people tasked with invading the systems of western corporations and infrastructure. When Britain’s energy infrastructure is being constructed in partnership with companies so closely aligned with the Chinese state, it is scarcely credible to imagine that opportunities for cyberespionage would be forgone.
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It could be argued that such risks outweigh the benefits of massive investment for Britain. Yet it is hard to believe that any such calculation has been soberly made. In 2013 parliament’s intelligence and security committee criticised the manner in which government contracts were struck with the Chinese telecoms company Huawei, citing “a disconnect between the UK’s inward investment policy and its national security policy”. Britain appears to be making the same mistake again.
China’s economy may be slowing, but it remains a valuable source of investment and has many legitimate reasons for wishing to invest in the West. The chancellor, likewise, is right to wish to bring that investment home. Yet security considerations must not be overlooked. China today has large stakes not only in our nuclear future but also in ports, water companies and a big oil refinery. The security committee’s 2013 report recommended systematic scrutiny in such things, not only when projects are devised but throughout their lifetime. Yet decisions on Hinkley Point and Bradwell feel little more than ad hoc. Britain’s allies, chiefly the United States, are known to be growing increasingly concerned at the scale of Chinese involvement in critical British infrastructure. Perhaps it is time we listened to them.
Correction: We stated (“In China’s Hands”, leading article, Oct 16) that the intelligence and security committee had criticised the manner in which government contracts were struck with the Chinese telecoms company Huawei. The criticism in fact centred on the way government approval was given to contracts between Huawei and BT.