China’s Dirty Money: How Dangerous Is the China-UK Nuclear Deal?

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China’s Dirty Money: How Dangerous Is the China-UK Nuclear Deal?

Is Beijing “friend or foe” in cyber nuclear joint development?

China’s Dirty Money: How Dangerous Is the China-UK Nuclear Deal?
Credit: shutterstock

Pundits of all stripes in the U.K. have worked themselves into a lather over the announcement of old news that China would invest in a U.K. nuclear power plant which is due to begin producing electricity in 2025. In a visit to China last month, Chancellor George Osborne made a strategic investment agreement with Beijing for two additional nuclear power plants.

The news has been dramatized in the media which see the danger of China’s spy agencies taking control of or damaging the operating nuclear power plant during some sort of crisis. This produced the unusual event of GCHQ, Britain’s cyber espionage agency, saying to the press in response a week ago that it had a role in monitoring cyber security aspects of the country’s critical infrastructure. U.K. security agencies are genuinely concerned.

Throughout Asia, and in the United States, the military strategic implications of China’s expanding global investment portfolio have been a concern for some time, as the debate over Huawei investment in the United States and Australia shows. Yet BT (British Telecom) is one of Huawei’s best customers and it describes the Chinese firm as a trusted supplier of multi-billion pound contracts. In 2013, the U.K. government appears to have conceded that it did not give due security consideration to the 2005 contract with Huawei.

This same story is playing out in Australia right now with an “after-the-fact” controversy about the 99-year lease by a sub-national government (the Northern Territory) of part of Darwin harbor to a Chinese-owned firm. The Director of the Australian Strategic Policy Institute, Peter Jennings, has raised predictable concerns about apparent lack of high level ministerial scrutiny of the deal, suggesting that it should have been approved by the National Security Committee of Cabinet.

Jennings cited the following overarching concern:

We face an increasingly tough strategic competition between China and the US and its friends and allies. No one could confidently claim this competition wouldn’t give rise to open hostility.

The U.K.-China nuclear deal is particularly complicated by the fact that it is this sector that has been named by the United States as one of the main victims of Chinese commercial espionage by cyber means. Westinghouse nuclear power station secrets were among those that figured in the May 2014 indictment in a U.S. Federal Court, alleging that China was making commercial advantage over U.S. firms.

Moreover, a cyber attack on a Chinese nuclear power plant (in Hong Kong) provides the opening sequences of a movie released just this year, Blackhat. In 2014, the EastWest Institute called for international agreement to quarantine civil nuclear stations form cyber attack. So the nuclear cyber sector is definitely a live issue for China, its partners and all of us.

The mix of competing interests opposed to the U.K.-China nuclear deal has been enriched by environmentalists who have argued that Britain need not expose itself to any possible Chinese threat because it did not have to go down the nuclear energy path at all, and could rely instead on other renewable resources.

The U.K.-China nuclear deal has yet again revealed what we all knew. There is no solid consensus anywhere outside China whether it is wise to take Chinese investments of any kind, and that in areas of sensitive environmental concern, like nuclear power, or national security concern, like possible cyber attack, any decision to accept Chinese money is fraught with even more uncertainty and much higher risk. Yet the juggernaut of China’s outward investment continues and will not be stopped.

Critics of China say that we can accept Chinese investments as long as we undertake appropriate security reviews and exclude them from the most sensitive national security sectors. This seems like common sense. Let’s take good Chinese money for anything we can, as long as we can also keep them at arms’ length in national security affairs or sensitive sectors because we don’t know if the “tough strategic competition” will “lead to open hostility”, to use Jennings’ words.

But closer examination of the reality of the inter-mingling of Chinese entities and those outside the country, whether in the sedate English countryside or down under, but especially in the United States, suggests that it may be too late for such concerns. The high levels of dependence between Chinese and Western firms and economies, including in the development of high technology, may now be irreversible.

A case could be made that old “friend or foe” technologies in the policy domain, such as processes of national security review of Huawei investment in BT or Chinese leasing of a port in Australia, have passed their use-by date on two counts. The first is that China is too deeply integrated and too wealthy to resist. That argument is not yet totally convincing for me though we are approaching that point. National identity in global financial transactions and investment has been seriously eroded almost beyond recognition.

For me, a second count is more convincing. It is more a judgement of political values on our part. I see the talk of possible war with China (“open hostility”) in the same way I saw talk by some American commentators in the 1980s of possible war with Japan, which was then a rising power. The cases are very different, but the strength of the commitment to war avoidance by both governments has been more or less equivalent for several decades.

We must not forget that China launched four ballistic missiles in test mode to intimidate Taiwan in 1995 and 1996, or that it invaded Vietnam in 1979. We must also note rising nationalist, even militarist views in some sections of the Chinese armed forces. These important reference points do not prove China is our enemy, they merely require us to modernize and calibrate our policy technology for identifying “friend or foe” in the modern world as circumstances change.

In particular, that lens must allow us to distinguish between “aggression” and China’s maneuvering in the South and East China Seas, where territorial claims have not been fully settled since the 1930s and where maritime boundaries became unsettled in part as a result of the U.S. claim in 1945, against international law at the time, to resource jurisdiction over the extended continental shelf.

People relying on outdated policy lenses or those less familiar with the detail of global realities, including inside China, will continue to be circumspect, and to “err” on the side of caution. But I would argue that now is the best time, as China’s power is surging, and as it so steadfastly commits to military strategic stability, for us to change our “friend or foe” policy technology.

China does not share Western values about domestic social order, or about cyber espionage, but it does share our values about the need to avoid war. As the movie mentioned above shows, a cyber attack on a nuclear power station in China resulting in catastrophic radiation release would be a threat to general peace affecting us all, as it would be if the same happened in the U.K.

A nuclear war might happen. China might transition to “open hostility” with the West. But both are highly unlikely and we are getting farther away from such scenarios rather than closer to them, at least as far as China is concerned. It is time we recognized this more concretely in our approach to China, rather than head off in the opposite direction, as Australia and the United States are now doing.