Published 1st October 2015
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Jeremy Corbyn has brought policies such as nationalising the railways and taking political control over monetary policy back on the agenda. To many this constitutes a belated but welcome revival of socialist ideas. However, we don’t need to wait five years for Prime Minister Corbyn to thrust socialism back into the heart of our economy, we have a Conservative Chancellor doing it for us already. This is because of Osborne’s fascination with China.
Two major infrastructure projects being pushed through by the Tories involve placing a begging bowl in front of the Chinese. On his recent visit to China, George Osborne urged Chinese firms to bid for seven contracts worth nearly £12bn to cover the first phase of HS2 between London and Birmingham. He was also keen to secure Chinese cash for the Hinkley Point project and has said he is happy for the Chinese to build and own nuclear power plants in Britain.
In this globalised economy where East meets West and Left meets Right perhaps I am just being rather chauvinistic to question the origin of investment cash. What reasons are there to object to the Chinese becoming a major shareholders in UK plc?
The first obvious answer is that such investment is unreliable. China is not clearly either a socialist or a capitalist state. But to the extent that it resembles the latter, its finance markets are in their infancy and subject to the sort of volatility that could be expected from this stage of capitalist development. Recent stock market collapses are indicative of this instability and we could hardly be surprised if the Chinese Communists were to favour domestic investments over foreign deals when recurrent crises put their own credibility at risk.
The story of Chinese finance at Hinkley is usually told in terms of the nuclear expertise being provided by French companies EDF and Areva and the finance coming from China. But it should be noted that the Chinese companies involved in the deal are both nuclear companies and both wholly or partially state-owned. So the government is allowing our energy security to depend on the commitment of two companies controlled by the Chinese Communist Party. In the case of the China National Nuclear Corporation, it is a state-owned entity which combines nuclear weapons production with civilian nuclear power. It’s a strange old world where such a company is considered a reliable partner in such a crucial area of our economy.
Chinese investment finance is also very expensive. It is almost always the case that governments can borrow money more cheaply than companies, so it must be Osborne’s ideological resistance to borrowing to invest in infrastructure that causes him to favour dubious Chinese companies over public sector investment.
Another indicator of the immaturity of Chinese capitalism is its questionable commitment to safety and environmental standards. Not reassuring for a partner in an industry that is so risky and potentially toxic as nuclear.
Given the vast cost of electricity that may one day be generated at Hinkley, and the horrendous impact this will have on our manufacturing industry, not to mention domestic fuel bills, we can only assume that the government’s enthusiasm for the deal is based on its love of finance and the City.
Hinkley and HS2 share one important feature: both are white elephants. This expression arises from gifts that were given by the eastern emperors of old to their enemies. For religious reasons they had to be looked after with great care and at great expense and this contributed to destroying the threat posed by the political rival. Far be it from me to suggest any such strategy on the Chinese side with regard to our infrastructure projects. However, it does not seem far-fetched to suggest that Osborne is saddling us with projects that might have an equally destructive economic impact.