China's Xi turns to money and politics in Britain after day of pomp

After a day of pomp, Xi will get down to business at Cameron’s Downing Street residence and attend a meeting in London with chief executives of big British companies.

The highlight of that summit is expected to be an announcement that state-owned China General Nuclear Corporation (CGN) will take a one-third stake in the planned 18 billion pound ($28 billion) Hinkley Point nuclear plant owned by France’s EDF (EDF.PA).

“A growing China-UK relationship benefits both countries and the world as a whole,” Xi told a state banquet at Buckingham Palace hosted by Queen Elizabeth on Tuesday night.

Escorted by Prince William, the queen’s grandson, Xi on Wednesday inspected a new battery-powered black taxi to be produced by London Taxi Company, which is owned by Chinese carmaker Geely [GEELY.UL].

Cameron is pitching Britain as the pre-eminent Western gateway for investment from China, though the warmth of the reception for Xi has raised some eyebrows with allies and drawn criticism that London is ignoring China’s human rights record.

Protests on the street against the Communist leader have been small so far, despite activists accusing Cameron of courting Chinese money while brushing aside criticism of a crackdown in civil liberties since Xi came to power in 2012.

British officials and business leaders say the rise of China is impossible to ignore: China’s economy – the second biggest in the world – is four times the size of Britain’s.

“We encourage investment, and China is investing more in Britain now than other European countries,” Cameron, who wants to make London the dominant Western center for renminbi trade, told China Central Television.

China on Wednesday nearly doubled a bilateral currency swap agreement with Britain to 350 billion yuan ($55 billion), part of Beijing efforts to spur more use of the yuan abroad.

NUCLEAR DEAL

In what is likely to be the biggest deal of Xi’s visit, China will take a stake in the EDF project in Somerset that is due to start operating by 2025 and is the first European nuclear plant to be built since Japan’s Fukushima disaster in 2011.

The Chinese investment, agreed in principle in October 2013, breathes life into a British plan to replace around a quarter of its electricity generating capacity over the next decade and offers China a way to showcase its nuclear technology as part of its pitch as a global exporter of quality infrastructure.

As part of the deal that includes Hinkley Point, EDF and CGN are expected to cooperate on building a new Chinese-designed reactor at a site near London.

The deal brings Britain’s first new nuclear plant since 1995 a step closer and is also a boost for EDF, which has been hit by billions of euros of cost overruns and years of delays with two of its other European nuclear projects in Finland and France.

As part of the deal, which EDF has still to sign, the French group may agree to cede majority ownership on a new nuclear project at Bradwell, east of London, to CGN.

The prospect of China, which Western spymasters say sponsors hacking of global companies, helping to build a nuclear plant in Britain and being involved in running others has stoked security concerns in Britain.

Steve Hilton, a former policy adviser to David Cameron, told the BBC that Britain should impose sanctions on China for political oppression and cyber attacks instead of rolling out the red carpet.

“This is one of the worst national humiliations we’ve seen since we went cap in hand to the IMF in the 1970s,” said Hilton, who left Downing Street in 2012, referring to the 1976 crisis during which Britain was forced to ask for a loan from the International Monetary Fund.

“The truth is that China is a rogue state just as bad as Russia or Iran, and I just don’t understand why we’re sucking up to them rather than standing up to them as we should be.”

China has strongly denied previous accusations of espionage, saying it is itself a victim of cyber attacks.

China has feted Britain for a visionary choice to strengthen ties, though some British lawmakers have also pressed Cameron to raise the issue of cheap Chinese steel imports after over 4,000 jobs were thrown into jeopardy at steel plants across Britain.