Wednesday, 23 October 2013

China In Your Hand?

As Richard North notes the forthcoming announcement of the construction of a giant new nuclear plant at Hinkley represents a staggering escalation in costs. However leaving aside the continuing folly of the UK’s energy policy it’s intriguing that much comment has been made about the fact that it is Chinese, not UK, investment that is involved, as indicated by this Telegraph piece (pictured above):
But others were less sanguine about China possibly coming to dominate Britain’s nuclear industry. “It’s troubling how far the Government is bending over backwards to allow this,” said Paul Dorfman, research associate at the energy institute of University College London.
Que much teeth-nashing - sorrowful that a country which was once at the forefront of nuclear power is now having to rely on Chinese investment to "kick start" our nuclear industry. But as is typical of our increasingly isolationist and "Little Englander" media, it ignores the wider picture. And it misses the insidious, and in this case the subtle, nature of our membership of the EU.

The UK and China have been forging a closer relationship for some time now; and crucially it has been doing so in the process of an increasingly close relationship between China and the UK government to support internationalization of the Chinese currency – Renminbi (RMB).

China is seeking to replace the US dollar, with the RMB, as the major world reserve currency. To help fulfil the criteria it is doing so with increasing co-operation of the Hong Kong and London financial markets, as noted by the South China Morning Post:
With Hong Kong’s support, London has become the leading offshore RMB centre in terms of payments with Hong Kong and China.  According to the Society for Worldwide Interbank Financial Telecommunications (SWIFT), London now accounts for 28 per cent of offshore RMB settled transactions.
Thus China has an enormous vested interest in the health of the UK financial sector. One can imagine therefore that it won't be best pleased to see the increasing efforts of the EU to impose ever draconian rules deliberately designed to damage one of the UK’s most important parts of its economy:
George Osborne has launched an unprecedented legal challenge against European plans for a financial transactions tax.

The move, which will be seen as a further sign of fraying relations between the UK and the rest of the continent, is designed to force the European Commission to reconsider the levy on Europe-related financial activity.
Chancellor George Osborne stood isolated after European Union finance ministers vowed to press on with proposals to curb bankers' bonuses.

He told a meeting of EU finance ministers that he could not back the plans, which he fears could damage London's financial centre.
By cosying up to the Chinese - which is not to everyone's liking - Osborne has a big player on our side when defending the City from EU laws. A big player that is effectively helping to prop up the Euro. A bigger game is being played here.

If one is to be generous we could argue that George Osborne has played a bit of a blinder, however a more realistic criticism would question whether the heavy reliance on the Chinese been so necessary if we weren't members of the EU?

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