China to UK: 'golden' ties at crucial juncture over nuclear delay

By Guy Faulconbridge and Kylie MacLellan

LONDON (Reuters) - China has cautioned Britain against closing the door to Chinese money and said relations were at a crucial juncture after Prime Minister Theresa May delayed signing off on a $24 billion nuclear power project.

In China's sternest warning to date over May's surprise decision to review the building of Britain's first nuclear plant in decades, Beijing's ambassador to London said that Britain could face power shortages unless May approved the Franco-Chinese deal.

"The China-UK relationship is at a crucial historical juncture. Mutual trust should be treasured even more," Liu Xiaoming wrote in the Financial Times.

"I hope the UK will keep its door open to China and that the British government will continue to support Hinkley Point — and come to a decision as soon as possible so that the project can proceed smoothly."

The comments signal deep frustration in Beijing at May's move to delay, her most striking corporate intervention since winning power in the political turmoil which followed Britain's June 23 referendum to leave the European Union.

Her decision indicates a much more cautious view of Chinese investment and a willingness to take a tough line with EU allies such as French President Francois Hollande.

Cast as the jewel illustrating a new "Golden Era" of relations between China and Britain, the Hinkley financing deal was signed in Downing Street during a state visit to Britain by President Xi Jinping last year.

GOLDEN ERA?

Under plans drawn up by former Prime Minister David Cameron, French utility EDF and China General Nuclear Power Corp would fund the cost of building two Areva European Pressurized Water Reactors at the Hinkley C nuclear plant in Somerset, in southern England.

Britain has committed to pay a minimum price for the power generated by the plant for 35 years, though critics said London had agreed to pay far too much.

Hinkley is seen as the frontrunner to closer ties with China on nuclear issues, paving the way for tens of billions of dollars of investment and another two nuclear power plants with Chinese involvement.

Cameron raised some eyebrows with allies by pitching Britain as the pre-eminent gateway to the West for investment from China and made London the biggest international trading centre for offshore yuan outside China.

Britain is currently discussing an agreement for landmark financial services links, including a London-Shanghai stock connection.

In the comment published in the Financial Times on Tuesday, China's ambassador said Hinkley was not "some whimsical idea or rushed decision" and pointedly said that Chinese investment had flowed because both countries "respected and trusted each other".

"If Britain’s openness is a condition for bilateral co-operation, then mutual trust is the very foundation on which this is built," said Liu.

Once Britain exits from the EU, London would need to clinch a new trade deal with China, whose $11.3 trillion economy is currently more than four times as big as Britain's at $2.4 trillion.

Liu said Chinese companies had invested more in the United Kingdom than in Germany, France and Italy combined over the past five years.

NATURAL CONCERNS

Since May won the top job, Britain has repeatedly said that it values its relationship with China and that it was natural for the incoming government to want to look at the plans in detail.

"This decision is about a huge infrastructure project and it's right that the new government carefully considers it," a government spokesman said.

"We co-operate with China on a broad range of areas from the global economy to international issues and we will continue to seek a strong relationship with China."

But Nick Timothy, May's influential joint chief of staff, also said last year that security experts were worried the state-owned Chinese group would have access to computer systems that could allow it to shut down Britain's energy production.

"Rational concerns about national security are being swept to one side because of the desperate desire for Chinese trade and investment," Timothy wrote in October 2015 in a column for a conservative news and comment website.

China was buying British silence on human rights, Timothy said, and stated that British security services thought China's spies were working against UK interests.

"No amount of trade and investment should justify allowing a hostile state easy access to the country’s critical national infrastructure," he said.

A final decision on Hinkley is due in September.

(Additional reporting by Elias Glenn in Beijing; Editing by Sonya Hepinstall)

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