The People’s Republic of China is today the biggest platform in the world for the deployment of nuclear technology to generate electric power. In less than twenty years, China has increased its population of operating nuclear power reactors from three to thirty-eight, with eighteen more plants under construction. China currently accounts for more than half of the world’s new nuclear power investment. In 2018, only the United States and France operate more nuclear power plants than China. According to current expectations, Chinese nuclear power production may surpass the United States, which has led the world in nuclear power generation for over half a century, sometime before 2030.
Following from China’s success with nuclear power so far, external experts in government and industry generally anticipate that China will continue to successfully manage and move forward with its nuclear energy program in the coming decades. Especially in that case, decisionmaking in China’s nuclear sector will likely significantly impact the global long-term outlook for nuclear power and the architecture of the nuclear fuel cycle; competition for nuclear exports; nuclear technology holders’ strategic leverage over trading partners; and international nuclear governance.
Regardless of its future outcomes, China will profoundly influence what the rest of the world believes about nuclear power and the nuclear fuel cycle. China aims to transition from conventional nuclear power reactors to a fully closed nuclear fuel cycle based on fast breeder reactors, spent fuel reprocessing, and the use of recycled plutonium fuel. If China fails, it will reinforce conventional thinking in some countries that nuclear fission is a transitional energy technology likely to be replaced this century by other sources. If China succeeds, prevailing low expectations for nuclear power may instead be dramatically revised. Other states may follow China’s lead in projecting that nuclear power will be sustainable for centuries and that the risks associated with an industrial-scale “plutonium economy” are socially, economically, environmentally, and politically acceptable.
China’s industry is poised to invade the world’s nuclear goods markets. Continued Chinese success in nuclear power will add to the challenges faced by a nuclear industry in the West that is in deep trouble. Chinese state-owned enterprises (SOEs)—which were, until recently, expected to become “second tier” suppliers—may penetrate established nuclear power plant export markets. China’s dirigiste business model may give its SOEs supreme competitive advantage over all foreign private sector companies in the nuclear industry. If Chinese business practices prevail, China might eventually become the world’s leading provider of nuclear fuel, nuclear power plants, and nuclear engineering services.
Beijing will obtain strategic leverage where Chinese nuclear firms do business. Chinese success in exporting nuclear equipment, technology, and materials will open the road for China to replicate the success of the United States’ Atoms for Peace program, in spreading its influence into the foreign, energy, and technology policies of China’s nuclear partners and clients. The expense of spreading nuclear commerce, especially to developing countries, might be underwritten by China in support of its strategic interests.
The bigger China’s nuclear power footprint grows, the more say China will have in global nuclear governance. If China in the coming decades becomes the leading nuclear power country, it will demand and obtain a commensurate role in members’ decisionmaking concerning multilateral technical rulemaking compacts and organizations, including the Non-Proliferation Treaty (NPT), the International Atomic Energy Agency (IAEA), and the Nuclear Suppliers Group (NSG). If China closes the nuclear fuel cycle, global governance mechanisms related to nuclear security and nonproliferation may be adjusted to reflect that accomplishment.
While these developments loom on the horizon, the intensified buzzing of China’s nuclear beehive has not escaped the attention of Chinese and international news media. However, the media’s day-to-day focus on new contracts, nuclear industrial partnerships, reactor projects, and record-setting electric power production contribute to a misleading impression that China’s nuclear power program will continue to expand indefinitely and incrementally without challenges, crises, or setbacks.
It is possible that, in the coming years, China’s nuclear industry will not continue on the same robust trajectory as over the last three decades. That may even be likely should other developments transpire, including: the widespread introduction of market reforms into China’s electricity sector that would threaten government subsidies and assistance to the nuclear power industry; a prolonged economic slowdown combined with a deeper shift from capital investment to consumer goods; greater debt and globalization-fed risk aversion; the emergence of nuclear power input bottlenecks; and China’s failure to make the transition from replicating established nuclear technologies to the more advanced, technically complex, and innovative systems that it wants to deploy in the future.
In any event, it would be a mistake to assume that China’s nuclear program will continue on the course it has steered since the 1980s. China built up its nuclear power system under assumptions it made before embarking on profound reforms that tied China to the development of the global economy. Today, the consequences of these reforms—greater wealth, industrial corporatization, economic competition, more diversified growth, and rising expectations for environmental protection and political accountability—will constrain and influence the state’s nuclear energy decisionmaking. To be successful, China’s rulers will have to adjust longstanding nuclear policies and aims to take this evolution into account.
Challenging the West’s Nuclear Industry
The scale of China’s nuclear energy industry alone ensures that how Chinese decisionmakers choose to manage this sector will have a great impact on the world’s nuclear energy systems. By the end of the twentieth century, France’s mature nuclear energy industry operated over fifty nuclear power reactors to supply about 80 percent of the electricity consumed by its population of 60 million people.1 By contrast, when China connects its fiftieth nuclear power reactor to the grid, which is expected in a few years, China’s nuclear power plants will contribute only about 5 percent of the electricity demanded by its population of 1.4 billion.2
Long before China set its sights on exporting nuclear power plants, the global nuclear industry had begun a process of consolidation that is still in progress. Since the 1980s, firms in Belgium, Germany, Italy, Japan, Netherlands, Sweden, Switzerland, the United Kingdom (UK), and the United States have abandoned the nuclear industry. Today, the nuclear engineering sectors of companies in France, Japan, and the United States, which supplied nearly three-quarters of the world’s nuclear reactors, are in decline and their futures are uncertain. These firms are experiencing low-capacity utilization, rising costs, loss of expertise, and waning political support. Westinghouse Electric Company, a firm in the United States whose technology is the basis for over half the power reactors in the world, was selected by China in 2006 to provide the blueprint for a raft of its future nuclear power plants. In March 2017, after Westinghouse had transferred much technology to China and on the eve going forward with new business with China, the company filed for bankruptcy in the United States, saddled by nearly $10 billion of debt resulting from cost overruns amounting to an estimated $18 billion for two nuclear plant construction projects.3 That followed revelations that Toshiba, a leading nuclear power vendor firm in Japan and Westinghouse’s owner, would post a net loss of $9.9 billion for 2016–2017.4 French firm Areva, Europe’s leading nuclear vendor company, which has transferred nuclear power technology to China since the 1990s, recorded cumulative net losses of EUR 7.5 billion from 2014 through 2016.5
Should China’s nuclear development remain on track, its industry’s anticipated massive economies of scale and high turnover will also put foreign competitors under even greater commercial pressure. Under President Xi Jinping, the Chinese state has pushed forward with plans to further support and consolidate its SOEs, including companies in the nuclear industry that may be subject to megamergers. Wedding the might of Chinese industry to the central government’s strategic and diplomatic aims, Beijing ordered its nuclear SOEs to collaborate to design Hualong-1, a national champion power reactor model that Chinese companies, at the behest of the state, are expected to aggressively export. In addition, Beijing planners are counting on exports of nuclear power plants to compensate for a marginal downturn in the domestic order books of equipment makers, engineering firms, and construction companies should demand for more reactors in China slow in the coming decades.
China’s Policy Choices and Strategic Implications
Ever since the mid-1980s, China has prioritized the development of nuclear power technologies because central planners considered them to be strategic. After a September 2016 address by Liu Baohua, the nuclear energy director of the China Atomic Energy Authority (CAEA), Chinese media summarized that nuclear power is “not simply an energy source” but is a technology with “other roles” in the Chinese state. Nuclear energy, they wrote, is “an important cornerstone of strategic power, a vehicle for civilian-military integration, and a ‘China card’ to play in the country’s international cooperation diplomacy.”6
China views nuclear energy as strategic from several perspectives. The technology for nuclear power generation is derived from the same science and engineering pursuits that are the basis for the reactors, uranium enrichment plants, and spent fuel reprocessing plants used to produce nuclear weapons; indeed, the chain-reaction physics is the same for nuclear weapons and power reactors. A country with advanced nuclear fuel-processing technology for power reactors has the means to produce fissile material for nuclear explosives.
Skills developed and experience accumulated in a country’s civilian nuclear energy applications can be put to use in its nuclear defense programs. The human and capital resources required for a successful nuclear energy program are great, and the timeline for nuclear power projects from conceptualization to decommissioning can be a century or more. Nuclear cooperation and the export of nuclear equipment, technology, and materials are vehicles for states to access and influence other countries’ decisionmaking on technology and energy. The greater a country’s nuclear power infrastructure is, the more a country is able to influence global governance standards for nuclear safety, nuclear security, nuclear trade policy, and nuclear nonproliferation.
Finally, nuclear energy is expected to contribute significantly to China’s intent to further urbanize its population by reducing air pollution in expanding megacities, and to show global leadership in reducing atmospheric carbon emissions. All of these strategic aims will factor into current and future Chinese decisionmaking about its nuclear power program.
From a strategic point of view, there are two reasons in coming decades why China’s most significant nuclear power challenge will be the establishment of an industrial-scale fuel cycle. First, China has since the 1980s aimed to effect a transition from conventional power reactors to a nuclear system based on more advanced fuel cycle technologies, to ensure that nuclear power has a future extending beyond the twenty-first century. Second, the decisions China makes in this area will have profound impact elsewhere. Since the 1960s, efforts to establish a closed fuel cycle in France, Germany, Japan, the UK, and the United States have been shelved or terminated due in large part to public opinion, politics, and market forces. How these same factors will affect Chinese plans to deploy fast reactors and industrial-scale reprocessing plants is not yet known.
This report considers both internal and external factors that can be expected to contribute to Chinese nuclear energy policy making. In addition to overriding and long-term Chinese strategic interests, the most important internal drivers will be China’s industrial policy concerning science and technology development, infrastructure investment, and electricity. The most important external drivers will be the forces of globalization. These could impact China’s nuclear course in two ways: by exposing China’s top-down and technocratic decisionmaking to increased influence from more Chinese stakeholders, and/or by encouraging and strengthening the impact of market forces in China’s economy, including its electricity sector.
Decisionmaking on how China moves forward with nuclear energy development is complex and opaque. There are many actors and many interests. China has on several occasions reshuffled the organizations and hierarchies of its nuclear energy–related authorities and agencies. It can be anticipated that this bureaucratic evolution will continue toward mid-century, beginning with the preparation for China’s next central planning milestones in 2020. Important decisions can be made with little regard for transparency. Indeed Chinese and foreigners have held different views about which Chinese government nuclear agencies are the most important.
So far, the decisions to select and deploy technologies for nuclear power generation have been made by the central government and the Communist Party of China without any significant public input. In recent years, the Chinese public has paid increasing attention to government actions concerning welfare, equity, health, the environment, and safety, including in the nuclear energy sector. Public concerns have multiplied even as Beijing has strengthened nuclear safety oversight. In 2013 and 2016, Chinese authorities canceled plans to build nuclear fuel cycle installations in the immediate wake of local opposition. These cases may be harbingers of greater public intervention in nuclear matters, but it is not a foregone conclusion that the Chinese state will react to public pressure by overturning decisions to proceed with specific nuclear investments—especially if the government considers projects to be in the strategic national interest. Regardless of China’s growing interaction with the outside world, government decisionmaking under Xi has become more centralized, opaque, and unpredictable. His record should caution observers not to expect that a more globalized China will necessarily become more transparent or permit greater public participation in nuclear energy matters.
How China proceeds will likely be decided above all by the central government, as decisionmakers balance policy goals and the interests of actors and institutions, and assess risks and opportunities. This report examines the future of China’s nuclear power development through 2050 by considering both the policy choices and the strategic implications, domestic and global, which include China’s choice of advanced nuclear technology, policymaking in China’s electricity sector, management and assessment of nuclear project and political risk, as well as the prospect for Chinese nuclear exports and China’s nuclear governance.
This report is intended to serve as a vehicle for informing a growing number of stakeholders in China’s nuclear energy program, as well as a broader policy community outside China, about the background, influencing factors, possible outcomes, and significance of the decisions that China will have to make in the coming years. The report does not aspire to predict how China will make these decisions, nor who will make them, nor what the outcomes will be. The report is based on five years of research and information obtained in part from government planning documents, academic studies, financial reports from industry firms, records of conferences and meetings, and Chinese and foreign news media accounts. The report benefitted from uncounted discussions and interviews with government officials, industry executives, economists, scientists, consultants, lawyers, academicians, and civil society experts since 2011. The centerpiece of this project was three annual workshops with Chinese and foreign expert participants concerning the future of China’s nuclear energy program, held from 2014 to 2016 on behalf of the Carnegie Endowment for International Peace, in Beijing, Xiamen, and Berlin.
1 “History of Nuclear Power in France” [in French], Fondation d’Entreprises Alcen Pour la Connaisance des Énergies, January 11, 2016, https://www.connaissancedesenergies.org/fiche-pedagogique/histoire-de-lelectronucleaire-en-france.
2 David Biello, “China Forges Ahead With Nuclear Energy,” Nature, March 29, 2011, http://www.nature.com/news/2011/110329/full/news.2011.194.html.
3 Mark Hibbs, “Does the U.S. Nuclear Industry Have a Future?,” Carnegie Endowment for International Peace, August 10, 2017, http://carnegieendowment.org/2017/08/10/does-u.s.-nuclear-industry-have-future-pub-72797.
4 Diane Cardwell and Jonathan Soble, “Westinghouse Files for Bankruptcy, in Blow to Nuclear Power,” New York Times, March 29, 2017 https://www.nytimes.com/2017/03/29/business/westinghouse-toshiba-nuclear-bankruptcy.html?_r=0.
5 Michael Stothard, “Areva Posts €665m Net Loss in 2016,” Financial Times, March 1, 2017, https://www.ft.com/content/e38738f3-a4b5-3b90-9c2b-4ec975a60157.
6 Lili Liu, “Administrative Measures for Nuclear Power” [in Chinese], Sina Press, December 9, 2016, http://www.china5e.com/news/news-971094-1.html.