China has given the green light to the construction of two new nuclear plants after granting no new approvals for more than a year, as the country continues to follow its old playbook of increasing infrastructure investment to boost the economy and employment, while improving future energy security amid escalating geopolitical tensions.
The State Council, China’s cabinet chaired by Premier Li Keqiang, also stressed at its meeting on Wednesday that it would maintain a flexible monetary policy stance to support the coronavirus-hit economy, amid questions about whether the central government will roll back its stimulus measures after a stronger-than-expected economic rebound in the second quarter and during the first part of the third.
The cabinet approved the two nuclear power projects in the coastal provinces of Hainan and Zhejiang, at an expected cost of 70 billion yuan (US$10.24 billion). The one in Hainan is expected to be finished by 2026, and Zhejiang’s is expected to be finished by 2025.
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“Pushing forward the construction of nuclear power projects actively and steadily is an important measure to expand effective investment, enhance energy support and reduce greenhouse gas emissions,” the cabinet said in an official statement after the meeting.
In addition, the projects “will create a large number of jobs”, the statement added. Maintaining stability has been the government’s top priority this year, given the damage done by Covid-19.
Stronger infrastructure investment was a key engine that helped power China’s gross domestic product growth of 3.2 per cent in the April-June period, compared with a year earlier. This followed a sharp contraction of 6.8 per cent in the first quarter, after which China rebounded to become the world’s first major economy to return to growth following the virus shock.
During a high-level meeting on the development of Tibet last week, Chinese President Xi Jinping once again called on the government to push a series of large infrastructure projects to support economic growth.
Nuclear plants have long been a favourable option for Beijing to stabilise the economy.
The central government launched a long-term development plan for nuclear power in 2007 and vowed to increase the number of domestic nuclear plants in 2008, amid the impact of the global financial crisis.
But after the 2011 Fukushima nuclear plant disaster in Japan, China halted its approval of new reactors for four years. These resumed in 2015, largely driven by Beijing’s pledge to cut carbon emissions. Then, from 2016 to 2018, the country again stopped granting permission for the construction of new nuclear power plants. After three new plants were approved in June 2019, government approvals again ground to a halt until this week.
A number of factors have provided new impetuses for the approval of more nuclear plant projects. The coronavirus pandemic has strained the national economy, tensions are rising with the United States, and China is looking to cut its reliance on fossil fuels while reducing pollution.
Liu Jing, an analyst at Huajin Securities, said the State Council’s decision meant that China’s construction of nuclear plants would return to a more active track, with four to six projects expected to be approved annually over the next few years.
“Nuclear power … plays a pivotal role in ensuring China’s energy security and in achieving the [government’s] goal for non-fossil energy to account for 20 per cent [of China’s energy consumption] in 2030,” Liu wrote in a note on Thursday.
China has surpassed the US to have the world’s largest capacity of nuclear power plants – in operation under construction, or proposed – with a total estimated electrical generating capacity of 108.7 million kilowatts as of April, according to figures from the World Nuclear Association. That total capacity is equivalent to about five Three Gorges Dams – the world’s largest capacity hydroelectric power station.
The country was expected to have a total of 51 nuclear power units by the end of the year, including 17 units under construction, with the generating capacity of nuclear plants in operation reaching 70 million kW by 2025 – the end of next five-year plan – according to a report by the China Nuclear Energy Association released on June 16.
Also at Wednesday’s meeting, the State Council called on the People’s Bank of China (PBOC), the nation’s central bank, to help the economy recover.
“To maintain the strength and sustainability of [monetary] policies, do not flood the economy with credit, and guide more funds to flow into the real economy,” the official statement from the meeting said.
There are increasing concerns that policymakers in Beijing might opt to tighten their policy stance, as the recovery has proved stronger than expected.
The PBOC announced on August 20 that it would keep its benchmark lending rate – the one-year loan prime rate (LPR) – unchanged at 3.85 per cent for a fourth straight month.
Analysts with China Fortune Securities said that the State Council meeting and LPR decisions both pointed to a tightening in China’s monetary policy stance, to ensure the central bank has sufficient room to manoeuvre in the future, given that the economic recovery’s momentum is still strong.
“We believe that the statement on monetary policy at this meeting is slightly tighter than before,” they wrote in a note on Thursday.
The State Council also specified rules for the establishment of financial holding companies, while stressing the importance of reducing air pollution in the Beijing-Tianjin-Hebei region and neighbouring areas.
More from South China Morning Post:
- Chinese President Xi Jinping turns focus onto Tibet border security
- Coronavirus: China’s State Council urges local authorities to speed up fiscal support for small firms
- China to overtake US as world’s top economy in 2032 despite Washington hostilities, state think tank predicts
- China’s service industries catching up as life returns to normal after coronavirus shock wave slammed economy
- China’s banks must innovate to help small businesses weather ‘complex and severe’ economic environment
This article China’s cabinet approves two new nuclear power plants in push to boost economy, cut pollution first appeared on South China Morning Post