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Thursday, November 25, 2010

Westinghouse sells nuclear technology (and its future?) to China

By Ed Flanagan, NBC News

BEIJING – Lost in all the drama along the Korean peninsula was the news earlier this week that American nuclear power company, Westinghouse, had handed to China more than 75,000 documents related to the construction of their third generation AP1000 nuclear power reactors.

The move is a prelude to the planned sale of four nuclear reactors to an energy-hungry China that in recent weeks has shown increasing strains in its energy producing capacity. When completed, the Westinghouse reactors sale will represent over 30 per cent of Beijing’s planned nuclear power plant construction for the near future.

China currently has 23 reactors under construction and a further 120 proposed.

The move is a curious one, however, as it comes at a time when western companies from energy to biotech have been complaining about the technology transfers demanded by China in exchange for successful contract bids.

Chief amongst the western companies’ concerns are intellectual property protection and a recent trend which sees China attempting to nurture “National Champions” in key industries, often at the cost of foreign business interests.

Jack Allen, president of Westinghouse for Asia, did not seem overly concerned about being pushed out of China’s nuclear market in the near future, telling the Financial Times, “We don’t expect that we will walk away at the completion of these units and not participate in the [nuclear] program, but there are no guarantees.”

Those sentiments were echoed by Rajesh Panjwani, a Hong Kong-based analyst who said, “In a lot of other industries we have seen this strategy not work very well because China has emerged as a competitor. But for nuclear we don’t know how much time China will take to master the technology and emerge as a competitor.”

Indeed, this strategy of allowing transfer of critical technology to China and banking on its companies’ inability to master the skills and adapt the equipment to their needs has failed miserably, most notably in the railway industry.

Just this past week, Kawasaki Heavy Industries Ltd. put out a statement noting that years of unabated technology transfers to China by a host of major western train manufacturers including Bombardier Inc. and Siemans AG had helped create Chinese rail companies that could now compete abroad using their technology at a much lower cost base.

China argues that while the trains they are now attempting to export worldwide, including California, are based on technology acquired from abroad, their trains have simply been “re-innovated” and stand on the “shoulders of past pioneers.”

Foreign railway executives will almost certainly attempt to protect their intellectual property from being re-exported abroad under the name of a domestic Chinese rail company, but they will face an uphill court battle and will need to tread a very fine line, lest they also anger the Chinese government and jeopardize their own future sales on the mainland.

Westinghouse’s gambit that the Chinese will be slow to adapt to the technology and safety requirements of their plants might prove correct in the foreseeable future. However, if recent history has shown us anything, it’s that the company may very well have sold off decades of research and development and its future in the China market in exchange for a couple years of excellent profit.

Just call it the real “China Price.”

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