US is slow off mark in effort to play role in China nuclear industry

By any standards, China's commitment to nuclear energy is an ambitious one. But the country faces an uphill battle to implement its plans fully. US companies have moved closer to participation in the program, with the signing last month of a nuclear technology agreement between the two nations, but their role remains unclear for two reasons:

Only now does it appear that US firms will be allowed to participate. But negotiations for China's first nuclear facility are well advanced.

China's nuclear program itself is highly uncertain because of economic constraints.

The US-China agreement would permit US companies to sell nuclear reactors, components, technology, and materials to China. It was initialled by President Reagan and Chinese Premier Zhao Ziyang in April 1984, but the agreement was not submitted to Congress until last month because of concern about China passing US technology to third parties. The Senate has 90 days in which to veto the agreement.

Because of the delay, US companies have almost certainly missed the bidding for China's first nuclear power station at Daya Bay in Guangdong Province near Hong Kong. Contracts for that $3.5 billion joint-venture project have not been signed, but negotiations with France's Framatome and with Britain's General Electric (not related to the US company of the same name) are at an advanced stage.

Earlier this month, China also signed a nuclear agreement with Japan, only 10 days after Chinese Vice-Premier Li Peng and US Vice-President George Bush signed the US-China agreement in Washington. Britain, France, and West Germany have signed similar agreements in the past two months.

Foreign competition for participation in the Chinese nuclear construction program now focuses on a site near Shanghai in Jiangsu Province. The Chinese are already discussing that project with the French and Germans, say industry sources.

``The probability of the Daya Bay negotiations opening up to other participants are low,'' said one Western diplomat. ``But it is possible that Westinghouse and Mitsubishi will be invited to offer their propsals for the plant in Jiangsu,'' he said.

The Jiangsu project is the second nuclear power plant to involve foreign contractors and is scheduled for completion in the early 1990s. Chinese nuclear industry sources say the Jiangsu site could eventually include as many as four reactors producing 900 million kilowatts each, with a total contract value twice that of the Daya Bay site.

According to Vice-Premier Li, China's nuclear energy plans aim at a total installation of 10 megawatts by the end of the century. Industry analysts estimate this means an investment of $10 to $20 billion, at least 25 percent of which will require foreign exchange for purchases of equipment and for debt financing.

Energy is a priority issue for the Chinese. Foreign observers estimate that 15 to 20 percent of China's industrial equipment is lying idle because of power shortages and 40 percent of rural households do not have electricity. The energy shortage has been getting worse with the rapid pace of industrial development, especially with the mushrooming of small industries in the countryside.

China has vast sources of energy in coal and hydropower. But these are poorly developed, and the coastal areas -- where the most rapid industrial development is expected to take place -- are remote from these forms of energy.

The proposed nuclear plant sites, therefore, are along the country's eastern and southern coasts. In addition to Guangdong and Jiangsu, other proposed sites are in Liaoning and Fujian provinces. There are also persistent but unconfirmed rumors that the Chinese have talked with the Soviets about their building a nuclear plant in the northeast, probably in Heilongjiang Province.

According to Western obeservers, one big constraint for China's nuclear development is financing. The haggling over financing for the Daya Bay project showshow serious the problem is, one Western diplomat said. Daya Bay has a built-in source of foreign exchange earnings, since 70 percent of the power will be sold to Hong Kong.

``If financing is a problem with Daya Bay,'' said the diplomat, ``imagine how difficult it will be to finance projects elsewhere in China.''

For the other projects the Chinese have mentioned some form of compensating trade to pay for the multimillion-dollar equipment in something other than cash. But it remains to be seen if they can come up with attractive offers for nuclear suppliers, especially those companies in the US which are looking for hard cash to bail themselves out of a slump in the nuclear industry back home.

China now operates six research reactors, but has no nuclear plants supplying power for residential and industrial use.

The country has a surplus of nuclear engineers, however, many of whom were trained in the Soviet Union in the 1950s but who since have had to find work in other fields.

Now China's nuclear engineers are trained mainly at home, though a small number are studying in France, West Germany, and some in the United States, according to a spokesman for the Chinese Nuclear Society, a professional organization. The society's membership includes some 20,000 trained nuclear engineers, the spokesman said, though a recent press report mentioned there were only 10,000 people involved full time in China's nuclear industry.