1. 1
Master 2 of Economics and Business in
European Markets and Firms Strategies
Aloïs Gallet
September 2010
MEMOIRE
NUCLEAR INDUSTRY IN CHINA

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DISCLAIMER
Views and opinions expressed in this essay are the responsibility of the author and, therefore do
not necessarily reflects the ones of Université Paris Sud XI nor the AREVA Group.

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FOREWORD
The following developments interest the nuclear industry in China. The author is a junior
lawyer in environmental law, and a student in economics following a Master degree at the
Université Paris Sud XI. At the occasion of the Master degree and, in the context of an internship
taken with the Legal Department of the AREVA Group, the author was required to write a
“mémoire” in economics. Due to the double competencies acquired during his studies, the present
“mémoire” is mainly based on economic analysis, but also bring attention to legal developments
which may relevantly embellish the discussion.

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Table of contents
Table of contents ..................................................................................................................................... 4
INTRODUCTION................................................................................................................................... 6
I. Basic knowledge about the nuclear industry: generalities ...................................................................... 8
A. History of the nuclear power............................................................................................................ 8
1. A military technology push induced by the West .......................................................................... 8
2. Contemporary developments for nuclear power ............................................................................ 9
B. Credibility of nuclear in the future world energy mix..................................................................... 14
1. Energy mix and electricity mix................................................................................................... 14
2. Uranium and fissile material: primary energy for nuclear............................................................ 14
C. Nuclear cycle................................................................................................................................. 15
1. Mining ....................................................................................................................................... 16
2. Front-end ................................................................................................................................... 16
3. Reactors and services ................................................................................................................. 17
4. Back End.................................................................................................................................... 17
D. Peaceful use of nuclear energy: non proliferation implications....................................................... 17
II. Energetico-economic context for a market study of the nuclear industry in China .............................. 19
A. Economic facts.............................................................................................................................. 19
1. Basic remarks about economic tendencies in the PRC................................................................. 19
2. Electricity intensive sectors ........................................................................................................ 20

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3. China is a wired connected country............................................................................................. 23
B. Economic growth and needs for electricity in China....................................................................... 25
1. Electricity in China..................................................................................................................... 25
2. Electricity generation and consumption ...................................................................................... 27
3. Energy challenges ...................................................................................................................... 27
C. Strategic analysis of Chinese nuclear strategy................................................................................ 30
1. The Chinese energy mix............................................................................................................. 30
2. Reasons for a shift in the electricity mix to an increasing part of nuclear..................................... 31
III. Regulatory framework...................................................................................................................... 45
A. Weight of institutions in a regulated market................................................................................... 45
1. Liberalization process................................................................................................................. 45
2. Principle governmental bodies.................................................................................................... 45
B. Room for foreign investors in a protected market........................................................................... 47
1. WTO accession and control over direct investments ................................................................... 48
2. Public procurement framework and unfavorable practices for foreign investors .......................... 50
3. Foreign investments legal framework ......................................................................................... 51
4. Technology transfer issues.......................................................................................................... 52
CONCLUSION ..................................................................................................................................... 53

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INTRODUCTION
Predictions for world energy demand at horizon 2030 is believed to double, and at the same time
the energy sector is responsible for about 40% of global CO2 emission which are recognized to
be responsible for climate change1
. China, referred as a developing country regarding the Kyoto
Protocol, is observed as a booming economy. Since most of the economy is sustained by the
secondary sector, energy needs for China must be analyzed accordingly.
The booming economy in China has already inflicted terrible environmental consequences. The
current state of the environment is alarming. In 2006, an official delivered a speech before the
National People Congress talking about the state of the environment in the People’s Republic of
China (hereinafter referred as “China” or to “PRC”) as 触目惊心 “chu mu jing xin” which means
in English “whatever hit the eyes is shocking”. It may have ignited a change in the Chinese public
awareness.
Already, it comes to light that environmental issues are highly complex and interdisciplinary.
Sciences, sociology, economy and legal matters are involved. Because the systemic causes of the
problems of pollution, harmful for the environment, but also for the health and the ultimately the
economy of the country, all share the common starting point of energy consumption. The latter
should be studied with a wise eye to the environment. Economic and legal approaches will be
discussed in separated parts of the following developments.
The double digit economic growth enjoyed for the past decades relied heavily on the industrial
sector. The economy operated a shift about ten years ago, from a manufacturing industry, to a
“heavy industry”. Such a shift in the economic patterns combined with the market opportunities
located in China has required enormous quantities of energy, more specifically a surging demand
in electricity.
Consequently, the entire economy with a population estimated of 1.5 billion people, are
dependent on coal. International observers do not miss a chance to undermine the debate waving
the argument of the communist regime carelessness, the avidity to sustain the growth by all
means. The assumption may lack solid grounds and references, especially when knowing that the
1
See the World Nuclear Association, “World energy Needs”, available at http://www.world-nuclear.org/info/inf16.html

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Chinese news relate on a weekly basis the political and legal forecast in the subject matter of the
environment. Ignoring the Chinese press and defending the theory of the greedy China for oil,
coal and growth, the environmental steps forward are deemed as faked. It seems that the
credibility of China is often subject to doubt and looked down on from the outside. Though, a
specific focus on the state of nuclear and official prospects in China may be regarded, to some
extend, as an effort from the PRC to tackle economic growing drawbacks: environmental and
climate change issues.
The general context of energy production, the specificities of the Chinese political will and
environmental awareness has evolved in the recent years with the booming nuclear market. The
present essay aims at identifying the cause and possible consequences of the Chinese recent
nuclear developments. More precisely, the essay is an attempt to analyze the potential future of
Chinese nuclear as an actor of the world nuclear market, rather than a restrictive market for
foreign nuclear suppliers.
These are the question the present report will tend to clarify and answer in three parts. First of all,
several generalities concerning the nuclear industry must be reminded or simply exposed so that
the reader obtains the necessary keys for further development (I). Indeed, the nuclear industry is
very specific due to the multiple safety and security obligation that States and operators must
respect all along the life length of a nuclear power plants. Second of all, and economic analysis is
proposed considering the elements obtain after researches and thinking (II). Third of all, legal
implications in the field of nuclear industry will be presented, taking the view point of a foreign
investor who strives for business opportunities in China (III).

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I. Basic knowledge about the nuclear industry: generalities
This first part of the “mémoire” is a general presentation of the nuclear industry. In order to be
sufficiently detailed, the present part will describe the history of nuclear power from its origin to
today’s civil application (A), before studying the current state of nuclear as a source for
electricity generation (B).
A. History of the nuclear power
1. A military technology push induced by the West
Nuclear has undergone a complex evolution since the first scientific discoveries at the end of the
18th
century. Basically, nuclear energy consists in using the radioactivity contained in the fissile
material like uranium so as to transform into energy such as heat. The heat generated in the
process may thus be used to run a turbine and generate electricity.
Uranium is the main source for nuclear power since it is the chemical base for radioactive fuels.
It is available in its natural form. Uranium was discovered in the late 18th
century by a German
scientist named Martin Klaproth. Radioactivity was later discovered, about a century later, by
Wilhelm Rontgen who occurred to produce X-rays. The term “radioactivity” was given by the
famous French couple Pierre and Marie Currie in 1986, so as to describe the phenomenon.
The scientists Hahn and Strassman later discovered the nuclear fission. Their discovery consisted
in proving that the fission of the atom released a lot of energy, and also, that the process of fission
released additional neutrons. This was the founding of a self-sustaining chain reaction when it
appears that released neutrons could lead to further fission phenomenon and ultimately, to an
enormous release of energy.
The mastering of radioactivity and nuclear energy was allowed by the race to the nuclear weapon
encouraged in the context of World War II. British scientists set up the MAUD Committee who
made important moves towards further uses for uranium: the atomic bomb and, a source for

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energy generation. Two reports were issued in 1941, namely the “Use of Uranium for a Bomb”
and the “Use of Uranium as a Source of Power”. The use of uranium for nuclear power led to the
invention of the uranium boiler, which is the ancestor of the nuclear reactor. The US army further
developed MAUD’s concepts in 1942.
The first atomic bomb was dropped on Hiroshima on August 6, 1945. The second bomb,
containing Pu-239, was dropped on Nagasaki on August 9, 1945. That same day, the USSR
declared war on Japan. On 10 August 1945 the Japanese Government surrendered. From that day
on, the history was marked forever and nuclear potential was disclosed to the world.
Post World War II, weapons development continued to be carried on at both sides of the "iron
curtain", but a new focus was the atomic power as a source of energy for non military purpose.
Nuclear energy could be used for generating steam and electricity. Heat produced in the process
of nuclear fission could be controlled either for direct use as heat, or for generating electricity
with the heat produced.
In 1953, the US President Eisenhower proposed the “Atoms for Peace” program. Electricity
generation was the purpose of the program and took place in the course for civil nuclear energy
development.2
The first nuclear reactor to produce electricity was the Small Experimental Breeder reactor
(EBR1) in Idaho, USA, which started in 1951. Nuclear energy first went commercial in the
USA.3
The history of nuclear power is intrinsically linked to the development of the atomic bomb.
History was made so, nonetheless military oriented researches in the field of nuclear were the
true origins of nuclear power for peaceful use. Recent developments of nuclear technologies shall
also be mentioned.
2. Contemporary developments for nuclear power
2
S.Weart, “Nuclear Fear”, Harvard UP, 1988
3
C. Hardy and G. Haven,” Atomic Rise and Fall”, the Australian Atomic Energy Commission 1953-1987, edition 1999

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i. 1980-2000: transitional period
From the late 1970s to about 2002 the nuclear power industry went through stagnation period,
and even some declines. Only few new reactors were ordered after the 1970s wave. The share of
nuclear in world electricity from mid 1980s was fairly constant at 16% to 17%.
On April 26, 1986, the Chernobyl disaster marked a profound decline and distrust in the history
of the nuclear history. The uranium price dropped accordingly. The phenomenon was observed
and its cause attributed to the decline of nuclear, and the consequent renewal of secondary
supplies. Indeed, oil, gas and coal that may be used in thermal power plants reacted to the
“nuclear shock” as substitutes. Indeed, the relatively moderate share of nuclear energy into the
world electricity mix allowed such substitution effect. It must be reminded here that the oil shock
has passed at the time of nuclear shock. Oil companies which had entered the uranium field
bailed out, and uranium producers went into a consolidation strategy.
The Japanese nuclear technology rebooted the sector thanks to the finalization of third-generation
reactors. In the late 1990s, the first of the third-generation reactors was commissioned.
“Kashiwazaki-Kariwa 6” was a 1,350 MWe Advanced BWR. Its commissioning marked of the
recovery of commercial nuclear after more than twenty years of stagnation.
ii. 2000: nuclear renaissance
From year 2000, the combination of several factors revived the prospects for nuclear power. The
projected increase of electricity demand worldwide and specifically in rapidly-developing
countries was part of the nuclear revival decisions.

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The green part in the graph below shows how fast the world electricity demand is estimated for
the period 2004-2030. Such increase in the demand cannot be met by the use of fossil fuels only
without emitting enormous quantities of CO2 into the atmosphere.
Energy security came also as a decisive point. The notion of energy security encompasses various
themes. Countries that go nuclear answer to energy security issues by diversifying their energy
mix. Since resources for uranium and radioactive fuels providers are located in different places
from those owning coal, gas and oil resources, the political choice to go nuclear appears as a
strategy of securizing by diversifying. Furthermore, nuclear countries are less subject to hike in
carbon fossil fuels prices, which is another guaranty for security. Nuclear power is deemed an
efficient source of electricity that is less subject to closing of shortage in case of unfavorable
weather forecast.
The most recent concerns were environmentally related. Finally, in a context of carbon market
building at the global scale, nuclear is a CO2 free energy solution and its mastering in any
country may be a way to prevent indirect hike in energy generating industries. Indeed, the carbon
emissions due to the massive use of fossil fuels in the electricity generation sector which heavily
relied on coal, gas and oil leads to climate change4
. Climate concerns attribute global warming
(or more fashionably climate change) to the massive emission of CO2 at the occasion of fossil
fuels burning. The electricity sector in particular may make use of nuclear fission technology to
produce efficient, clean and competitive electricity. The nuclear source electricity does not emit
4
See the Intergovernmental Panel on Climate Change Report available at http://www.ipcc.ch/

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CO2 at the stage of combustion. Nuclear energy thus appears as a CO2-free technology, and even
a clean and climate change friendly technology.
The availability of a new generation of nuclear power reactors marked a renaissance. In 2004,
more than ten years after “Kashiwazaki-Kariwa 6”, the first of the late third-generation units –
Evolutionary Pressurized Reactor – was ordered for Finland. A 1600 MWe European PWR
(EPR) is the result of a French and German cooperation in the field of nuclear third generation
reactor design. The first model is to be constructed by AREVA. A similar unit is also planned for
France in Flamanville as the first of a full fleet replacement project. Two other 1,700 MWe EPRs
have been ordered by China in 2008. They will be built on Taishan sites (Taishan 1 and Taishan
2) by AREVA.
China alone plans a sixfold increase in nuclear power capacity by 2020, and has more than one
hundred further large units proposed and backed by credible political determination and popular
support. These orders are the latest western designs (such as the French EPR, and the US CPR
1000).
Historical plans and projects for nuclear in Europe and North America are now overshadowed by
even bigger projects in China, India, Japan and South Korea. However, it must be noted that
nuclear nations are those which detain nuclear technologies. France is ranked second, right after
the USA (796.9 TWe) with a total nuclear electricity generation of 391.7 TWe in 2009. Japan,
Russia, South Korea and Germany respectively account for 263.1 TWe, 152.8 TWe, 141.1 TWe
and 127.7 TWe.5
The history of nuclear power is, so far a western driven story. Nuclear science was initiated and
first mastered in Europe with major moves in UK and USA, and commercial nuclear was
strongly launched in France and USA. After few decades of decline, Japanese designers allowed
the renaissance of nuclear reactors with the third generation, then mastered by the western
designers again. As for today, the biggest nuclear markets of all times take place in East Asia,
China being the largest client for nuclear industries, and potentially a new comer in the reactors
designing, building and operating for tomorrow.
5
See Nuclear share figure 1999-2009 available at http://www.world-nuclear.org/info/nshare.html

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Let’s now have a glimpse at the general tendencies for nuclear power in the electricity sector.

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B. Credibility of nuclear in the future world energy mix
1. Energy mix and electricity mix
The world energy mix represents the share of primary energies that is consumed in all sectors. In
the figure below, nuclear only accounts for 6% of total primary energies.
The main explanation is that nuclear energy is almost exclusively assigned to electricity
generation, while coal, gas and oil receive application in the transport sector, the chemical
industry, the steel industry among others. In spite of the technological entry barriers and the sunk
costs implied, nuclear power appears as a credible option into the energy mix. In 2006, nuclear
electricity accounted for a little less than 15% of the world electricity mix. Such figure shows that
nuclear share has not increased since the 1970s. The main explanation is that there has not been
any nuclear growth since then. On the contrary, nuclear has been in decline and only starts now to
recover from a stagnation period of about 30 years.
2. Uranium and fissile material: primary energy for nuclear
Primary energies or fuels stands for natural resources that must be turned into energy. They are
not directly useable as energies. They must undergo a process of transformation to be turned into
energy, and more specifically into electricity.
Primary energies are either fossil fuels, or renewable energies. The distinction is made following
the fuels considered is, as a resource finite or not finite. Renewable energies are non finite, and

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their use is thus totally neutral for the environment, people’s health or other natural or economic
agents. Indeed, the use of renewable generates no negative externalities.
Uranium as a source for nuclear energy is a fossil fuel. Like every fossil fuels, uranium is a finite
natural resource. Nuclear primary energy actually stands for uranium, which itself respond to a
complex production process before being admissible into reactors. Uranium must be mined first,
then being enriched and ultimately loaded into nuclear reactors. The enrichment phase of
uranium accounts for about 40% of the generation costs of energy. The remaining 60% of the
cost are spent into the designing, the building and the operating process of the nuclear facility.
C. Nuclear cycle
The nuclear industry is classically presented as a set of successive stages leading to electricity
generation: the nuclear cycle. Nuclear cycle is also a dedicated expression for qualifying the
value chain in this specific industry.
The nuclear cycle integrates the entire process from uranium mines, to the final storage of nuclear
spent fuels, not forgetting the entire chain of command included in the nuclear power plants
(reactor). The electricity industry in which the nuclear industry is incorporated consists in
building production capacities, transmission capacities, and distribution capacities. Consequently,
electricity generation companies are the client for nuclear capacities building companies.
Transmission and distribution comes at the end of the process for the electricity industry. The
nuclear value chain, or the nuclear cycle is complex enough to be presented in details below.

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1. Mining
Mining operation stands for the activities related to the exploration and the exploitation of
uranium. Exploration consists in seeking for new deposits of uranium. Uranium is then subject to
extraction operations, and finally, the ore extracted must be processed. AREVA is the largest
uranium producer worldwide. Major known resources for uranium are located in Canada,
Kazakhstan and Niger.
2. Front-end
The front-end stage deals with nuclear fuels based with natural uranium and other fissile
materials in certain cases. The ore and materials must undergo a conversion and enrichment
process so as to become proper fissile materials. Natural uranium, as a raw material, and also a
mining substance is chemically divided in two sub-categories with similar chemical properties.

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U-235 and U-238 are the two isotopes that compose the natural uranium. U-235 represents only
0.7% of natural uranium, and U-238 the remaining 99.3%. The enrichment consists in increasing
the proportion of the U-235 isotope in the natural uranium. Then, fuels are assembled according
to the target reactor, because nuclear fuels are custom fit designed for each reactor according to
the type of technologies involved.
3. Reactors and services
The design and building of nuclear reactors is the core activity of nuclear building companies. In
most cases, the design is reactor is jointly realized by the manufacturer and the future operator of
the nuclear power plant. The manufacturing of related equipments is also par of this central
activity, with maintenance, upgrade and performance improvement services.
4. Back End
The last stage of the nuclear cycle is very delicate since it consists in ensuring the security and
safety of nuclear power plants and nuclear spent fuels once their life is over. Indeed, the
radioactivity emitted by reactors or spent fuels oblige to take safety measures so as to guarantee
the interest of the public and the environmental protection. Management of end-life spent fuels
goes with recycling solutions and disposing or staring of nuclear waste, while end life of reactors
goes with cleaning-up and dismantling old nuclear site.
D. Peaceful use of nuclear energy: non proliferation implications
After World War II and the discovery of a frightening tremendous power resulting for the
mastering of the atomic energy, the International Atomic Energy Agency was set up in 1957. An
international Treaty was elaborated and ratified by nuclear powers so as to avoid the spread up of
nuclear weapons in the world. The destructive potential of the atomic bomb could not be left
without specific precautions.
China did not sign the Non Proliferation Treaty (NPT) in 1968, at the initial date of opening for
signature. On the contrary, the Chinese government denounced the treaty as a "conspiracy
concocted by the USSR and the US to maintain their nuclear monopoly." China viewed the NPT
as a way for nuclear nations to perpetuate their military and industrial power by limiting the

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military capabilities of other countries. China maintained through the time that it stood for the
complete abolition of nuclear weapons, but that the nuclear superpowers had no right to prevent
non-nuclear states from acquiring nuclear weapons until the nuclear superpowers committed
themselves to complete disarmament.
In the 1980s, China's position on nuclear proliferation started to change. Beijing indicated that it
accepted in principle the norm of nuclear nonproliferation. In 1984, China became a member of
the International Atomic Energy Agency (IAEA) and agreed to place all of its exports under
international safeguards. In August 1991, after France finally acceded to the NPT, China also
declared its intention to join, though it again expressed its reservations about the treaty's
discriminatory nature.
China finally formally acceded to the NPT in March 1992 as a nuclear weapon state. China was
thus the latest of nuclear weapon states to do so.
Peaceful use stands for non military purpose, but civil applications such as research, medical
and most of all, electricity production. Therefore, by evacuating military related connections,
civil nuclear energy is related to economic considerations.

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II. Energetico-economic context for a market study of the nuclear
industry in China
National markets are defined according to a set of variables, among which general economic
tendencies of the country import most (A). The development of nuclear energy is commanded
by specific analyses dependant over the context of the considered industry: electricity related
industry (B). Finally, the political choice to embrace the nuclear path is encompassed in a
medium to long term strategy elaborated by the Chinese Government (C).
A. Economic facts
1. Basic remarks about economic tendencies in the PRC
During the recent years, China has undergone an impressive economic expansion. In 2008, the
Chinese economy grew by 9% with a GDP of USD 4,400 billion. The primary sector accounted
for 11.3%, the secondary for 48.6% and the tertiary sector amounted for 40.1%6
. The secondary
sector is the most energy intensive sector of the Chinese economy.
According to the national bureau of Statistics of China, 2008, the working population in the
industry only accounted for 26.8%. The cross comparison of the working population in the
secondary industry and the GDP realized in the sector reveals not only the productivity of the
population in the industry, but also the potential mechanization of the sector. The more machines
involved in the industry, the more energy intensive is the sector. The Chinese population in 2008
enjoyed the second highest GDP measured in Purchasing power parity (PPP).
The main indicator, the GDP has hit the 10% increase for several consecutive semesters since
2005. With such an increase of wealth, China is now ranked at the second largest economy of the
world. The ranking takes into account the total GDP of the country. Observers noticed few days
ago that China has just overtaken the world second economic rank in the place of Japan. On the
one hand, Chinese GDP increase was very rapid, on the second hand Japan is in the middle of a
recession.
6
National Bureau of Statistics China, 2009

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China’s impressive economic expansion is responsible for soaring electricity consumption. While
the electricity consumption grew steadily during the 1990s, there was a tremendous hike in 2004
(14,5%) and 2005 (16,9%). About electricity production, a deep analysis is not required at this
stage. The study of the PRC reveals production of electricity is a true indicator to the
manufacturing sector’s health. The electricity production in China, but more generally in fast
growing economies is a reliable indicator because it reflects the amount of electricity that is
produced and that cannot be stored. It also reflects the industry consumption of electricity, that is
to say the dynamism and progress of industrial activity in the PRC.
Analysts observe a remarkable rebound capacity in the PRC. Indeed, the manufacturing industry
was still proven in expansion during the year 2009, although the foreign demand for products was
in decline. This point deserves few comments. The Chinese manufacturing industry is deemed
closely linked to the foreign demand that imports Chinese goods. However, the economic crisis
has proven that Chinese economy is not completely dependant upon foreign demand. Economic
growth has kept on a steady path during the crisis period.
2. Electricity intensive sectors
China is often referred to as the manufacture of the world. Indeed, its wealth does not come from
the agriculture, or the sale of intellectual services. China is highly specialized in the production of
goods, machinery and raw materials. The industrial features of China are commonly called the
heavy industry. Such a name comes from the idea that the mass production generates heavy
intensive energy demand, big outputs, and inevitably important emissions of pollutants. The GDP
in 2004 was coming up to 53% from the industrial sector. However, one precision should be
made; the specialization of China in the heavy industry is quite recent compared to the 20 past
years of growth. Even though the secondary sector was and is still the preferred sector of the
economy, a shift has been operated within.

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GDP in 2004*7
Rmb billion % year-on-year
change
% of total
Gross domestic product (GDP) 13,651.5 9.5 100
Primary industry 2,074.4 6.3 15
Secondary industry 7,238.7 11.1 53
Tertiary industry 4,338.4 8.3 32
* Preliminary estimates.
The importance of talking here about the sectors will be further detailed. Basically, from an
environmental point of view, the relation between the industries and the pollution shall be clearly
exposed. Indeed, the economy of a country specialized in high technology goods and in services
cannot be compared with the economy of China, nor can be the environmental impact.
Two “not to be confused” environmental factors are suspended to the sectors of industry. The
first factor is the volume of pollutants released into the air, the water or the ground by certain
industries. The other one which is the core topic of the present report is the energy consumption
of each sector, and the total energy needs of the general Chinese economy.
The particular case of the cement production is relevant in the analysis of the Chinese industrial
sectors since China is the first producer of cement all over the world. China supplies the world’s
demand in cement with 44% of the global production. The booming industry of cement is due to
the rapid urbanization of the formerly so called “third world”, now renamed the developing
countries. The construction sector relies on the supply of cement which is the raw material for
nearly every building. According to recent national press8
news released, the construction sector
in China is adding about 2 billion of square meters per year for housing offices and stores. This
only meets one half of the national requirements. The housing market has know a 80% increase
in first to third semester 2009. Indeed the urbanization of China is currently low compared to the
demand. Every year, about 10 millions of people are coming to the cities. Consequently the
demand of building and other related constructions such as roads follows. The interesting point
with the cement is that its production is highly energy demanding, and then, a main source of
7
National Bureau of Statistics, China Statistical Yearbook 2004, National Bureau of Statistics plan report
8
China Daily 2008/02/02 “EU offers energy saving to help construction”

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CO2 pollution over the world. The 2007 US Geological Survey estimates that cement is
responsible for 9% of the CO2 emissions of the country. According to the same source, the
cement industry all alone would account for 4% of the global CO2 emissions.
All indicators prove the growing demand for energy, and especially for electricity. Indeed,
housing, industry and transport accounts for the major post of electricity consumption in China
and all over the world9
.
The other energy consuming sector of the Chinese industry is the steel production. Nowadays, the
Chinese steel supplies about on third of the global demand. The steel production has met the
same increasing during the famous period 2001 – 2006. In 2000 the total production accounted
for 130 millions of tones, whereas in 2006 the production passed over the 475 million tones. Thus
it comes to no surprise if the energy demand of China has increased consequently.
China not only develops its industry, its capacity of production its wealth and so on, within its
own territory, but also now goes out of the frontier to make deals with countries from abroad. The
most famous case of external economic development is the agreements signed with African
countries. China has built close and tight relationships with several countries of Africa such as
the Democratic Republic of Congo or the Sudan. Its mains activity is the extractions of resources,
especially the ore industry. Some would say that China has a controversial role in those countries
due to the “eyes closed policy” led by Beijing. Indeed, Beijing was used to take, until recently,
very shy positions on humanitarian issues such as the one of the Darfour by waving the flag of
the “internal affairs issue” and the non-interference duty. Other watchdogs, who might be slightly
better advised would make another analysis: first of all China, by legally exploiting the resources
since the mine are object to legal concession accorder by the African relevant states, is not doing
any worst than any other nation. Second of all, China, as a developing country with such history,
is well aware of the true needs of African partners. China repays for the concession permits with
construction of buildings, roads and bridges. This might simply be what Africa needs to develop
in a more efficient way. There cannot be any development without means of transport and safe
ways to ship goods. About Sudan, Beijing has softened its policy and taken steps for further
discussion that led to humanitarian outcomes. On bad point though, when China goes abroad and
make deals that allow her to extract the ore for instance, China is not respecting any further
9
C-Y. Chen, Money Week, 14–20 January 2010, p.14

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environmental regulations that the one imposed by the hosting country. This so called bad point
or reproach is a typically western point of view. Indeed, when Europeans see an ethical issue in
pursuing or not a deal with a State that fails to respect the human rights, China on the contrary is
likely to see internal affairs of the relevant State. As a consequence, the environmental impact of
China goes beyond the impact within its frontiers. China may pollute, but shall it be deemed as a
lack of ethic, or simply as a systemic consequence of its heavy industrial polluting activities in
and out of the boundaries.
3. China is a wired connected country
Previously to the study of the electricity in the PRC, it must be noted that the access to electricity
is deemed almost complete by the International Energy Agency. Indeed, the latest report
indicated the PRC is a well wired connected country now.
The electrification rate in China was achieved by 2009 with a rate of 99.4% in the entire country,
and 99% in rural areas. However, nuclear power plants are to be operated with the electric
network. The later is design with specific power capacities. If a network’s maximum admissible
voltage is lower than the sum of electricity generation plants connected to it, the network must be
reinforced or rebuilt. Therefore, references below indicate that the country has access to
electricity, but substantial works may be required so as to meet the future electric capacities.
Electricity access in 2008
Electrification rate
(%)
Total Urban Rural
Population
without
electricity
(millions)
China 99.4 100.0 99.0 8.0
Brunei 99.7 100.0 98.6 0.0
Bahrain 99.4 100.0 95.0 0.0
Chinese Taipei 99.0 100.0 98.0 0.2
Brazil 97.8 99.5 88.0 4.3

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Israel 99.7 100.0 96.4 0.0
China & East Asia 90.2 96.2 85.5 195.1
World 78.2 93.4 63.2 1,456
(Source: IEA, World Energy Outlook 2009 new Electricity Database)
The figure above stands for the electrification rate of the PRC. Other relevant developing
countries were introduced into the table so as to provide with few elements of comparison.
Overall, the PRC has no major electricity network issue. The figure does not mention
malfunction or limited capacity for the network, but basically, it can be reasonably concluded that
the PRC electricity network is effective. Our following developments will take this statement into
account.
However, the specific case of rural electrification is a potential issue in China, as much as in most
of the developing countries. The international Energy Agency released in March 2010 an
information paper on the rural electrification policies in emerging countries10
. Rural
electrification is a potential field for international collaborative activities11
. While about 22% of
the world’s population has no access to electricity, and 85% of this population is located in peri-
urban areas or remote areas. Those regions, when they are electrified, face modernization, service
and quality needs. If not policy is implemented in the field of electrification, the population
without access to the electricity would still reach 16% at the horizon 203012
.
China is now proceeding to a decentralized power systems, which is easily understandable
judging from the size of the country (96 million square kilometers put China the third largest
country in the world).
Principal uses of electricity in these electricity-less regions are the powering of light-bulbs, fans,
television sets, computers and other home appliances. Benefits an positive externalities of
electricity access in such poor regions are mostly social since population are not limited by the
day-time rhythm anymore, and also relevant with education context since children may study
later than when using candles.
10
IEA, A. Niez, “Comparative study on rural electrification policies in emerging economies, Keys to successful
policies”, March 2010
11
Ibid, IEA, A. Niez, p.11
12
Ibid, IEA, A. Niez, p.12

25. 25
B. Economic growth and needs for electricity in China
1. Electricity in China
The production of energy in China has boomed following the economic growth. The figure below
shows how strong was the increase in the energy production.
The production of electricity has literally surged since the end of the 1980s. Compared to the
energy production increase, the electricity production is much higher. For the future
developments of the Chinese electricity, installed capacities must be reinforced so as to meet the
electricity demand. It shall be noted here that coal alone represent the about 70% in the electricity
mix. This tendency appears in the graphic below as an historical fact. Indeed, coal originated
electricity is not only a big share in the electricity mix, but also the target of impressive
development efforts from the late 1980’s. No other electricity source has undergone a comparable
evolution in China.

26. 26
As a consequence of the electricity mix evolution, China’s power generation capacities are
completely thermal plant dominated by coal. In 2009, total installed capacities for electricity
generation amounted coal thermal plants to 75%.
During the period 2008-2009, the electricity production increased by 27.3%. In 2008, the PRC
electricity production reached 3,451 trillion kWh while the electricity consumption was 3,438
trillion kWh13
. Such figures imply two important comments. First of all, production and
consumption levels are equals because the electricity production is dedicated to national needs
only. Indeed, the PRC does not export electricity (while the PRC does export primary energy,
such as coal) and consume it all. The slight difference between the two numbers is due to loss in
transmission. Secondly, with 3,451 trillion kWh produced, the PRC comes second in the world
ranking of electricity producers right after the United States (4,110 trillion kWh), and closely
followed by the European Union (3,080 kWh in 2007), Russia 1,040 kWh and Japan 957,900
kWh.
13
Central Intelligence Agency, The World Fact Book, available at https://www.cia.gov/library/publications/the-world-
factbook/geos/ch.html

27. 27
2. Electricity generation and consumption
The total electricity production of China was estimated in 2008 to 3.45 trillion kWh. Thermal
power (coal, gas and oil) accounted for the 81.2% of total electricity production. Hydropower is
also remarkable source of electricity in China with about 16.5% of the electricity generated. On
the contrary, nuclear power remains very weak with 2%14
.
Urban electricity consumption represented 58.8% in 2007. Comparing this figure with the urban
working population data (see above), it clearly appears that the average productivity of China is
enhanced by the urban areas, where the economic development takes place. Urban areas and
coastal regions are the heart of the economic and industrial dynamism of the country.
Installed capacities stands for the potential maximum use of the energetic infrastructures
dedicated to electricity generation. It is the sum of all energetic generators. In 2008, China had a
total installed capacity amounted to 793GW. By 2020, the capacity should hit 1,600 GW, which
means about a double.
Thermal power will thus represent only 65% of installed capacities, which is a deep shift in the
energetic strategy compared with nowadays figure where thermal capacities amounts for 75%15
.
The ten points’ gap should be filled by renewable and nuclear.
3. Energy challenges
i. Historic shortages (2007-2008)
In 2005, many provinces suffered from power shortages due to the over consumption of
electricity. The scenario was repeated in summer 2007 when the historic heat wave that stroke the
southern China led to a demand for electricity required for the running of air conditioner. During
the next winter, power shortage hit many parts of the country when the cold wave stroked the
country. Competent national grids in the country decided to cut off power in certain areas so as to
limit the demand and face the limited capacities of the installed power generators. Resources fell
short.
14
State Grid Corp. Power Economic research Institute, Jiang Liping, 2009
15
Ibid

28. 28
Power shortages allowed the State Electric Power Regulatory Commission to identify the cause
of the electric system failures. Inter alia, many thermal power plants were operated below their
capacity because coal supplies were insufficient. A strong growth in the electro-intensive
industries such as the steel industry, or the cement industry, both industries that are connected to
each other, and highly concerned by the construction programs and project (evaluation of the
housing market). Air conditioning was finally recognized as responsible for a substantial part in
the electricity consumption.
ii. Economic related needs for electricity
The PRC, with a population reaching 1,5 billion people, a surging economy enjoying a double
digit growth even during the recent recession times has a great need for energy. But the current in
house resources are mainly composed of steam coal, a fossil fuel responsible for greenhouse
gases, climate change issues and also public health major difficulties. Coal mining in China,
where coal is plentiful, is suffering from a pledge due to numerous accidents.
Thus the energy demand must go into a diversification process. Renewable energies and nuclear
power are responses for the specific needs of the PRC since both options are CO2 free
technologies. Renewable energies are expected to account from 10 to 12% of the energy mix by
2020, and nuclear is expected to reach 13%.
The demand for energy requires a specific focus on the demand for electricity. The demand in
electricity has boomed in the middle 2000 years due to the demand coming from the industry. In
2005, the power generation hit a 16,9% increase, and put China into the world second power
generator. In spite of the astonishing growth of the electricity market, years 2007-2008 spotted
the weaknesses of the system when power shortage occurred in the summer due to hot weather,
and again in the next winter when China undergone one of the harshest winter of its history. The
overuse of heating systems was responsible of such shortage. Most of major cities of eastern and
southern China were built within integrated heating system. As a consequence, reversed air
conditioning, which is a very energy greedy appliance, is used during winter times as a substitute
for heating system.

29. 29
The IEA estimates that the demand for electricity will keep on at an average rate of 5.1% per
year.
The geographic organization of the power supply is now deemed incoherent with the country’s
need. While the population is reaching the cost by waves of millions, dams and power plants are
often located inside the lands. Challenges in terms of transmission are thus considerable. A
reorganization of the energy supply in China is required. We will see later that nuclear projects
are programmed to be implemented close to the demand for electricity: on the coast.
The Chinese authorities have launched policies to diversify their energy sources, including
attention to secure their energy supply, tackle environmental issues, and of course secure the
country’s economic growth.

30. 30
C. Strategic analysis of Chinese nuclear strategy
1. The Chinese energy mix
i. Coal in China
The energy demand in the PRC feeds the economy base. The electricity generation process still
largely relies on one fuel: coal. Indeed, if China is the first polluter in the world, the main cause is
definitely the coal-dominated energy supply structure of its energy mix. The trend is not likely to
be reversed since coal is such an abundant resource in the PRC. Most of the reserves are in the
northern and western provinces while the needs for electricity are in the eastern part of the
country. Thus, transportation of coal from mines to power plants requires important
infrastructures, principally roads, but also railways routes.
China is at the same time the biggest producer and the biggest consumer in the world. In 2008,
the world coal production was the fastest growing production of fossil fuel for the sixth
consecutive year, and China alone accounted for 85% of the growth16
.
About 2.5 million tons of coal were produced in 2006, half of it was used in the power plants.
The intensive extraction of coal mines in China spread light on the terrible working conditions.
Indeed, Chinese coal mines are considered the world’s most dangerous with 2,631 dead miners
officially reported in 2009.
Coal for electricity is known as steam coal. Peat, in some extent is also a Chinese resource with
similar properties as steam coal. Other forms of coal, such as coke or lignite are used in the steal
industry and do not fit the energy requirements.
ii. Hydro power in China
China also has important hydroelectric potential and does exploit it. Resources, like coal, are also
located in the western part of the country. Whereas in 2005, the Chinese energy mix only referred
hydroelectric as 6%, it accounted for 13.3% of the world’s hydroelectric production. The use of
16
BP Statistical Review of World Energy, full report 2009, (BP comments)

31. 31
hydroelectricity benefits to the development of the western part of the country, but cannot
actually supply the major cities in the east due to electricity transport limitations.
The Three Gorges Damn is the world’s largest damn ever built. Its electric generation total
capacity attains 18.2GWe.
Hydroelectricity is considered a renewable energy. What is true is that the operating of a
hydroelectric damn does not emit CO2 emissions and can thus be considered a clean energy.
Nevertheless, the construction of the damn required a large scale eviction procedure. The dawn
was erected between the two side of two mountains and all the inhabitants of the region had to be
erected.
2. Reasons for a shift in the electricity mix to an increasing part of nuclear
i. Strategic geography location of electricity needs
The geographical repartition of natural resources in China is inappropriate to a complete
renewable evaluation. Indeed, dams and coal resources are located in the center, northern and
western part of the country, and quite far from the east of the country, where most of the
population lives and need for electricity is at the highest level.

32. 32
The map on the left side indicates the population density by regions. The map on the right set
light on the GDP per regions. There is a clear correlation between the people’s migration trends
and the GDP repartition. Population, economic growth, and consequently needs for electricity are
located on the eastern part of the country. These regions are surrounded by the coast.
It comes to no surprise that existing nuclear plants and planed nuclear plants are located on the
coast too.

33. 33
The Map above shows the location of nuclear sites in China. Pursuant to a sort of principle of
proximity, nuclear power plants are installed exclusively in the coastal provinces of the country.
The Chinese nuclear fleet is located where the demand for electricity is the highest.
Thus, power resources are necessary close the coast of China. Transmission and distribution shall
too be taken into consideration so as to complete the ambition power capacity building project of
China.
The geographic repartition of fossil fuels is still nowadays, interesting in terms of supply security.
While oil and gas reserves are located in the same areas, with the Middle-East as the world first
region, uranium is mined more various places. Proven reserves of oil and gas shall be
extinguished in half a century, but in the contrary, uranium is expected to remain in sufficient
amounts to supply the nuclear industry for the next 200 years. The optimistic scenario requires

34. 34
the launch of new generation of reactors, which consume less uranium fuels by maximizing their
energetic power. The forth generation of reactor directly aims this goal. Coal resources appears as
the most serious competitor to nuclear because proven reserves are plentiful, evenly dispatched
on the globe and the fuel is consequently today the cheapest of fossil fuels. However, the steam
coal industry (not to be mistaken with hard coal industry that targets the steel market rather than
the energy market) must undergo its own revolution with clean coal technologies so as to satisfy
environmental requirements. Coal is a highly polluting fuel which is responsible for large
emissions of green house gases and air pollution (with other consequences on health, the
environment, acid rains damages…).

35. 35
ii. Energy independence and discussions
The question of the energy security relates to the resources importing issues. The diversification
of the energy mix is an answer to the energy security where a shortage on oil, gas or coal can
happen due to economic or political crisis.
World resources by fuels
Resources
Uranium Austalia (23%), Kazahkstan (15%), Russia (10%), Canada, Niger …
About 80 to 200 years
Petroleum Russia and Middle East (67%)
About 42 years
Gas Russia and Middle East (66%)
About 60 years
Coal PR China, USA, India, Australia, South Africa, Russia, Indonesia
About 133 years (proven reserves)
At the beginning of the French nuclear history in the seventies was the oil shock. The French
President De Gaulle argued and fought for massive investments into the nuclear because it was
one possible answer to counteract further oil shocks. Indeed, oil resources were located in the
same areas, mainly in the middle-east. With the nuclear solution, the industrial system appeared
preserved from the economical and political downturns linked to oil supply.
iii. Environment related concerns
A polluted atmosphere is first of all human beings concern. Even though the environment
understood as the flora and fauna, might suffer or be endangered by the poor air quality, the first

36. 36
reason for governments to take prompt actions is related to the public health. The United Nations
funded in 1948 April 7th
the World Health Organization. On a WHO 1998 survey, it has been
underlined that among 272 cities, the PRC had ten of the most polluted atmosphere in the world.
And among the top 10 of the most polluted cities in the world, seven of them were Chinese cities
(Beijing at the world rank thirds position, Lanzhou, Taiyuan, Urumqi, Chongqing, Jinnan and
Shijiazhuang). Plus according to the PRC official data, among 338 cities reported, two third are
polluted, and two third of these are moderately to heavily polluted. Indeed, atmospheric pollution
is likely to be the worst of all the pollutions in China, (even though when talking about air or
atmospheric pollution it is uncomfortable to talk about national pollution). The WHO conduct
surveys, but also make reports that eventually lead to recommendations, aimed at preventing
consequences on health.
There are four principle chemicals seek at the occasion of air pollution investigations. The first
one is Sulphur Dioxide, SO2 that mainly comes out from the burning of coals, then the Particles
Means, PM that are found in the fumes from both power plants and vehicles, Ozone molecules
(O2) that are well known to attack the ozone layer that will conduct to skin cancer and heating of
the poles, finally, Nitrogenous Dioxide (NOx). For all these polluting substances and molecules,
the WHO made recommendations to set the maximum levels over which air quality would be
considered as not acceptable. It means it would arm the people’s health. It would favour
respiratory disease such as asthma or even lung cancer.

37. 37
TSP and SO2 Concentrations in China, 2002
The most exposed cities to air pollution are known to be the cities of the Shanxi, and Shaanxi
province, and also Beijing or Tianjin.
In 2005, still 50% of the cities in China were unable to meet the air quality standards given by the
WHO. SO2 is mostly concentrated in the urban areas, where it is actually created.
Beijing is very strongly hit by the air pollution problems. The Olympics approaching, it pushes
Beijing to take further measure since participating countries expressed their concern over the
health of the sportsmen. Of course, the tourism opportunities that Beijing represents are another
cause of making efforts to clean up the air.
Climate change and political will in China
When it comes to evaluate a country’s commitment to a cause, here to the “green” effort, the
clues may be found in the place of its legal system. Especially in China where the politics has its
importance, “legal frame and the politic should walk hand in hands”17. When seeking for the
honesty and truth of a commitment, maybe the first way to look are the regulations. Then, the
content of the regulation could be corroborated with the political speeches, or not. Furthermore,
as unlikely as it seems, in China the environmental law has actually forgone the political will.
Indeed, whereas the proper environmental concerns related by the public persons have only very
17
C. Tung from S-J. Mallesons, Climate Change Law and Sustainable Development, 2007/05/15, published on
www.legalstudio.com

38. 38
recently been heard, the first environmental law dates back to 1979. There has been a shift in the
environmental policy which is a brand new concept and a powerful preoccupation of today, and
there is now a regain of power for the environmental and green related legislation. The study that
is going to follow will also help to judge the actual efficiency of the legal protection for the
environment, and ultimately, the protection against the danger of the economic growth.
iv. Nuclear and political will in China
The Chinese Communist Party Congress is held every five years. The organ is the highest body
of the Communist Party. It is tasked with setting medium terms targets in the field of economy,
but also energy. The 16th
Congress for the period 2000-20020 set the objective of an average
growth of 7%. Since the production of electricity is the key factor for a sustained economic
growth, the Congress explicitly aimed at reaching 1,000 GWe of installed electrical capacity in
2020, while the situation in 2006 was 622,5 GWe. The international Energy Agency estimates an
average 5.1% per-year increase of electricity demand until 2015.
The Five Year Plan set a number of key objectives in all fields of the Chinese policy. The 11th
Five Year Plan for the period 2006-2010 targeted a 20% of energy use par unit of GDP. This
objective stands for the political will to decrease the overall energy intensity of the country. The
first target with this long term objective is to readjust the energy policy, and more particularly the
electricity policy so as to reduce the energy intensity of the economy. Such plan takes
improvement of the energy efficiency with the shutting down of old and low yield coal power
plants. Those power plants shall be replaced by
The graphic below is an extract from the World Nuclear Association18
which forecasts the
evolution of nuclear capacities in China according to a low increase scenario and a high increase
scenario. Both scenarios show that horizon 2030 will be decisive for the future of the Chinese
Nuclear. As for 2009, China nuclear electricity generation amounted to 65.7 TWe (mainland
China only, Taiwan Hong Kong and Macao) excluded We will see later that current projects are
to be operated from 2015 and later. Depending on the evolution of the market, the economic
18
See the full table available at http://www.world-nuclear.org/outlook/clean_energy_need.html

39. 39
context and the possible technological switches, the nuclear market may either follow a smooth
path or simply boom.
WNA Nuclear Century Outlook
0
500
1000
1500
2000
2500
3000
Capacities(GWe)
Low
High
Low 9 35 150 500
High 9 100 750 2800
2008 2030 2060 2100
Timeline for the Chinese nuclear industry19
The Chinese nuclear history dates back to the 1970’s that is to say at the end of the Cultural
Revolution. President Mao and Premier Enlai were the initiators of the first steps of the nuclear
energy for peaceful use. The first reactor construction project was launched in the early 1980’s
with a PWR in the Zhejiang province (eastern china, Zhejiang is a coastal province located at the
south of Shanghai). Thus, in 1985 followed new projects for reactors in Daya Bay. The projects
were conducted by a JV between the Guandong Electric Company and Hong Kong Light and
Power Company. Daya bay may therefore be considered as the historic nest of the Chinese
nuclear industry and the Guandong Electric Company as its mother enterprise.
The first commercial nuclear reactor was Qinshan 1. It was connected to the grid on 1993, that is
to say less than ten years after the first reactors projects were launched in Zhejiang Province.
In 2000, the first Chinese nuclear reactors to be build outside mainland China was established in
Pakistan.
19
U.S Energy Information Administration available at www.eia.doe.gov

40. 40
In 2007, the installed capacity of nuclear power was 9 GWe with 11 nucelar power plants in
operation. This capacity only accounted for 2% of the electricity production. Power plants were
located in the south east were the economic growth is the most important, and were other energy
resources (dams, coal) are missing. The NDRC planned in 2007 to increase nuclear capacities to
40GWe in 2020 and between 120-160 GWe by 2030.
The modern turn in the nuclear history is due to the NDRC plans to increase national capacities to
36 million kW in 2004. The cruising path for reactors construction was established at two new
plants per year until 2020.
National technologies
A quick presentation of the main technologies employed in the nuclear power industry comes
relevant when knowing that China already possess or plan to operate at short to medium term all
the major technologies available on the nuclear reactor market.
United States of America
Westinghouse designed the first fully commercial PWR of 250 MWe, named the Yankee Rowe
in 1960. Meanwhile the boiling water reactor (BWR) was developed by the Argonne National
Laboratory. By the end of the 1960s, orders were being placed for PWR and BWR reactor units
of more than 1000 MWe.
Canada
Canadian reactor development headed a quite different track by using natural uranium fuel and
heavy water as a moderator and coolant, whereas other technologies used light water (either
Boiling Water reactors or Pressurized Water reactors). The first unit started up in 1962. This
CANDU design continues to be refined and commercialized as of today.
France

41. 41
France started out with a gas-graphite design and the first reactor started up in 1956. Commercial
models operated from 1959. It then settled on three successive generations of standardized
PWRs, which was a very cost-effective strategy. The EPR, is the latest version of the third
generation of reactors. Its business potential is very important, first in France where the EPR is
programmed to replace the existing ageing nuclear fleet, but more interestingly at the exportation.
A command was signed by China for two EPR in late 2008.
USSR/Russia
Soviet nuclear technologies began a little later. It is only in 1964 that the first two Soviet nuclear
power plants were commissioned. VVER is the main soviet, and now Russian technology still
traded on the market today. Its origin goes back to Novovoronezh (Volga region) when a new
design of small (210 MW) pressurized water reactor (PWR) known as a VVER (standing for
“veda-vodyanoi energetichesky reactor”) was built. In the Arctic northwest, a VVER with a rated
capacity of 440 MW began operating in 1973. This model was improved to a 1000 MWe version
which became a standard design. In parallel, the first large RBMK (1,000 MW) started up at
Sosnovy Bor.
Light water, pressurized water, boiling water and heavy water reactors
Technologies for reactor principally opposes light water reactor to heavy water reactors. As of
today, the CANDU models rely on heavy water technologies, while the rest of the market is
dominated by light water models. Boiling-water (BWR) and pressurized-water reactors (PWR)
are called light water reactors, because they utilize ordinary water as the moderator. In all light
water reactors to date, this water is also used to transfer the heat from reactor to turbine in the
electricity generation process. In other reactor designs, the heat may be transferred by light water,
pressurized heavy water, helium, liquid sodium, or other substances.
The nuclear market is characterized by an oligopolistic market structure with only few reactor
technologies available on the market. Most of the reactors building were launched in the 1970s
in western countries. With only few exceptions around the world, countries have chosen light-

42. 42
water designs for their nuclear power programs, so that today 60% of the world capacity is PWR
and 21% BWR20
.
China diversifying the energy mix (renewable and nuclear).
Great needs for energy in China are currently satisfied according to the following energy mix.
The largest part of the energy consumption relies on coal that is used to produce electricity.
Renewable electricity sources are deeply encouraged via the adoption of the Renewabe Energy
Law in 2005. In 2003, renewable energies accounted for about 3% of the total energy capacity of
the PRC. The renewable share in the energy mix is plan to reach 10 to 12% by 2020. Wind farms
are likely to be implemented in the coastal region. It occurs that coastal region in China are at the
same time the centers of economic growth in the country. Thus, the energy demand of those
region keep increasing due to the economic development of the industry, but also via a side effect
of economic development which ignite or enhance urban modification. Population is growing in
parallel to the economy. Housing needs, public transport development and other infrastructures
goes with the development of those regions. Energy demand is fed directly, and indirectly.
China, as a client for nuclear constructors has licensed various technologies of nuclear reactors.
French, Russian, Canadian and US designs compose the national nuclear fleet. Consequently,
fuels supply contracts were signed accordingly, because specific fuels are required for each type
of technology.
In complement to a foreign nuclear fleet, China has developed its own indigenous technology
thanks to technology transfers.
20
See Radiation in Perspective, OECD NEA, 1997

43. 43
Installed technologies are diversified because some plants were developed by either Chinese technologies,
or foreign enterprises. France, USA, Russia and Canada are the technology providers for China.
Technological priorities
The priorities were established by the State Council. Advanced Pressurized Water Reactors (PWR) and
High Temperature Gas-cooled Reactors (HTR) were declared the top priorities for horizon 2015. CNNC, a
Chinese SOE, has confirmed HTR and fast neutron reactors are to be developed on the long term.

44. 44
The first fast neutrons experimental reactor (sodium cooling system) is about to be finished near Beijing in
2008. The chosen partner was for this 65MWe demonstration reactor is a Russian company (OKBM
Afrikantov). Other project for fast neutrons reactor are currently under discussion.
The joint venture - Sanding Nuclear Power Co Ltd - was established by China National Nuclear Corp
(CNNC), Fujian Investment and Development Corp and the municipal government of Sanming city.
CNNC holds a majority stake in the venture. According to a statement from CNNC, a site survey at
Sanming was completed in 2007, while a preliminary feasibility study was completed in 2008. Proposals
were submitted in 2009 to build a demonstration fast reactor at Sanming in cooperation with Russia. A
comprehensive feasibility study into the construction of the Sanming fast reactor was launched on 23
April during the first general meeting of the project partners.
In October 2009, a high-level agreement was signed for Russia to start pre-project and design works for
two commercial 800 MWe fast neutron reactors in China, with construction due to start in August 2011.
The agreement, signed with Russia's AtomStroyExport by the China Institute of Atomic Energy (CIAE)
and the Chinese Nuclear Energy Industry Company (CNEIC) - a CNNC subsidiary responsible for
technology imports - followed a call a year earlier by the Russian-Chinese Nuclear Cooperation
Commission for construction of a demonstration fast reactor similar to the BN-800 unit being built at
Beloyarsk in Russia and due to start up in 2012. Earlier in 2009, St Petersburg Atomenergopoekt said it
was starting design work on a BN-800 reactor for China, with two proposed at coastal sites. The project is
expected to lead to bilateral cooperation on fuel cycles for fast reactors.

45. 45
III. Regulatory framework
The Chinese regulatory framework that surrounds the nuclear industry contributes to the
development of the later. Indeed, in China institutions tightly control the economic sectors, and
more specifically strategic sectors such as the nuclear industry (A). Moreover, protectionist
policy forces foreign investors to comply with stringent rules in order top preserve their chances
to obtain markets (B).
A. Weight of institutions in a regulated market
Institutions involved in the energy sector are numerous in China. The organization of the country
is, and not only in the energy sector, but in general, a centralized system where the government
takes every decisions or initiate every program. Before 1985, the centralized planning and
management of the power industry was totally in the hands of the government. However, the
historically centralized country has turned to decentralization. Nevertheless, the nuclear safety
issues cannot afford a complete decentralized organization.
1. Liberalization process
In 1985, the State Council approved the “provisional regulation on encouragement of Fund
raising for power plants and implementation of varied prices”. Pursuant to this provisional
regulation, the enterprises were tasked with running the power plants, while the Stat was tasked
with managing the grid, and local governments were the State’s correspondent in the province.
Local grids were set up. Observers thus see, concerning modern moves of China in the energy
sector, a decentralized organization a less stringent regulation, more competition and more
private investments. The energy sector undergone a process of liberalization since the mid 1980s,
and is frequently subject to minor adjustments.
2. Principle governmental bodies
The National Development and Reform Commission (NDRC) plays a major role in the energy
governance. It coordinates about a dozen of governmental agencies and sets prices for energy.
The National Energy Commission and the National Energy Administration were created in
March 2008 so as to substitute the NDRC in its coordination task. Today, the NEA drafts the

46. 46
energy plans and policies; it also negotiates directly with international energy agencies and
approves foreign investments in the field of energy.
The prices prerogatives has, however remained an exclusive NDRC prerogative for energy, the
NEA being only authorized to formulate opinions. The State Council is the ultimate competent
authority for energy prices.
The State Electricity Regulatory Commission (SERC) is an independent regulator established
under the State Council in 2003. Prices for electricity are the responsibility of the SERC.
The National Power Grid in China is organized following the centralized custom. The States Grid
Corporation of China is the main Grid, which is itself divided according to an artificial zoning of
five sub grids connected to a central Grid.

47. 47
B. Room for foreign investors in a protected market
Generally speaking, the context for foreign investments in China is not as favorable as it used to
be. Many varied industries have recently been subject to difficulties related to the authorization
granted by the Chinese authorities. Google in the internet industry and the web browser sector is
subject to a year to year licensing. The latest renewal occurred in a tricky diplomatic context, and
the license was finally renewed after a 9 days delay beyond the expiration date. Rio Tinto, a
major mining company in China, undergone a criminal procedure aimed at some of its
employees. They were convinced of corruption and economic spying after arrested for State
secret robbery. Condemnation reached from 7 to 14 years of prison for four. The Australian
Prime Minister, Kevin Rudd declared to the press his skepticism concerning the fairness of the
trial. Indeed, half of the case was held in camera21
. Observers comment on China a stiffening of
21
Which means that the public was not authorized to assist to the debates

48. 48
the political interventionism among other factors of the growing delicateness of business
activities involving foreign companies in China.
According to a survey from the European Chamber of Commerce in Beijing, 80% of the foreign
enterprises are confident in the evolution of the Chinese growth, but only 34% are enthusiastic
concerning the potential profits they may perceive.
Source: http://www.chinability.com/FDI.htm
1. WTO accession and control over direct investments
The question of the access to the Chinese market is encompassed in a general context designed
further to the World Trade Organization signature on December 11, 2001. Consequently to the
entry into the WTO, the PRC adopted the general rules of the WTO aimed at a lowering the
obstacles to trading.
Internally, the PRC adopted the “China foreign investments guide”. The latest review of the
catalogue dates back to 2007. The 2007 catalogue reflects the PRC government's current policy
priorities. The National Development Reform Commission (NDRC) and the Ministry of
Commerce of the People’s Republic of China (MOFCOM) were in charge of drafting the
catalogue. A notice on the release of the catalogue provides details for its application and draws
the general objectives among which the following directly interest the nuclear industry:

49. 49
To encourage foreign investment while improving the overall quality and industrial
composition of investment projects, particularly in high-tech sectors;
To encourage investment in environmentally friendly and energy-saving technologies;
To encourage balanced development between the relatively prosperous coast and the less-
developed western, central, and northeastern regions; and
To protect "national economic security" and only cautiously open sensitive and strategic
industries to foreign investment.
Foreign investments are divided in three basic categories. Investments can be encouraged,
restricted or prohibited according to the previously mentioned guide. Encouraged investments are
submitted to no restrictions at all. Restricted investments obliged foreign investors to realize their
business project with a national partner with a partnership contract such as a joint-venture, a
wholly foreign owned enterprise (WFOE) or a holding. And finally, prohibited investments are
not open to foreign investments because of their strategic implications. Regulation on Guiding
the Direction of Foreign Investment of February 2002, and the Decision of the State Council on
the Reform of Investment System of July 2004 also applies.
In the field of energy, it should be noted that the Chinese government proactively encourages
foreign investments in renewable energies. Investment in hydropower stations and other energy
power plants including solar, wind, magnetic, geothermal, tidal and wave, biomass, are strongly
encouraged. On the contrary investments in conventional coal fired power plants (coal fired
steam condensing power plants with a capacity over 300 000 kilowatts or coal fired dual units
and co-generation plants with a capacity over 100 000 kilowatts) are prohibited in the entire
country, but in the Tibet, Xinjiang, Hainan.

50. 50
2. Public procurement framework and unfavorable practices for foreign investors
As for public procurements, there are two national laws to be considered: the “Tender Law”22
and
the “Government Procurement Law”23
. On top of these two fundamental set of rules come local
regulations that are adopted by local governments.
As a general rule, the construction of infrastructures or equipments responding to the general
interest shall respect a public procurement contract procedure with a call for tenders. Doubtlessly
the construction of nuclear island, reactors or enrichment plants does belong to the category of
project with a link to the general interest.
One major issue for foreign companies who enter the Chinese market with a construction project
is not to identify the applicable regulation, but to interpret them. Very often, key concepts of the
Chinese law are not defined. For instance, the basic nuclear law of the PRC – the Law on
Prevention and Control of Radioactive Pollution – is such an example. No definition is provided
by the law.
Moreover, foreign companies are competing sometimes against Chinese companies which may
be State Owned Enterprises (SOE). The distinction between private and State companies is a true
difficulty in China since the corporate habits are shifting from a 100% SOE to private
ownership24
.
And if the legal uncertainties may impact foreign investors as much as local entities, the
administration is sometime in the same difficulty. The law does not indicate what measures are
compulsory and which are not. In 2008, the Government Accountability Office of the USA
published a study foreign investment and concerning China commented on the discrepancies for
interpreting the rules within one same administration25
. The tender Law is not clearer, and the
catalogue of investments seems confused.
Foreign entities can barely rely on the laws or the Chinese administration so as to secure their
operation. In a context of low-level transparency, foreign entities rely on other means for
contracting in China and leading development plans such as political support. Indeed, large scale
22
« The Tender Law », of August 30, 1999.
23
« The Government Procurement Law », of June 29, 2002.
24
IEA, Rural Electrification, p.42
25
See, Laws and Policies Regulating Foreign investment in 10 countries

51. 51
contracts for the construction of nuclear reactors are not only subject to public procurement
procedure, but also to economics summits involving heads of governments and States. The
Taishan contracts involving a Chinese electricity company of Guangdong and AREVA/EDF was
signed in 2007 at the occasion of a visit from the French President Sarkozy in China.
Furthermore, it happened at several occasions that foreign candidates in public procurement
procedures were disqualified for non respect of the technical conditions. Criteria of selection
shall be known by all candidates pursuant to the article 14 of « Invitation and submission of bids
for construction work projects procedures », of March 8, 2003. But, analysts observe that is it
very hard to know the selection criteria26
.
Public procurement in China remains an issue with potential economic consequences for foreign
investors27
. However, it should be noted that the PRC has not signed yet the specific WTO
agreement on public procurement, although negotiations may have started since the PRC
officially asked for being a signatory country28
.
3. Foreign investments legal framework
Foreign investments are subject to the catalogue of foreign investments which determines the
feasibility of an operation and the obligation or not of a Chinese partner. Thus foreign entities
shall respect applicable law according to their status (for JV, WFOE and holding) as a Chinese
established foreign enterprise.
« the Equity Joint Ventures Law » of July 1, 1979 modified on March 5, 2001;
« the Foreign Cooperative Joint Ventures Law » of April 13, 1988 modified on October 31, 2000;
« the Foreign Capital Enterprises Law » of April 12, 1986 modified on October 31, 2000.
26
Fu Yake, CCTV, Seminar China-EU on public markets, April 30, 2008
27
OECD, La Chine dans l’économie mondiale – La gouvernance en Chine, 2005, p. 501
28
Ping Wang, China’s accession to WTO’s government procurement agreement, p. 8

52. 52
Foreign investors and their projects are directly subject to the above mention law, but also to the
approbation by the administration. Moreover, about 200 laws and regulations are applicable to
direct investments.
In spite of these difficulties, the construction of nuclear reactors responds to other procedure in
which diplomatic efforts are highly involved. However, the previous comments are relevant
regarding all contracts of services and products surrounding the nuclear reactors operation.
4. Technology transfer issues
AREVA may now be considered a solid partner of the PRC with about thirty years of
uninterrupted cooperation, offices in the country (Beijing, Shanghai, Wuhan, Suzhou, Nanjing,
Daya Bay, Hong Kong and others) and about 2,600 employees. Indeed, the Daya Bay and Ling
Ao nuclear power plants are considered milestones in the Chinese nuclear history, and AREVA
took part in both projects (under the name COGEMA).
Technology transfers took place during the close cooperation, but china has gained autonomy in
nuclear energy since the manufacturing and the engineering were realized in China by Chinese
firms.

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CONCLUSION
Conclusion is not synthesis. In the French law faculties, students are advised not to write
conclusions. Nevertheless, a “mémoire” dedicated to the nuclear industry in China is a wide
enough subject to allow many various developments, and the conclusion might serve as a final
opportunity to stress out the ultimate analysis.
AREVA has been working in China since the 1980s. Their collaboration between the French
nuclear company and the Chinese government has steadily kept on during the year. It is an
uninterrupted collaboration that is believed to be the key success of the French Company in
China in spite of the wild competition going on as of nowadays. The Daya Bay and Ling Ao site
were built by AREVA. It should be reminded here the historical importance of those two sites
which appears as the birth place of the nuclear history of china. Areva itself present the result of
the two sites construction as a symbol of a strong cooperation between the countries.29
According
to the official language of the Areva Group, nuclear energy has the following advantages
compared to the other source of energy: it is a CO2-free energy, it is competitive compared to the
other fossil fuels, the capacity of power generation is higher than for any other power generation
means.
Historical trustful economic partnerships and reliability is one of the important elements to gain
market shares in China. However, History, economical tendencies, industrial facts and the legal
framework described previously may lead to one conclusion. The PRC has wisely set up a
conquest strategy over the world energy industry and specifically, a potentially dominant position
over the nuclear market for tomorrow.
Chinese nuclear fleet is likely to become the largest fleet over the world, and the most diversified
that ever existed in the hand of one sole centralizing government. Furthermore, imported
technologies were associated in the contract with technology transfer clauses. China has already
started to operate and run indigenous nuclear technology. China is thus likely to become a serious
nuclear actor in few decades.
29
AREVA in China, Press Kit November 2007

54. 54
Medium term perspectives announce a shortening in nuclear fuel resources. Either the fourth
generation of reactors is developed together with recycling techniques so that fissile materials
shortages are avoided. Or, not only China, but also emerging economies strongly launch their
nuclear program so that uranium resources start lacking. Economic previsions at few decades
horizon are hardly estimable, however, current tendencies may show that China is likely to
benefit from its inertia and take over the first economic word rank. Will there be room for foreign
actors to sustain a strong position on the nuclear market?
The Report Roussely issued in July 2010 suggests that France, benefiting from a unique
experience and know-how in nuclear power, could and must reinforce its strategic positioning on
the market. This would go with the gathering of synergies between the major nuclear companies,
and innovations in the field of EPR third generation reactor and also fourth generation R&D
efforts (such as ITER).
The PRC is today the largest nuclear market, and is likely to become tomorrow a major nuclear
supplier. In a highly competitive sector, strategic positioning, innovations and abilities to
anticipate new comers’ (like China) moves are the key success factors.