Technology transfers, whether on a contractual basis or through theft, have long bedeviled companies that want to benefit from China’s cheap labor and 1.3 billion consumers. Automakers, aerospace companies, technology outfits…. it’s the price they have to pay. But when it seeped out that the largely state-owned nuclear industry in France was trying to sell its secrets to China to make a deal, oh là là!
That the French have been through this with their high-speed train technology, the TGV, was hammered home on Wednesday when China opened the world’s longest high-speed rail line—1,428 miles between Beijing and Guangzhou. It extended the high-speed rail network to 5,800 miles. And the network will practically double over the next three years if government funding continues to flow. By comparison, it will take the US, or more precisely California, an unknown number of years, perhaps as many as 20, to complete the link between San Francisco and Los Angeles.
On the Beijing-Guangzhou line, trains will run at a maximum speed of 186 mph, specs that the TGV mastered decades ago. Initially, China struggled to develop its own technology. After it tripped badly, it decided to import some trains, and the missing technology, from Japan, Germany, and France.
They all got a piece of the pie. Alstom of France won an order for 60 sets of its latest tilt-technology trains, the Pendolino. Three were delivered fully assembled; six were delivered in kits and assembled by an entity of China National Rail; and the remainder were manufactured in China with some imported components and a lot of transferred technology. And that was mostly it for TGV sales in China. Now, China has the ability to manufacture its own trains. It’s pushing the technology to the next level. And it will become a formidable competitor anywhere in the world, even in California.
Nuclear energy—where France has also been proudly on the forefront—was going to be next. Until the scandal of massive nuclear-technology transfers broke into the open. The central figure, Henri Proglio, CEO of mega-utility EDF that owns France’s 58 active nuclear reactors but derives almost half of its revenues from outside France, has come under investigation by the Inspector General of Finance (IGF). Of particular interest: the agreement to sell nuclear and industrial secrets and know-how to China in order to conclude a deal that had been “aborted.”
On Thursday, the government announced that it would try to shed some light on the relationship between the French nuclear industry and its Chinese partners. And on Friday, it was leaked that the government, which owns 84.4% of EDF, will sack Proglio in February or March and replace him with the CEO of state-owned railroad SNCF, Guillaume Pépy, who immediately denied being “candidate for anything.” The revolving door of state-owned companies.
The intrigue goes back years. In January 2012, during the presidential campaign, a confidential agreement bubbled up, signed in Beijing on April 29, 2010, by Proglio and He Yu, the CEO of China Guangdong Nuclear Power Group (CGNPC). It envisioned a tight partnership concerning the “design” of nuclear reactors and the transfer of nuclear technologies—to the point where Chinese specialists would be associated with the construction of reactors … in France.
The Socialists, including Jean-Marc Ayrault who would become Prime Minister, raised a ruckus: A Chinese company might soon build nuclear power plants in France? Areva, the government-owned nuclear conglomerate and crown jewel of French nuclear technology, might soon have to compete with a Chinese company for reactors in France? A shock too many for the battered “Made in France,” which had become a campaign issue.
Then, on April 19, 2012, just three days before the presidential elections, after more embarrassing details made it into the media, Finance Minister François Baroin put a hold on that contract. Turns out, apparently, EDF would hand over secrets about France’s entire stock of nuclear power plants to the Chinese. Nevertheless, in October, after the storm had settled, EDF, Areva, and CGNPC signed a contract. It remains confidential. Nothing has leaked out.
The unions were particularly worried. They demanded transparency concerning the technology transfers. They feared the effects on employment in the nuclear energy industry. They feared that much of it might shift to China.
Now, the government might be having second thoughts. The IGF is intensely interested in the first agreement between EDF and CGNPC that defined a partnership whose goal it was to build nuclear power plants together. The plants would be equipped with a new reactor type, the latest and greatest alternative to the catastrophically over-budget and now stalled European Pressurized Reactor (EPR) that Areva had been pushing for years. That EDF, which was mostly government-owned, could even envision a deal that would hurt Areva, which was wholly government-owned, was simply too galling.