CASE NUMBER:	415
	CASE MNEMONIC:	DAYABAY
	CASE NAME:	Daya Bay Nuclear Power Plant

Hypertable of Contents: IDENTIFICATION The Issue Description Related Cases Author LEGAL Cluster Discourse and Status Forum and Scope Decision Breadth Legal Standing GEOGRAPHIC Cluster Geographic Locations Sub-National Factors Type of Habitat TRADE Cluster Type of Measure Direct vs Indirect Impacts Relations of Trade Measure to Resource Impact Trade Product Identification Economic Data Impact of Trade Restrictions Industry Sector Exporters and Importers ENVIRONMENT Cluster Environmental Problem Type Species Resource Impact Urgency of Problem Substitutes OTHER Factors Culture Trans-Boundary Issues Human Rights Relevant Literature

source: www.insc.anl.gov/index.html

1. The Issue:

China's industrialization in the more advanced eastern and southern regions is hindered, in part, by energy shortages resulting from inaccessibility to hydroelectric and coal resources concentrated in central and western provinces. Moreover, coal -- China's traditional primary energy source -- is creating a number of environmental and health problems which makes urgent the identification and implementation of substitute energy sources. Nuclear energy is one of the alternative power sources being emphasized in China's ninth five-year plan. While nuclear accidents such as Chernobyl linger in the minds of opponents, Chinese authorities view the operation of China's Daya Bay nuclear power plant as evidence of nuclear energy's ability to serve as a clean, , and safe means of meeting China's future energy demands. Although Chinese authorities have touted nuclear energy as an ideal substitute for coal, the use and expansion of nuclear energy are not without its critics. Nuclear energy opponents, particularly those in Hong Kong, criticize nuclear energy for the potential negative environmental effects stemming from a nuclear accident and from affiliated waste storage problems.

2. Description:

This case study tracks the development of the Daya Bay nuclear plant, a Sino-foreign joint venture, and outlines its role in China's economic development and considers its contributions to trade and the environment. Legal, geographic, trade, and environmental aspects will be detailed and their implications will be noted. Moreover, Guangdong's experience with nuclear energy is considered within the broader context of China's overall nuclear energy plan.

Beginning in 1979, the study to select the nuclear power plant site was begun. In 1980, proposals for the Daya Bay nuclear power station were first made public and a location study was begun. The location study concluded in 1983, selecting the Daya Bay region as the nuclear plant site. The Daya Bay nuclear power station is located in China's southern, coastal province of Guangdong. The station is located less than 50 miles from Hong Kong and 70 km east of Shenzhen. In 1984, the station's ground-breaking was completed.

China's energy profile is first discussed. The profile places China's energy production and consumption in perspective with patterns of industrialized countries and highlights the problems affiliated with China's present energy resource utilization. The role of foreign direct investment (FDI) in developing China's peaceful nuclear energy industry, and in constructing the Daya Bay nuclear power plant is the next topic of discussion. The participation of FDI will enable China to pursue nuclear energy expansion by ensuring that the most sophisticated available technology will be used. From FDI, the paper moves to a description of the legal, trade, and environmental issues affiliated with the Daya Bay nuclear power plant project.

a. Energy Profile:

Although the contribution of nuclear energy output to relieving China's energy shortage was nil as of 1994, China's nuclear power output in 1996 was reported at 14.3 billion kWh, representing a 12% increase over 1995 levels.(4) By October of 1996, installed electricity capacity was 210,000 MW, with 2,100 MW supplied by nuclear power.(5)

Energy consumption is dominated by industry. Industrial endeavors account for 65% of China's energy use, with residential demands taking second place - 19%. The remaining energy use is evenly accounted for by Transport (5%), Agriculture (5%), Commercial (3%), and other (3%).(6)

While China's natural fuel resources are abundant, many are inaccessible. Consequently, China is forced to import products in an attempt to meet burgeoning energy demands. China's top export and import markets for refined products include:(7)

Guiding the future development of China's nuclear energy industry is the ninth, five-year plan. The plan calls for the erection of four large-scale nuclear power plants and the building of eight reactors in Guangdong, Liaoning, and Zhejiang -- all coastal provinces. The aim is to increase nuclear power installed capacity from 1% of the national total in 1995, to 3-4% of the national total by 2010, with subsequent increases thereafter.(8)

In 1994, the economically developed coastal areas (including Guangdong) accounted for 46% of national energy consumption, despite their mere 28% output contribution. Nuclear energy's benefits are deemed as being threefold:

reduce power shortages by 20-30 million kW by 2010
alleviate strain on rail transport
lessen pollution.(9)

Li Wenqu, Guangdong Power Supply Bureau's deputy director, estimates that Guangdong will require 70 million kW by the year 2010, where 10 million kW will be supplied through nuclear power.(10) To fund the expansion of its nuclear capabilities, Guangdong expects to draw on foreign investment. Although an expensive undertaking, nuclear energy is viewed as a necessity, given inadequate energy resources and the environmental problems that plague coal-fired plants.

For the near future, Guangdong will continue to depend principally on coal-driven power, but nuclear energy will become the focus of additional energy capacity in Guangdong between 2000 and 2010, supplying 20,000 MW of the planned 30,000 MW new capacity.(11) Natural gas will comprise the rest.

Guangdong's Daya Bay Nuclear Power Plant "... is China's first large-scale station that makes use of foreign investment, sophisticated foreign equipment and advanced technology."(12) The first generating unit began functioning in February of 1994 and the second unit started operations in May of that same year. In 1995, its first generation unit produced 3.7 billion kW output (with an effectiveness rate of 48.4%); the second generation unit produced 6.3 billion kW output (with an effectiveness rate of 82.3%).(13) Since operation began in 1994, the Daya plant has produced an output value of more than $700 million. In 1996, Daya's contribution to total national nuclear power output was 12.11 billion kWh (total 14.3 billion kWh).(14)

b. Foreign Investment:

As one of China's special economic zones (SEZs) and as a coastal province located close to Hong Kong, Guangdong has become the principal province driving China's economic development, earning large shares of inward foreign investment. Foreign investment in Guangdong totaled US$11.45 billion in 1994; US$12.1 billion in 1995; and, US$13.9 billion in 1996. The total investment for those three years equal 56% of the province's cumulative foreign investment between 1978 and 1996.(19)

China's 'Opening' and Strain on Energy: The phenomenal growth of China's economy since its opening in 1979 depicts a burgeoning need for increased electricity capacity, particularly in the southern coastal provinces. Industrialization in China has outpaced its ability to domestically meet energy needs and has outstripped China's ability to upgrade coal-extraction capabilities. Moreover, the more capital-intensive, technologically sophisticated nuclear power plants require foreign participation.

Foreign Participation in China's Energy Sector: Prior to 1992, development of China's energy sector was largely closed to foreign participants. Foreign multinationals -participating in the electric power generation sector - in China were restricted to sales of power generation systems.(20) Beginning in 1992, however, the Chinese government further liberalized its investment regime for electric power generation.

Between 1979 and 1995, the Chinese government reported the existence of 75 medium-to-large size, foreign-funded power projects, with a combined output of 49.09 million kW. Their total contracted value was US$17.3 billion, with the actual value reaching US$12.2 billion (or 10% of China's power construction total investment).(21)

Daya Bay Nuclear Power Plant Project: When the Daya Bay nuclear power plant project was negotiated, it was China's largest foreign joint venture (JV). The agreement brought together the Guangdong Nuclear Power Investment Company and the Hong Kong Nuclear Investment Company (owned by Hong Kong's China Light and Power) under the establishment of the Guangdong Nuclear Power Joint Venture Company.

1. Financing: Total plant construction costs for the Daya Bay project were estimated at $4 billion.(22) Ten percent of the $4 billion was to be financed through equity; the other 90% would be financed with debt. The Hong Kong Nuclear Investment Company pledged 25% of the equity (equivalent to $100 million). The remaining $300 million in equity was to be put up by the Guangdong Nuclear power Investment Company. With respect to the debt financing component, the Bank of China would float international loans to be financed across the first 20 years of Daya Bay's operations. Export credit loans comprised 2/3 of the debt, while commercial loans accounted for the remaining 1/3. Loan repayment would stem from Daya Bay's electricity receipts.

Although the Guangdong Nuclear Power Investment Company possesses the larger equity share of the JV (75%), it uses only 30% of the total output and sells the other 45% to the Hong Kong Nuclear Investment Company. The power output retained by Guangdong will be channeled into the province's electrical grid to alleviate present energy shortages.(23)

2. Construction and Equipment Provisions: France's Electricite de France was slated for control over designing, building, and commissioning the nuclear power plant. Framatome of France was awarded the contract for supplying Daya Bay's two nuclear reactors and Great Britain's General Electric Corporation received the bid to supply the turbine generators required for the project.

During the Reagan Administration a U.S.-PRC nuclear cooperation agreement was drafted. Concern over China's nuclear trade with Islamabad, however, resulted in the agreement becoming a hostage of Congress for over a year. When a joint resolution finally passed, U.S. cooperation with China was conditioned by China's compliance with the Atomic Energy Act and other U.S. non-proliferation laws. A presidential certification of compliance must therefore be issued prior to the granting of export licenses to U.S. exporters. In effect, these controls severely inhibited full participation of U.S. companies in China's nuclear energy market.(24)

Beginning in 1994, however, some of the controls were relaxed. U.S. companies were permitted to export plant equipment, including steam turbines, boilers and generators. The policy change facilitated Westinghouse's ability to establish a JV in China, in 1995, for the manufacturing of nuclear power plant inspection equipment. Future Nuclear Power Projects Involving Foreign Participation: Under the ninth, five-year plan, Guangdong province will erect a second nuclear power plant in Lingao (1 km east of the Daya Bay plant). The French company, Framatome will supply the two, 985 megawatt reactors; turbines will be supplied by GEC-Alstrhom.(25) The Lingao plant will require US$4.1 billion in foreign financing for construction.

c. Legal Issues:

The Provisional Regulations on Environment Control for Economic Zones Open to Foreigners --China Law No. 339 also governs the use of foreign investment to prevent environmental degradation. Moreover, China reaffirms its commitment to environmental preservation through five-year plans. Theoretically, China's environmental legal base is strong. In practice, however, enforcement of these laws tends to be lax. As discussed in section 24 (Substitutes), the massive potential for pollution control products in China is tempered by the ineffective enforcement of such environmental laws.

The Role of the International Atomic Energy Agency (IAEA):
According to various reports referenced herein, the operations of Guangdong's Daya Bay Nuclear Power Plant received high marks from the IAEA. The IAEA, in particular, conducted a 3- week pre-operation 'safety review' of the Daya Bay plant beginning in mid-May of 1993. Thus, it would appear that China's use of nuclear energy technology and equipment is aligned with international standards.

U.S. Restrictions on Nuclear Energy-Related Product Exports:
Export of dual use technology/equipment is primarily controlled in the U.S. by COCOM. COCOM maintains a Munitions List, an Atomic Energy List, and an International Industrial List all of which structure the regulation and export control of products falling within this list. In addition, dual- use items are governed by multilateral arrangements such as the Nuclear Suppliers Group and the Missile Technology Control Regime. Enforcement of these regulations by the U.S. tends to be more strict than its competitive counterparts. Thus, U.S. exporters in the industry complain that U.S. companies are disadvantaged as a result. For instance, the U.S.-based company, Westinghouse, is prohibited from selling nuclear equipment to China because of the U.S. concern that the technology will be transferred to third countries.(26)

d. Trade Issues:

This optimism, however, needs to be tempered. Even after implementing its open door policy, China has emphasized self- sufficiency and domestic production wherever possible -- nuclear energy is no exception. China will stress technology transfers to facilitate domestic production development; priority will not be given to purchases of complete plants from overseas. Only 2,000 - 3,000 mw of the planned 10,000 mw increased nuclear capacity by the year 2000 will be supplied by imported technology and equipment (28). In addition, nuclear energy will not likely become China's primary energy source. Coal and hydropower sources are still the principal energy sources.

Uranium Resources:
China's uranium deposits are located in the provinces of southern Anhui, Fujian, Guangdong, Guangxi, Hunan, southern Jiansu, Jiangxi, and Zhejiang. Additional reports suggest other deposits in Xinjiang, Qinghai, Inner Mongolia, and northeast China. The largest uranium mining endeavors are located in the province of Guangdong. Between 1979 and 1985 new uranium deposit discoveries averaged 10 per year.(29) Exact reserve figures are not publicly reported, although some western sources in 1985 had estimated reserves at 800,000 tonnes.(30) Figures quoted for China's uranium deposits support the notion that nuclear driven power plants could be supplied for the mid-to-long term. More recent sources calculate reserves for China's uranium deposits at 1.7 million tons, with China needing 250,000-300,000 tons by 2020.(31)

Although peaceful nuclear endeavors were not undertaken until recent years, China has been mining uranium since the 1950s. As of 1985, approximately 80% of total uranium extraction occurred through underground mining techniques; the open-pit mining process accounted for the remaining uranium extracted (32). China's mining capabilities, thus, are adequate and the country possesses a nuclear fuel production system that is fairly complete.

Domestic Production and Export:
Aside from the Daya Bay foreign JV, China's Qinshan Nuclear Power Plant was domestically designed and produced, and is managed without foreign affiliates. To date, its operations have run smoothly, with few glitches. It marks the potential for China's nuclear energy industry to be globally competitive. China has concluded an agreement with Pakistan for the export to and installation of a 300,000 kW Chashma Nuclear Power Plant in Pakistan.(33) The project is expected to be complete sometime this year (1997).

Nuclear Proliferation:
Jovan Jovanovich assesses the potential for military crises generated by the use of nuclear energy technology for nuclear weapon production versus those by the development of a severe world energy shortage. He concludes that the lesser of the two dangers is the potential link between nuclear energy and nuclear weapon proliferation. Jovanovich asserts that a world energy shortage would more likely spark a war than the 'mere possession' of nuclear weapons.(34)

Historically, disputes over resources involving China appear to confirm Jovanovich's conclusions. Vietnam and China (as well as the Philippines) have a history of limited military engagements over energy resources such as oil and gas. Please see SPRATLY ISLANDS DISPUTE case study which outlines the clash between states over resources, with a focus on China. Aside from the Spratly Islands disputes, China and Vietnam have recently entwined themselves in a tiff over China's off-shore drilling in territory claimed by both countries which is located 64.5 nautical miles off Chan Nay Dong cape (35).

In July 1996, China temporarily suspended nuclear tests in an effort to bring the Comprehensive Test Ban Treaty to closure. This move suggests that China is willing to cooperate on such matters of international importance. Moreover, Tang Hua reported in Beijing's Liaowang, the number of nuclear tests that China has conducted represents less than one-twentieth of those undertaken in the United States.(36)

Illegal Smuggling:
Another concern with respect to nuclear energy is the illegal smuggling of nuclear fuels, in particular by former Soviet Union and Eastern European countries. To date, however, China's State Atomic Energy Agency has not encountered loss due to illegal activities and has taken strides in reinforcing nuclear fuel management.(37)

e. Environment Issues:

Coal-Fired Plants:
A sustained economic boom in China will foster a heavier strain on world energy resources, contribute more significantly to environmental problems, including acid rain, CFCs and global warming.(38) For a more complete description and assessment of Chinese coal, trade and the environment, please see the CHINA COAL case referenced below.

Effects on Land and Ocean Life:
Newswire reports on the environmental effects of nuclear activity at the Daya Bay nuclear power station are vague and lack detail. The Beijing Xinhua news source reported that periodic surveys are conducted by seven radioactive monitoring stations which have been strategically positioned within a 10 km radius of the Daya Bay Nuclear Power Plant. Recent results of the stations' monitoring indicate that ecologically, the environment appears 'normal'.(39) In-depth data on what constitutes 'normal', however, is lacking.

Another newswire from Beijing Xinhua reported that some low- content traces of man-made nuclear material were detected in some marine animals by the State Bureau of Oceanography during testing. The content level, however, was deemed 'very low' with no visible effects on the ocean environment.(40) The news report, however, did not detail the nuclear material content level and did not identify specific marine animals.

In yet a third newswire from Beijing Xinhua, the news service reported that the Daya Bay plant had passed IAEA safety checks, but details of the safety surveys were not disclosed.(41)

Under the direction of the ninth five-year plan, a second nuclear power plant will be constructed in Guangdong province in Lingao. Studies assessing the impact of a second nuclear power plant in Guangdong province show a rise in sea temperature of no more than 1 degree. Marine life is not expected to be adversely affected and water contamination will not be an issue. The slight rise in water temperature, may in fact, facilitate the growth of seaweed.(42) Aside from the assessment studies, the Agriculture and Fisheries Department indicated that they had not checked area fish for radioactive contamination. Officials further said that the Daya Bay waters were not popular for fishing, anyway.

Land-based samples evaluated by the various monitoring stations around the Daya plant indicate that radioactive levels prior to Daya's operation have not increased since the station began operating. One of the monitoring stations run by the Guangdong Provincial Environmental Radiation Research and Monitoring Center reported that various samples tested for radioactivity include: airborne dust, potable water, reservoir water, seawater, soil, organisms, and effluent gasses. Daya Bay's radiological dose registers below 0.25 millisievert per year, compared to the natural human radiological exposure is 3 millisievert per year.(43)

Nuclear Waste:
Yu Fuwin "indicated nuclear waste was a difficult issue saying, many foreign companies want to discuss nuclear power with us [China], but none of them want to assume responsibility for the waste."(44) At present, nuclear waste is managed jointly between the French affiliate and the China Nuclear power Industry Corporation. Guangdong Power Bureau only purchases power from the Daya Bay nuclear power plant, it is not directly responsible for nuclear waste management.

Nuclear power critics argue that the issue of nuclear waste disposal has not yet adequately been resolved. Presently, nuclear waste is stored on site. This is particularly a problem for high- level radioactive waste. China has become adept at applying technology used to treat low-to-mid-level waste, but China is still researching the glass solidification technology to cope with high- level waste which accounts for 99% of the total man-made radioactive nuclear waste volume.(45)

The Daya Bay plant has generated a more positive image regarding nuclear energy use in China. Although the government standards are not outlined in several assessments of Daya's environmental impact, waste discharge falls within government-established parameters.(46) Daya's actual discharged waste figures for gas, liquid, and solid waste were 4.3%, 8.3%, and 50% of the 1995 estimated figures, respectively.(47)

Daya Bay's on site spent fuel storage capacity is 15 years, compared with China's domestically-constructed Qinshan plant whose storage capacity is 10 years. Moreover, part of China's ninth five-year plan involves a pilot reprocessing plant at the Lanzhou Nuclear Fuel Complex under construction in Gansu Province. The pilot plant will extract plutonium from the spent fuel, reprocessing 400 to 800 tons per year after 2010.(48)

Human Health:
Although the radiation effects of nuclear power are hotly debated, it is possible that collective exposure to radiation is linked to cancer. Others suggest that the physical effects of nuclear power- generated radiation are no more severe than those created by natural background radiation.(49) Annual radiation levels emitted from the Daya plant activity are below 0.25 millisievert; whereas, natural level exposure hovers around 3 millisievert per year.(50)

Technician Training, Safety Features, and Monitoring:
Although China's peaceful use of nuclear energy was not introduced until the 1980s, China has acquired close to 50 years of military- related nuclear energy experience. Critical nuclear researchers, scientists, and production specialists carry a professional status similar to those in advanced industrial nuclear leaders. China boasts 5,000 nuclear professionals -- ranging from technocrats, engineers, designers, and researchers -- with 80% of them possessing prestigious western academic backgrounds.(51) The Daya Bay nuclear power plant, in particular, has educated technicians as well as engineers who study and train abroad to ensure smooth operation. Moreover, technicians must receive state certifications from the Nuclear Security Bureau before they can be employed.(52)

Both reactors undergo annual core fuel assembly replacements as part of the Daya Bay's safety provisions. Each year, approximately 53 of the 157 reactor core fuel assemblies must be replaced at the Daya Bay plant. While long term spent fuel storage is an unresolved issue, the spent fuel storage pond at Daya Bay can accommodate spent fuel replaced over a 10-year period.(53) Moreover, the pond itself contains boron, which serves as a powerful barrier to nuclear radiation.

Aside from the extensive education, training and safety features incorporated into the design of the Daya Bay nuclear power plant, the Daya plant has established four of its own environmental monitoring stations on site and three outside the site. In addition, the state environmental protection authorities commissioned nine monitoring stations to track the plant's ecological impact. The intent is to provide impartial and objective assessments of nuclear plant activity effects.(54)

The proposed Lingao plant incorporated into the ninth five-year plan, will build upon the experiences of the Daya plant by incorporating additional safety feature improvements in its design. The Guangdong Nuclear Power Company reported to the Beijing Renmin Ribao that approximately 20 safety improvements will be made, including waste reduction measures.(55)

Nuclear Accident:
Fears over a nuclear accident at the Daya Bay station stem largely from the disaster at Chernobyl. See the CHERNOBYL case. The environmental disaster unleashed by Chernobyl's nuclear accident was at least partly the result of the absence of a reactor containment chamber, which contains the degree of radioactive substance leakage. China's Daya Bay Nuclear Power Plant, however, is equipped with three protective levels:(56)

fuel element cap
pressure container
reactor containment chamber

Nuclear advocates in China also emphasized that Chernobyl's granite-type reactor was inferior to the Daya Bay's pressurized water reactor with respect to safety and technology sophistication, hence the probability of a grave nuclear accident at Daya Bay was minuscule.(57) Jiang Xinxiong, minister of the nuclear industry, indicated that an accident involving the core's meltdown would not involve evacuation of persons living more than 10 km away from the plant. Opponents, nevertheless, attacked pro-Daya Bay groups for downplaying the probability that a nuclear accident would occur and the severity of the resulting consequences. To do so avoided the opponent's central argument that such a disaster would wreck havoc on Hong Kong's economic and political future.

Another issue related to the topic of nuclear accidents, is the geological stability of the land on which the Daya Bay plant was constructed. According to some Hong Kong nuclear opponents, China's government withheld specific parts of a feasibility study which exposed concerns directly related to the geological facets of the Daya Bay location. Geologically, the site's surrounding area does not contain any deep faults, and no earthquake activity above 7 on the Richter scale had been experienced in over 1,000 years.(58) Based on this geological survey, Daya Bay's plant was designed and constructed to withstand an earthquake at the 8 level. Even so, in 1987 the Shuitou-Xichong fault first appeared on Chinese seismic maps, located less than five miles from the Daya Bay site. Seismologists estimate that a 6+ Richter scale earthquake could strike Guangdong in the 1990s.(59)

3. Related Cases:

KAIDA = Hong Kong Toy Company

JAPANPL = Japan Plutonium Trade

TEMELIN = Czech Nuclear Plan

CHERNOB = Chernobyl and Trade

CHINCOAL = China Coal Trade

INDPOWER = India Power

JAPANAIR = Japan Air and China Coal

IRISH = Irish Sea and Waste

MOCHO = Mocho Nuclear Plant

SLOVAK Nuclear Plant

KORPOLL = Korea Air Pollution

NKORNUKE = North Korea

UKNUKE = UK Nuclear Processing

Keyword Clusters

(1) Forum	= ASIA
(2) Product	= POWER/ENERGY
(3) Environmental Problem	= RADIOactive

4. Author: Ann M. Weeks

II. LEGAL Cluster

5. Discourse and Status: DISagreement and COMPlete

When initial negotiations regarding the nuclear power project were under way and when ground-breaking took place in 1984, Hong Kong citizens voiced little opposition. After all, 70% of the electricity generated by the then forthcoming Daya Bay nuclear plant would be diverted to Hong Kong, thus ensuring continued prosperity and stability in the territory. China touted the Daya Bay plant as a commitment to the long-term prosperity of Hong Kong after its reversion to Chinese rule in 1997. The 26 April 1986 nuclear accident at Chernobyl, however, marked the start of a heated debate within the Hong Kong press and between citizens of Hong Kong and the mainland government.

Early in the aftermath of the Chernobyl incident, Hong Kong citizens confined their concern to safety issues over the possibility of a similar nuclear accident at the Daya Bay site. Lingering at the forefront of citizens' minds was anxiety about potential health effects and the possibility of an evacuation plan for Hong Kong.(60) As time progressed, however, a portion of Hong Kong citizens began to view the Daya Bay project as anathema to continued prosperity in the territory. Various opposition groups began to lobby for the plant's postponement to ensure resolution of safety issues while others requested that the plant be relocated to a more remote site. Daya Bay opponents emphasized "...the uniqueness of Hong Kong as an international trading port (61)" and indicated that a nuclear accident would cripple Hong Kong's international importance. Thus, while nuclear energy is a leading long-term solution to electricity demands, opponents were concerned with construction of a plant so close to Hong Kong.

Despite the loud voice of public opposition from Hong Kong, the mainland government displayed no trace of flexibility in carrying out the proposals for the Daya Bay plant. The leadership in Beijing neither entertained any of the suggestions put forth by opposition groups nor made symbolic concessions to assuage some of the animosity.

China's government decided to push ahead with the Daya Bay plant's construction, regardless of Hong Kong's concerns. Dismissal of the opposition's allegations aligns with the historical track record of the Chinese government's intolerance for public dissent. Rather than discussing safety and prosperity issues laid out by various opposition groups, the Chinese government decided to follow through with its original plans. In addition, to delay plans or alter the nuclear plant's location would be equivalent to saying that the government was wrong in its initial assessment of the project. Moreover, the government felt that any negative impact on Hong Kong's economy from the erection of the Daya Bay nuclear station would be short lived. This assessment was premised on Hong Kong's economic rebound less than two years after the slump struck in 1983 and on Hong Kong's strong growth rates in the midst of the Daya Bay debate.(62)

The fact that the Daya Bay project is complete and has been functioning relatively smoothly since 1994 does not rule out the possibility that proposed future nuclear power plants will not encounter opposition and resistance.

6. Forum and Scope: CHINA and UNILATeral and MULTIlateral

7. Decision Breadth: FOUR

China and Hong Kong; France and Great Britain

China and Hong Kong: The debate surrounding the Daya Bay nuclear power plant project principally involved mainland China and Hong Kong. China wanted to see the project executed in hopes of alleviating some of the power shortages faced in the SEZs, in this case, Guangdong. Symbolically, the project represented a commitment on the part of mainland China to the future economic prosperity and stability in Hong Kong.

The proximity of Daya Bay to densely populated centers in Hong Kong and the fact that the bulk of electricity generated by the Daya Bay plant would be channeled to Hong Kong gave the territory a direct stake in the outcome of the debate.

France and Great Britain: Although China and Hong Kong were directly affected by the immediate outcome of the discussion and had more at stake than other participants, France and Great Britain were also directly affected by the conclusion. The decision to proceed with the construction of the Daya Bay plant as originally planned, secured the bids France and Great Britain were awarded to supply essential plant equipment -- reactors and turbines, respectively.

Other Indirectly Affected Parties: The unfolding of events related to the Daya Bay case also impacts other foreign suppliers of nuclear-related power plant equipment in a couple of areas. First, the potential for foreign competitors' participation in future nuclear-related projects improves with the success of the Daya Bay project. Second, foreign competitors' ability to penetrate the Chinese market for nuclear-related power plant equipment will depend, in part, on the Chinese government's ability to enforce laws favorable to foreigner products.

8. Legal Standing: TREATY

The International Atomic Energy Agency (IAEA): When the Daya Bay project got underway, the Chinese government identified the nuclear power plant as one of the stations to be subject to safety supervision by the IAEA. China also agreed to cooperate with the IAEA with respect to safety standard setting and evaluation.

In 1983, China became a signatory of the IAEA, indicating its willingness to become a mature member of the international nuclear community. In brief, the IAEA is responsible for enforcing provisions of a nonproliferation treaty drafted in the late 1950s. By becoming an IAEA member, China agrees to subject imported equipment and materials as well as potential waste storage sites under international safeguards. Moreover, China ratified the IAEA- sponsored International Convention on Nuclear Safety in 1996.

In accordance with IAEA guidelines, the Daya Bay plant has written on-site emergency preparedness plans. The on-site preparedness plans are a pre-requisite for fuel loading approval.(63)

Government officials in China reiterate that site selection was undertaken in strict accordance with IAEA safety standards. The Daya Bay nuclear power plant is surrounded by a 1.2 km "uninhabited safety zone" with a lightly populated area extending 5 km beyond the uninhabited safety zone.(64) Furthermore, no population centers fall within the stipulated 20-km radius.

National Structure:
Laws:
China's Environmental Protection Law of the PRC
Provisional Regulations on Environment Control for Economic Zones Open to Foreigners (China Law No. 339):
1993 Regulations for Contingency Control of Nuclear Accidents at Nuclear Power Plants

Government Bureaucracy (65):
Many China-skeptics are concerned that part of the nuclear energy- related monitoring and testing bodies fall under the central Communist Party influence. Thus, crucial information regarding nuclear power plant malfunctions will not be disclosed and test results will be skewed to reflect safe and efficient operations. The following outlines the governmental bodies that oversee some part of the nuclear energy industry.

Nuclear Power Leading Group: This group retains overall responsibility for China's nuclear power development.

Ministry of Water Resources and Electric Power: This ministry is responsible for building of large power plants and supervises institutes involved in construction of nuclear power plants as well as maintains secondary cooling systems as well as nuclear reactor generators.

Ministry of Nuclear Industry: One of this ministry's main functions is to supervise the Nuclear Energy Industry Corporation. The Nuclear Energy Industry Corporation is responsible for uranium mines and processing plants.

Ministry of Geology and Mineral Resources: This ministry surveys activities at nuclear plant locations.

Ministry of Urban and Rural Construction and Environmental Protection: This ministry is linked to the State Environmental Protection Bureau in a supervisory capacity. The State Environmental Protection Bureau provides recommendations for protecting against nuclear pollution.

Ministry of Metallurgical Industry: Specialized materials related to nuclear reactor construction and operation are the domain of this ministry.

State Bureau of Nuclear Safety: Laws, regulations, guidelines, and standards are drafted by this state bureau. In addition, the Nuclear Safety State Bureau conducts safety examinations of civil nuclear facilities, undertakes safety research, and is responsible for the issuing of construction permits and operating licenses.

Provincial: Guangdong has adopted additional measures to protect against the ill-effects of coal-driven power plants, and is evident in Guangdong's ninth, five-year plan.. In 1995, Guangdong coal-driven power plants were required to install pollution control equipment.(66)

III. GEOGRAPHIC Cluster

9. Geographic Locations:

1. Continental Domain: Asia 2. Geographic Conflict Site: East Asia 3. Geographic Regulatory Impact Area: China Right: Pictured here are China's two pressurized water reactor nuclear power plants -- Qinshan and Daya Bay. Daya Bay is the red bullet to the south.

10. Sub-National Factors: YES

Disproportionate allocation of energy resources among China's various provinces requires energy development plans which suit the natural resource abundance and technological availability of a given province. Therefore, Guangdong's plans for increased nuclear-generated power plants may not necessarily coincide with other province plans. For instance, less-developed inner provinces may not be able to attract the degree of foreign investment necessary to switch from coal-generated power to nuclear or natural gas-generated power. Thus, potential improvements in air pollution and the quality of life generated by Guangdong's actions may not be typical of developments within other Chinese provinces.

11. Type of Habitat: TEMPERATE

IV. TRADE Cluster

12. Type of Measure: REGulatory STANDARD

13. Direct vs. Indirect Impacts: DIRect

14. Relations of Trade Measure to Resource Impact:

1. Directly Related to Product: YES [POWER]
2. Indirectly Related to Product: YES [COAL]
3. Not Related to Product: NO
4. Related to Process: YES [POLA]

16. Economic Data:

1. Industry Output:
   Since liberalization of foreign investment in the electric power generation sector, approximately 53 thermal, hydro, and nuclear power generation/power transmission projects have been concluded (through mid-1993).(67) A fair number of these projects are located in Guangdong Province.
2. Employment:
   32,000 Foreign-funded firms in Guangdong province employ 7 million persons.(68)
3. Financial Indicators:
   China's trade surplus, investment flows and foreign exchange market intervention have contributed to China's reserve growth, now second only to that of Japan.

In previous five-year plans, China included provisions for the expansion nuclear energy's role in satisfying domestic energy demand. However, lack of hard currency inhibited China's ability to fully-realize its nuclear energy goals. With the rise of China's foreign currency reserves, however, China now possesses the means to carry out large scale expansion of its peaceful nuclear industry.(70)

17. Impact of Trade Restriction: HIGH

Restriction of the energy sector is viewed as a 'defensive' distortion, based on national security concerns. This results in a lost market for competitive foreign companies as well as lost efficiency and continued environmental degradation for China.

18. Industry Sector: [UTILITY]

19. Exporters and Importers: MANY and CHINA

With the opening of foreign direct investment in the context of BOT projects, foreign participation, particularly among the advanced industrial countries, will blossom. The potential for many importers refers to the development of China's own nuclear power plant equipment design and production, which has been labeled as 'ideal' for other developing countries.

V. ENVIRONMENT Cluster

20. Environmental Problem Type: RADIOactive

21. Species: MANY

As noted earlier, the Daya Bay nuclear station is located in a province that is highly populated, is a major industrial center for all of China, is one of the principal recipients of foreign investment from Hong Kong, and is located approximately 50 miles from one of Hong Kong's dense population spheres as well as 70 miles from Shenzhen, another major industrial center. Thus, the potential for human life to be affected by a nuclear accident is fairly good.

Aside from affecting humans, sea life may also be affected by nuclear activities at the Daya Bay plant. This includes both marine animals as well as vegetation. To date, reports covering various environmental surveys suggest that the Daya Bay plant has been successfully operated without detrimental effects on either human or sea life forms.

22. Resource Impact: [HIGH] and [REGUL]atory

23. Urgency of Problem: MEDIUM

24. Substitutes: [SYNTH], [LIKE], and [CONSV]

Hydroelectric Resources: These resources are concentrated in the southwestern portions of China, which limits the extent to which this energy resource can be further developed. Development of this source is also complicated by China's deficiency in the proper technology which would make hydroelectricity both an efficient and effective source of power.

Coal: Although coal will likely remain China's primary energy source in the short-to-medium term, inadequate infrastructure will prohibit coal from effectively meeting all of China's energy demands. Because of the remote location of the bulk of China's coal resources, mined coal must be transported on rail lines to destination points. Existing rail infrastructure, however, is quite saturated, increasing the difficulty of transporting coal in a timely fashion.

Cleaning up the method used for coal-fired power plants is another option. This would be accomplished by developing China's market for pollution control equipment, such as desulphurization devices and proper testing equipment and instrumentation. The National Trade Data Bank Market Report identifies a huge market potential for pollution control equipment in China. To make this option effective, however, China's authorities would have to make tremendous strides in environmental law and regulation enforcement. Like other markets, such as those involving intellectual property rights, China's track record on law enforcement has been irregular and spotty at best.(71) Part of the problem in law enforcement stems from the rudimentary pollution monitoring system being used. Another source of the problem relates to the heavy fines imposed for pollution. Most of the enterprises are state-owned, which means that heavy fines implicate the overall prosperity of the government as much as it affects the enterprise itself.(72)

Renewable Energies: Sunlight, biomass, and wind have long been used by Chinese in rural areas. As of the mid-80s, these renewable energy sources accounted for a mere 0.2% of China's annual commercial energy consumption.(73) The general perspective of Chinese officials is that renewable energy sources will be used to supplement conventional sources, particularly in remote, rural areas. Consequently, it is unlikely that renewable energy sources will become an alternative to conventional sources such as coal and hydroelectricity, and increasingly, nuclear energy.

VI. OTHER Factors

25. Culture: YES

China's long history of foreign invasion has made it cautious about permitting unfettered foreign participation in its economic development. Hence, the slower reform path than those of former Soviet Union and Eastern European states. In particular, foreign participation in the energy and power sectors was severely constrained. A history of invasion and exploitation instilled in China, a strong desire to protect its national security.(74)

26. Trans-Boundary Issues: YES

Coal consumption generates air pollution of several types which crosses over provincial as well as national boundaries. Please refer to the CHINA COAL case study for further discussion on this matter. For additional information regarding Japan's perception of China's coal use and the transboundary air pollution that results, please refer to the JAPAN AIR case study.

The potential for far-reaching environmental concerns with respect to nuclear energy also exists. The CHERNOBYL case provides excellent information regarding the potential dangers affiliated with nuclear accidents. The threat of another Chernobyl tempers the positive environmental effects of switching from coal to nuclear energy.

Transborder environmental issues is also discussed in the KOREA POLLUTION case study.

27. Human Rights: YES

28. Relevant Literature:

End Notes:

(1) "China - Country Analysis Brief." USDOE, Energy Information Administration. NTDB Item ID: EN CABS CHINA. 27 Nov. 1997.
(2) Qian, Gaoyun. "Nuclear power Offers Practical Supplementary Energy." Beijing Review. 13-19 Jan. 1997. No. 2. p 16-19. http://fbis.fedworld.gov/cgi-bin/retrieve...40uq600atg21&CID- C16473388671875056291793.
(3) Qu, Geping, and Li Jinchang. Population and the Environment in China. Boulder, CO: Lynne Rienner Publishers. 1994: 42.
(4) "Domestic Nuclear Power Increases 12 Percent in 1996." Beijing Xinhua. 17 Jan. 1997. http://fbis.fedworld.gov/cgi-bin/retrieve...4dqhe029ehdh &CID= C16473388671875056291793.
(5) "Plans Set for Large-Scale Nuclear Power Construction." Beijing Xinhua. 14 Oct. 1996. http://fbis.fedworld.gov/cgi-bin/retrieve... Document ID: 0dzeowe00634ps.
(6) Bennett, Gary M., ed. China: Facts & Figues Annual Handbook. Vol. 19. FL: Academic International Press. 1995: 164.
(7) ibid, 168-169.
(8) "Plans Set for Large-Scale Nuclear Power Construction." Beijing Xinhua. 14 Oct. 1996. http://fbis.fedworld.gov/cgi-bin/retrieve... Document ID: 0dzeowe00634ps.
(9) Qian, Gaoyun. "Nuclear power Offers Practical Supplementary Energy." Beijing Review. No. 2. 13-19 Jan. 1997: 16-19. http://fbis.fedworld.gov/cgi- bin/retrieve... 40uq600atg21&CID-C16473388671875056291793.
(10) Kwan, Daniel. "Second Daya Bay Essential." South China Morning Post. 26 Feb. 1994: 10. Lexis/Nexis.
(11) American Consulate, Guangzhou. "China - Guangdong Coal Industry Profile." Lexis/Nexis. 24 Jan. 1994.
(12) Bennett, Gary M., ed. China: Facts & Figues Annual Handbook. Vol. 19. FL: Academic International Press. 1995: 167.
(13) "PRC: Daya Bay Nuclear Power Plant Completes Plan for 1995." Beijing Xinhua. 19 Jan 1996. http://fbis.fedworld.gov/cgi- bin/retrieve...qrkry017hjuc&CID= C16473388671875056291793.
(14) "Domestic Nuclear Power Increases 12 Percent in 1996." Beijing Xinhua. 17 Jan. 1997. http://fbis.fedworld.gov/cgi-bin/retrieve...4dqhe029ehdh&CID= C16473388671875056291793.
(15) Calculations are based on annual export and import figures extracted from the 1995 International Financial Statistics Yearbook. Vol. XLVII, prepared by the IMF Statistics Department.
(16) "Managing on the Frontier." The Economist, Multinational Survey. 24 Jun. 1995: 12-14.
(17) United Nations. United Nations Conference on Trade and Development. "Country and Regional Experiences in Attracting Foreign Direct Investment for Development: Foreign Direct Investment in Developing Countries." 23 Feb. 1995.
(18) Lardy, Nicholas. China in the World Economy. Washington, D.C.: Institute for International Economics. April 1994: 67.
(19) "Report on Overseas Investment in Guangdong." Beijing Xinhua. 11 Feb. 1997. http://fbis.fedworld.gov/cgi- bin/retrieve... Document ID: 0e5m7ci031808x.
(20) Lardy, Nicholas. China in the World Economy. Washington, D.C.: Institute for International Economics. April 1994: 67.
(21) "Power Industry Minister Comments on Foreign Investment." Zhongguo Xinwen She. 14 Nov. 1996. http://fbis.fedworld.gov/cgi-bin/retrieve... Document ID: 0e138gk01mq0tm.
(22) Matthews, Matthew J. "Nuclear Power Shapes Up: But Will the Opportunities Be As Large As Expected." The China Business Review. Jul/Aug 1985: 26.
(23) Gallagher, Michael C. "Hong Kong Fears Chinese Chernobyl." The Bulletin of the Atomic Scientists. Oct 1991: 10.
(24) Suttmeier, Richard P. and Peter C. Evans. "China Goes Nuclear." The China Business Review. Sep/Oct 1996: 20.
(25) "Second Nuclear Plant Taking Shape." South China Sunday Morning Post. 7 Jul 1996. http://fbis.fedworld.gov/cgi- bin/retrieve... Document ID: 0duasq10297gj2.
(26) Lardy, Nicholas. China in the World Economy. Washington, D.C.: Institute for International Economics. April 1994: 92.
(27) Matthews, Matthew J. "Nuclear Power Shapes Up: But Will the Opportunities Be As Large As Expected." The China Business Review. Jul/Aug 1985: 23.
(28) ibid.
(29) Hahn, Bradley. "China's Nuclear History: The Country Is No Newcomer to the Nuclear Arena." The China Business Review. Jul/Aug 1985: 28.
(30) ibid.
(31) Qian, Gaoyun. "Nuclear power Offers Practical Supplementary Energy." Beijing Review. No. 2. 13-19 Jan. 1997: 16-19. http://fbis.fedworld.gov/cgi-bin/retrieve... 40uq600atg21&CID- C16473388671875056291793.
(32) Hahn, Bradley. "China's Nuclear History: The Country Is No Newcomer to the Nuclear Arena." The China Business Review. Jul/Aug 1985: 29.
(33) "Official on Ensuring Safety of Nuclear Power Plants." Beijing Xinhua. 14 Jan. 1997. http://fbis.fedworld.gov/cgi-bin/retrieve... Document ID: 0e42pb502w5y5e.
(34) Jovanovich, Jovan V. "Possible Replacements for Fossil Fuels and Comparative Environmental Aspects." Chapter 9 in Global 2000 Revisited: Mankind's Impact on Spaceship Earth. Hugh W. Ellsaesser, ed. NY: Paragon House. 1992: 330.
(35) "Beijing Says Oil Ship Near Vietnam in China Waters." 17 Mar 1997. http://www.infoseek. com/content?arn=ao423...938373721E3906E3BAD8C01BA&kt=A&ak=allnews.
(36) Tang Hua. "Defending Highest Interests of State and Nation -- Before and After China's Temporary Suspension of Nuclear Tests." Liaowang. 7 Oct. 1996. http://fbis.fedworld.gov/cgi-bin/retrieve...
(37) Zhao, Xiyuan. "Qinshan Nuclear Power Station -- The Start of China's Peaceful Use of Atomic Energy." Renmin Ribao. Overseas Edition 25 Dec. 1995. http://fbis.fedworld.gov/cgi- bin/retrieve...
(38) Kristof, Nicholas D. and Sheryl WuDunn. China Wakes. New York: Times Books. 1994: 368.
(39) "PRC: Daya Bay Nuclear Power Plant Completes Plan for 1995." Beijing Xinhua. 19 Jan 1996. http://fbis.fedworld. gov/cgi-bin/retrieve...qrkry017hjuc&CID =C16473388671875056291793.
(40) "No 'Detectable' Radiation from Daya Bay Nuclear Plant." Beijing Xinhua. 11 Feb. 1996. http://fbis.fedworld.gov/cgi-bin/retrieve... Document ID: 0dqrcy903iofwc.
(41) "Official on Ensuring Safety of Nuclear Power Plants." Beijing Xinhua. 14 Jan 1997. http://fbis.fedworld.gov/cgi- bin/retrieve...42pb502w5y5e&CID=C16473388671875056291793.
(42) "Second Nuclear Plant Taking Shape." South China Sunday Morning Post. 7 Jul 1996. http://fbis.fedworld.gov/cgi- bin/retrieve... Document ID: 0duasq10297gj2.
(43) "Official on Ensuring Safety of Nuclear Power Plants." Beijing Xinhua. 14 Jan 1997. http://fbis.fedworld.gov/cgi- bin/retrieve...42pb502w5y5e&CID=C16473388671875056291793.
(44) American Consulate, Guangzhou. "China - Guangdong Coal Industry Profile." Lexis/Nexis. 24 Jan. 1994.
(45) Qian, Gaoyun. "Nuclear power Offers Practical Supplementary Energy." Beijing Review. No. 2. 13-19 Jan. 1997: 16-19. http://fbis.fedworld.gov/cgi-bin/retrieve... 40uq600atg21&CID- C16473388671875056291793.
(46) "Official on Ensuring Safety of Nuclear Power Plants." Beijing Xinhua. 14 Jan. 1997. http://fbis.fedworld.gov/cgi- bin/retrieve... Document ID: 0e42pb502w5y5e.
(47) "No 'Detectable' Radiation from Daya Bay Nuclear Plant." Beijing Xinhua. 11 Feb. 1996. http://fbis.fedworld.gov/cgi- bin/retrieve... Document ID: 0dqrcy903iofwc.
(48) Suttmeier, Richard P. and Peter C. Evans. "China Goes Nuclear." The China Business Review. Sep/Oct 1996: 18.
(49) Jovanovich, Jovan V. "Possible Replacements for Fossil Fuels and Comparative Environmental Aspects." Chapter 9 in Global 2000 Revisited: Mankind's Impact on Spaceship Earth. Hugh W. Ellsaesser, ed. NY: Paragon House. 1992: 319.
(50) "Daya Bay Nuclear Plant Safety Examined." Renmin Ribao. 24 Feb. 1996: p 2. http://fbis.fedworld.gov/cgi-bin/retrieve... Document ID: 0drrc7500rtco9.
(51) Hahn, Bradley. "China's Nuclear History: The Country Is No Newcomer to the Nuclear Arena." The China Business Review. Jul/Aug 1985: 30.
(52) Qian, Gaoyun. "Nuclear power Offers Practical Supplementary Energy." Beijing Review. No. 2. 13-19 Jan. 1997: 16-19. http://fbis.fedworld.gov/cgi-bin/retrieve... 40uq600atg21&CID- C16473388671875056291793.
(53) "Daya Bay Nuclear Plant Safety Examined." Renmin Ribao. 24 Feb. 1996: p 2. http://fbis.fedworld.gov/cgi- bin/retrieve... Document ID: 0drrc7500rtco9.
(54) ibid.
(55) ibid.
(56) Qian, Gaoyun. "Nuclear power Offers Practical Supplementary Energy." Beijing Review. No. 2. 13-19 Jan. 1997: 16-19. http://fbis.fedworld.gov/cgi-bin/retrieve... 40uq600atg21&CID- C16473388671875056291793.
(57) Yee, Herbert S. and Wong Yiu-chung. "Hong Kong: The Politics of the Daya Bay Nuclear Plant Debate." International Affairs. Vol 63 No 4. Autumn 1987: 622.
(58) Li Rongxia. "Daya Bay: Safety First." Beijing Review. No. 37. 15 Sep 1986: 7.
(59) Gallagher, Michael C. "Hong Kong Fears Chinese Chernobyl." The Bulletin of the Atomic Scientists. Oct 1991: 10.
(60) Yee, Herbert S. and Wong Yiu-chung. "Hong Kong: The Politics of the Daya Bay Nuclear Plant Debate." International Affairs. Vol 63 No 4. Autumn 1987: 618.
(61) ibid, 620.
(62) ibid, 626-627.
(63) Suttmeier, Richard P. and Peter C. Evans. "China Goes Nuclear." The China Business Review. Sep/Oct 1996: 19.
(64) Gallagher, Michael C. "Hong Kong Fears Chinese Chernobyl." The Bulletin of the Atomic Scientists. Oct 1991: 10.
(65) Matthews, Matthew J. "Nuclear Power Shapes Up: But Will the Opportunities Be As Large As Expected." The China Business Review. Jul/Aug 1985: 25.
(66) Weidenbaum, Murray, and Samuel Hughes. The Bamboo Network: How Expatriate Chinese Entrepreneurs Are Creating a New Economic Superpower in Asia. New York: Martin Kessler Books, The Free Press. 1996: 208.
(67) Lardy, Nicholas. China in the World Economy. Washington, D.C.: Institute for International Economics. April 1994: 67.
(68) "Report on Overseas Investment in Guangdong." Beijing Xinhua. 11 Feb. 1997. http://fbis.fedworld.gov/cgi- bin/retrieve... Document ID: 0e5m7ci031808x.
(69) Bank of America WIS Country Outlooks. Lexis/Nexis. Dec. 1996.
(70) Suttmeier, Richard P. and Peter C. Evans. "China Goes Nuclear." The China Business Review. Sep/Oct 1996: 17.
(71) Lam, Ying. "China-Pollution Control Equipment." 1996 National Trade Data Bank Market Reports. 16 Jan 1996. Lexis/Nexis.
(72) ibid.
(73) Li, David Nianguo. "China's Renewable Energies: Traditional Sources Retain a Place in China's Energy Future." The China Business Review. Jul/Aug 1985: 32. (74) Weidenbaum, Murray, and Samuel Hughes. The Bamboo Network: How Expatriate Chinese Entrepreneurs Are Creating a New Economic Superpower in Asia. New York: Martin Kessler Books, The Free Press. 1996: 122.

Go To Super Page

Go to All Cases

Go to TED Categories