Globally, 295 new nuclear power plants are under construction or planned by 2030. The total aggregate value of the total build is estimated at $1.23 trillion, with international procurement worth approximately $26 billion per annum.  The size and prestige of this market has long been attractive to the Chinese leadership, and China has recently unveiled its first 3rd generation nuclear reactor that possesses complete “indigenous property rights.” This step will enable it to compete in the international nuclear market, and will reduce China’s reliance on international firms for nuclear development, likely reducing access to what is likely to remain the world’s largest market for nuclear power.
Generation III reactors are defined as reactors incorporating evolutionary improvements from enhanced fuel technology, superior thermal efficiency, passive safety systems and standardized designs for reduced maintenance and capital costs compared to the fleet of reactors constructed prior to the year 2000 (known as generation II).
A key strategy employed by China in its nuclear development has been the extensive use of technology transfer agreements with companies such as Westinghouse (U.S.) and Areva (France). The evolution of these agreements is discussed in this article, followed by an assessment of the implications of Chinese nuclear development.
The Role of Westinghouse
In February 2006, the Chinese State Council issued the 2006–2020 National Medium- and Long-Term Program for Science and Technology Development, in which large scale advanced pressurized water reactor (PWR) technology was listed as a national development priority.  In September 2006, Chinese experts evaluating Generation III designs for adoption chose Westinghouse’s AP1000 reactor to form the basis of the Chinese 3rd generation nuclear fleet citing its passive and simplified safety features, modular construction (allowing faster construction and better cost control) and smaller components allowing more ready equipment localization. 
On December 16, 2006, the then-head of the U.S. Department of Energy, Samuel Bodeman and Chinese development and reform commission chairman Ma Kai signed an advanced pressurized water nuclear reactor technology transfer memorandum of understanding under which China would introduce AP1000 reactor technology from Westinghouse and construct four reactor units in Zhejiangmen and Shandong’s Haiyan, worth an estimated $5–8 billion (Xinhua, July 24, 2007).
On July 24, 2007, the China National Nuclear Company (CNNC) Westinghouse and several other Chinese SOEs signed the “China 3rd generation nuclear self-reliance nuclear island equipment procurement and technology transfer” agreement in the Great Hall of the People in Beijing (Xinhua, May 22, 2007). According to Xinhua, the deal called for China to purchase four AP1000 units, and for Westinghouse to completely transfer AP1000 technologies covering main pumps, blast valves, containment and pressure vessels, closure heads, steam generators, supervision and other nuclear technologies (Xinhua July 25, 2007). The Chinese side would possess AP1000 improvements and developments of models outputting more than 1350 MW. Moreover, under the framework of the Sino-U.S. peaceful nuclear energy protocol, the Chinese party would possess export rights. [see reference 3] At the ceremony, central committee member, State Council vice premier and National Nuclear Independence Working Group leader Zeng Peiyan emphasized accelerating the introduction, digestion, absorption and re-innovation of nuclear technologies to realize independent Chinese design, manufacture, construction and operation strategy objectives to safeguard the energy needed for China’s economic development. “It is necessary to carefully organize, formulate and implement plans to tackle key technology research and development, develop domestic equipment manufacturing capabilities and strive to implement equipment indigenization goals to quickly develop indigenous trademarkable nuclear IP rights for large-scale advanced pressurized water reactors” (Xinhua, July 24, 2007).
To facilitate advanced nuclear reactor technology transfer and achieve a self-reliant nuclear power industry with independent trademark nuclear technology, a new central government-controlled state owned enterprise (SOE), the State Nuclear Power Technology Corporation, Ltd. (SNPTC), was officially launched in the Great Hall of the People in Beijing on May 22, 2007. SNPTC chairman Wang Binghua stated that the company would “accelerate the development process of self-reliance, industrialization and modernization of China’s nuclear power industry.” A focus for the company is implementing the introduction, digestion, assimilation, research transfer applications and popularization of the Westinghouse AP1000 (Xinhua May 22, 2007). According to Wang, the nuclear independence strategy would proceed in three stages: The first stage would require complete reliance on outside assistance, while in the second China would begin to develop engineering plans, equipment manufacturing and construction in conjunction with Westinghouse. This process would culminate in the complete digestion and absorption of AP1000 technology and the completion of independent innovative designs. As stated by Xinhua: “Through introduction, digestion, absorption and re-innovation China will possess complete independent IP rights to trademark large-scale advanced pressurized water reactor technology, which will allow the Chinese nuclear industry to go out and capture the world nuclear market” (Xinhua, February 27, 2008).
The SNPTC rapidly realized its objectives, on August 9, 2010, SNPTC vice-president Sun Hanhong reported that domestic AP1000 equipment manufacture had already reached 55 percent localization, with breakthroughs in key technologies allowing more than 40 domestic Chinese companies meeting international standards to supply AP1000 equipment (People’s Daily, August 9, 2010). By December 2013, Xinhua reported that 80 percent of the components of the AP1000 had already been localized in China, and Chinese companies will seek opportunities in the spare parts export market (Xinhua, December 9, 2013).
In January 2012, the Chinese government announced that the SNPTC had achieved complete independent Chinese property rights for a 1400-1500 MW elaboration of AP1000/CAP1000 reactor designs (the CAP1400) developed between Westinghouse and the SNPTC. This development can be viewed as a significant milestone in the domestic development of pressurized water technology according to the State Council’s 2006-2020 national medium and long-term program for science and technology, introduced previously. 
During an October 2013 visit to Beijing, U.S. Energy Secretary Ernest Moniz stated that the U.S. is committed to working with China on the development of new nuclear reactors and will encourage joint project bids. “What we are seeing is a very close relationship with SNPTC in the design and construction of generation three technology… Westinghouse and SNPTC are collaborating in developing both the U.S. and the Chinese supply chains for these nuclear projects” (Reuters, October 30, 2013).
The French Connection
In addition to the United States, China also has long-standing nuclear connections with France. On April 25, 2013, at a ceremony in Beijing attended by Xi Jinping and French President François Hollande, Areva, the CNNC and the CGN signed a number of agreements to advance Franco-Chinese strategic civil nuclear partnership. Also signed was a letter of intent between Areva and the CNNC to build a state of the art nuclear fuel reprocessing facility (Areva Press release, April 25, 2013).
In December 2013 during a state visit to China by French Prime Minister Jean-Marc Ayrault to mark the 30th anniversary of Sino-Franco nuclear cooperation, Areva and the CNNC signed a letter of intent to cooperate in front-end fuel cycle activities, including the formation of a joint venture to develop a facility to fabricate and convert up to 600 metric tonnes of zirconium alloy annually for the Chinese market by 2017. This follows a 50/50 joint venture between Areva and the CNNC in 2010 (CNNC–Areva Shanghai Tubing) to produce zirconium alloy cladding tubes for nuclear fuel assemblies (World Nuclear News, December 9, 2013).
French importance to Chinese nuclear development was reiterated by Chinese Premier Li Keqiang, who said that France and China would expand their cooperation and jointly take advantage of third-party nuclear markets (Xinhua, December 9, 2013). According to the CGN’s He Yu, the Sino-Franco partnership over the last 30 years is an example of Chinese nuclear cooperation with foreign nations evolving from a situation in which initially China acted in an ancillary role, to the current situation in which the Chinese lead and the French provide support through joint planning and construction of new units. “Thirty years ago, China unceasingly absorbed nuclear technology development from around the world, through continuous introduction, digestion, assimilation and independent innovation. China has already realized 1000 MW nuclear power station plans, independent manufacturing, independent construction and independent operation, fundamentally shaping a complete nuclear industrial system” (Xinhua, December 9, 2013).
Prior to the agreements made in 2013, in November 2011 Xinhua announced that CGN had successfully developed an advanced form of the CPR1000 reactor, which was an upgraded version of a French 900 MW design imported in the 1980s, over which Areva retained IP rights. The 3rd generation ACPR1000 design replaced all Areva intellectual property rights, achieving a model possessing complete Chinese IP ownership. Moreover, the ACPR1000 meets the regulatory standards for China, Europe and the United States markets (Xinhua, November 16, 2011). The CGN made the reactor available for local construction, and planned to independently market the ACPR-1000 for export from 2013. [see reference 3]
Implications of Chinese Nuclear Development
Developments in the domestic Chinese market have significant ramifications for the competitiveness of nuclear exporting countries. The acquisition of Chinese proprietary nuclear IP is clearly the first stage in a “going out” policy, which includes new nuclear construction in Pakistan and the UK (Xinhua, March 9).
The Chinese nuclear industry has benefited from the extensive use of technology transfer agreements and high-level government support for SOEs, including favourable financing, industrial coordination and support for manufacturers through localization requirements for domestic reactor construction, which the U.S. Department of Commerce has identified as impediments to U.S. small modular reactor competitiveness. 
The use of technology transfer agreements to “indigenize” reactor designs appears to parallel the development of Chinese high-speed railway technology, during which Siemens and Kawasaki (Japan) were required to share high-speed rail technology with Chinese SOEs in order to access the Chinese market, at the cost of reduced long-term competitiveness and the establishment of domestic competitors. It is difficult to gauge Westinghouse’s or Areva’s reaction to Chinese nuclear technology “re-innovation” following technology transfer agreements even though such developments may have similar deleterious effects—the companies’ limited public statements may be due to the sensitive diplomatic nature of nuclear accords.
Why would competitive companies be willing to enter into technology transfer agreements? This issue is multifaceted and industry variable. In this instance, Chinese SOEs, and therefore the Chinese government’s, preponderance as the biggest buyer in the nuclear market allows it to dictate contract terms that include technology transfers. China will most likely retain this market dominance for the next 20–30 years, and hence its negotiating advantage will continue for some time.
On November 23, 2010, the Financial Times reported that Westinghouse had handed over more than 75,000 documents to the Chinese as the initial part of a technology transfer agreement relating to Sanmen and Haiyang reactors. According to the report, Westinghouse president for Asia Jack Allen stated: “We don’t expect that we will walk away at the completion of these units and not participate in the [nuclear] programme, but there are no guarantees… Our experience has been in the past that you can’t just give people drawings and manuals and they become proficient in a year or two years.” Allen further asserted that technology transfer agreements are designed to prevent copying and that Westinghouse has a history of formulating such agreements with other countries (Financial Times, November 23, 2010). However, this assessment appears to be contradicted by Chinese media assertions regarding the “localization” and replacement of IP limited AP1000 technology to achieve independent trademark nuclear reactor models for export at a time when increasing number of countries are initiating new nuclear construction projects.
- “The World Nuclear Supply Chain: Outlook 2030,” World Nuclear Association, 2012.
- “High temperature gas-cooled reactor demonstration project: Successful completion of concrete pouring for nuclear island floor” (Gaowen qilengdui hedianzhan shifan gongcheng hedaodiban hunningtu jiaozhu yuanman wancheng), Qinghua University Nuclear Power and New Energy Research Institute, 2007 (Retrieved February 2014).
- “Nuclear Power in China,” World Nuclear Association (retrieved February 2014).
- “Firmly Advance: A Report from the Forefront of 3rd Generation Nuclear Power Indigenization” (Jianding tuijin: Laizi sandai hedian zizhuhua de qianyan baogao), Central government portal, January 14, 2012 (retrieved February 2014).
- “The commercial outlook for U.S. small modular nuclear reactors,” U.S. Department of Commerce, International Trade Administration, February 2011.