Under The Same Blue Sky

Russia became the latest country to strike a civil nuclear deal with energy-hungry India on Monday when it agreed to supply reactors to Asia’s third largest economy.

International power companies from Russia, France, the UK, the US and Canada are flocking to India seeking opportunities to help one of the world’s fastest-growing economies meet its energy demands. The contribution of nuclear energy in India is forecast to rise from 4,000MW to as much as 470,000MW over the next 40 years.

The Russian deal follows a civil nuclear agreement with the US at the end of last year that helped clear the way for India to buy atomic power plants, technology and fuel from the nuclear club of nations.

India, officially a nuclear weapons power since 1998, had been denied access to civilian nuclear technology for more than 30 years since its test of a nuclear device in 1974 and its refusal to sign the 1968 non-proliferation treaty.

Manmohan Singh, India’s prime minister, told reporters at the Kremlin after talks with Dmitry Medvedev, Russia’s prime minister:

“Today, we have signed an agreement which broadens the reach of our co-operation beyond the supply of nuclear reactors to areas of research and development and a whole range of areas of nuclear energy.” The two leaders also struck defence accords including a partnership to produce a multipurpose transport aircraft.

New Delhi and Moscow have been close partners since India’s independence 62 years ago. During this period, Russia became the largest supplier of military hardware to India. But it is energy that Mr Singh has described as the greatest “emerging dimension” of the relationship.

Russia is already building two nuclear power plants in Kundankulam in the southern Indian state of Tamil Nadu under a 1988 agreement. These are expected to start producing electricity next year.

India operates 17 atomic power plants, and Mr Singh envisages expansion of capacity in the coming decades to help remedy the country’s power deficit and sustain economic growth.

The World Bank and Beijing are in discussions about setting up low-cost factories in new industrial zones in Africa to help the continent develop a manufacturing base and reverse its declining share in global trade.

Robert Zoellick, the president of the World Bank, said Beijing had shown “strong interest” in proposals to set up manufacturing bases to help African countries achieve high growth paths similar to Asian ones.

“There is not only willingness but strong interest among some in China and I’ve discussed with the minister of commerce, Chen Deming, that there may be possibilities of moving some of the lower-value manufacturing facilities to sub-Saharan Africa – toys or footwear,” Mr Zoellick told the Financial Times.

Chinese officials and academics have been debating in recent months proposals to use the country’s vast foreign exchange reserves to try to stimulate demand in developing countries – ideas sometimes referred to as “China’s Marshall Plan”.

Last month, Wen Jiabao, China’s premier, pledged $10bn in low-cost loans over the next three years, an end to tariffs on 60 per cent of exports from the poorest nations and debt forgiveness for several countries.

Beijing’s loans to governments that come free of western-style political conditions have attracted criticism for propping up unpopular regimes.

Some African leaders fear Chinese competition in areas such as shoes and textiles is undercutting Africa’s weak industrial base. Chinese officials are also worried that their relationship with Africa could be seen as a new form of colonialism.

Mr Zoellick said African countries needed to put in place infrastructure – such as power, transport and efficient customs regimes – to attract the transformative Chinese investment.

“Some of these Chinese industries have the benefit of knowing how to do more labour intensive manufacturing and they have the marketing networks and this is always a challenge when you start an operation,” the former US Trade Representative and deputy Secretary of State said.

But any plan to shift production to Africa that goes beyond the symbolic is likely to meet resistance. Beijing has opposed growing international pressure to appreciate its currency partly because of fears of job losses in export industries.

Provincial governments in the interior of China are also desperate to attract jobs to their areas as labour costs in the coastal regions increase.

Moreover, the prime motivation of the Chinese Marshall Plan has been to find ways to create new sources of demand for Chinese factories, not to shift their output elsewhere.

The Commerce Ministry in Beijing declined to comment.

They certainly do corporate takeovers a little differently in China.

Shenzhen Airlines said yesterday that Fan Cheng, a senior vice-president from national flag-carrier Air China, had been named Shenzhen Airlines’ Communist party secretary – the most powerful position in a Chinese company.

The news comes just days after Shenzhen Airlines revealed its de facto owner, Li Zeyuan, was being investigated for unspecified “economic crimes”.

Air China owns 25 per cent of Shenzhen Airlines but has been angling to increase its stake ever since Mr Li, a well-connected former military official, bought a 65 per cent stake from the government in 2005.

Chinese media reports and industry insiders are speculating that the investigation into Mr Li is related to that hasty purchase and the possible problems Mr Li has had in coming up with the money to pay for his majority stake in the country’s fifth-largest airline.

Meanwhile, Air China is owned by the central government and, with the nation’s coffers virtually at its disposal, the carrier has already swooped in to fill the void left by Mr Li and his legal troubles.

In further evidence that an Air China takeover is in the works, Shenzhen Airlines has refused to disclose the status or whereabouts of its chairman, Li Mo, who appears to have been sidelined and just happens to be the son of Li Zeyuan.