At least France sold the Chinese a couple of nukes. It could be all that Europe gets out of this week’s EU-China summit in Beijing.

An order for two nuclear plants, built to the latest French design, and vague pledges over a large fleet of Airbus jets. President Hu Jintao’s welcome gift to his guest Nicolas Sarkozy secured a somewhat ill-tempered response; in return, the French President treated the Chinese leader to a stern lecture about the iniquities of his country’s managed exchange rate policy.

The link between the yuan and the sinking dollar is costing eurozone exporters dear and Peter Mandelson, the European Trade Commissioner, laid into the Chinese yesterday in an article in the China Daily, calling for the policy to be scrapped. In an unsubtle hint that China might find itself in formal dispute with the European Union over a whole range of issues, from intellectual property theft to steel dumping, Mr Mandelson demanded that Beijing comply with the rules of the World Trade Organisation.

In response, Beijing officials quickly delivered a promise to cooperate with the eurozone countries and to “step up structural economic adjustments, prevent big swings in foreign exchange rates and make a contribution to an orderly adjustment of global imbalances”.

It’s words. The simple solution of letting the yuan float upwards to its natural level is out of the question. Beijing has bigger concerns, notably the risk of losing the export markets that have funded a million Chinese banquets. American consumers are fighting for scraps in the credit barrel and Chinese exporters have become fearful of the future. After wage inflation, dear oil and soaring food prices, a revalued yuan could be the extra burden that derails the Chinese locomotive in its dash for prosperity. Jobs and rising incomes mean political peace and no amount of threats from Europe will deflect the Beijing commissars from a commitment to massive economic expansion.

Besides, Europe remains hopelessly divided over policy towards China. Trade is one of the few areas where union has given Brussels a mandate to forge a single policy, but the 27 nations struggle to find common cause. It’s a row between hi-tech engineering firms in Northern Europe, who generally are doing well selling state-of-the-art equipment to the Chinese, and the clothing and textile makers of the Club Med, who battle daily with cheap rip-offs of European luxury brands.

Added to that is high-level political dissent. To the enormous irritation of Germany, Mr Sarkozy called again in Beijing this week for the lifting of the EU’s embargo on the sale of weapons to China. Angela Merkel, the German Chancellor, is vehemently opposed to arming the Chinese. In September she gave the Dalai Lama an official welcome at her residence in Berlin, a gesture towards Tibetan independence that drew a furious response in Beijing and has harmed Germany’s relations with the People’s Republic.

Back home, Ms Merkel has come under fire for damaging prospects for German exporters and investors, which have an unrivalled position in the People’s Republic. Meanwhile, Mr Sarkozy has again raised the threat of an EU carbon tax on Chinese exporters if China fails to commit to lower carbon emissions. It’s a bleak outlook: an enraged and isolated China armed to the teeth with French weaponry, its factories idle while unemployed workers take to the streets.

Paying the price for our greed

France has the solution: buy our nuclear power stations. China is keen to build a large fleet of nukes, but it takes time. The power is needed today and the country is commissioning two coal-fired plants every week.

The two French nukes ordered by President Hu Jintao probably won’t be up and running for more than a decade. It poses an interesting question: what is our strength? In doing business with China, what is our ultimate selling proposition?

It ought to be good ideas; while European companies with cutting-edge technology, such as Airbus or Rolls-Royce, are successful exporters, the technology gap is shrinking, nowhere more so than in energy, where real breakthroughs are few.

Areva, the French nuclear business, is doing well selling to China a modernised version of a 1960s product. Since the invention of the internal combustion engine, the world’s only big advance in energy technology has been nuclear power. Solar and wind remain effete alternatives.

It is the technology hiatus that hampers the West’s big oil companies in their efforts to gain access to hydrocarbons in the Middle East and in Russia. The national oil companies have money to buy expertise off the shelf, which leaves the oil majors sulking on the sidelines like unemployed teenagers.

For too many years, big oil failed to invest its profits in research and now we are paying the price for our dividend greed. It is a mistake that could become very costly for all of us.

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