The UK government will provide £2bn of initial support to build the Hinkley Point C nuclear power plant in Somerset.
The £2bn guarantee will be provided by government body Infrastructure UK and comes ahead of a final investment decision, due to be made in October.
That decision is expected to see Chinese companies China General Nuclear Corporation and China National Nuclear Corporation come to an agreement with the UK government and EDF Energy on how to fund the £24.5bn project.
The £2bn guarantee was announced by chancellor George Osborne during his five-day visit to China.
Mr Osborne said: “I am delighted to announce this guarantee for Hinkley Point today and to be in China to discuss their investments in Britain’s nuclear industry.
“It is another move forward for the golden relationship between Britain and China – the world’s oldest civil nuclear power and the world’s fastest growing civil nuclear power.”
He added: “Nuclear power is cost competitive with other low-carbon technology and is a crucial part of our energy mix, along with new sources of power such as shale gas.”
The deal aims to strengthen the trade relationship between the UK and China and could pave the way for further collaboration on nuclear new builds.
It has been reported that discussions between the UK and China have already begun over a potential new plant at the Bradwell-on-Sea site in Essex.
Hinkley Point C is expected to produce enough energy to supply 7 per cent of the country’s needs, powering around six million homes.
EDF Energy chief executive Vincent de Rivaz said: “The chancellor’s approval of the infrastructure guarantee is a clear sign of the government’s commitment to Hinkley Point C.
“The government’s determination to bring about a renewal of infrastructure and to attract inward investment to the UK are demonstrated by this good news.
“It is further progress towards a final investment decision on a project which will provide reliable, affordable low carbon electricity for decades.
“We welcome the government’s support for the industrial participation by EDF and its Chinese partners.”
The news will be welcomed by contractors, coming just weeks after EDF Energy announced £1.3bn worth of contracts for work on the £24.5bn development.
These saw a Balfour Beatty/NG Bailey JV pick up the electrical cabling and equipment installation contract, with Laing O’Rourke being handed the deal to build the workers’ campus accommodation.
Energy secretary Amber Rudd said: “New nuclear power is a vital part of our long-term plan to provide secure, clean energy supplies that hardworking families and businesses can rely on in the decades ahead.
“Today’s guarantee is an important step forward for the first new nuclear power station in a generation and the future of our homegrown energy supplies.”