The two Chinese companies involved in the deal, SinoFortone and China Railway No 3 Engineering Group (CR3), have withdrawn from a Memorandum of Understanding they struck with Nicola Sturgeon in March.
The episode is now reportedly being referred to as the “Scottish shambles” in China. The cash has been earmarked for investment in clean energy, transport and affordable housing.
But it only came to light after details of the deal were reported in the Chinese press with no formal announcement made by the Scottish Government at the time.
This prompted an immediate backlash among opponents amid claims that CR3’s parent company had been at the centre of corruption concerns among bosses at Norway’s oil fund who ditched their investment.
A spokesman for economy secretary Keith Brown attacked the role of opposition parties in the collapse of the deal.
“We were aware that Sinofortone felt they could not move ahead with investment in the climate of hostility they faced from other parties but continued to believe in the benefits for Scotland of an infrastructure partnership with China and hoped more unified support would be possible,” he said.
“We remain committed to pursuing these opportunities. The MoU is about building relationships with a view to investment and we remain committed to it.
“We are sorry if the partners consider the MoU to be cancelled and we remain open to working together on projects in the future.
“The opposition should be ashamed of themselves if their actions, in search of cheap headlines, have put up to £10bn of investment at risk. It would be helpful if opposition parties joined us in making the case for Scotland, rather than doing Scotland down.”
The Chinese firms backed out of the MoU in an email to the Scottish Government on 15 August – less than five months after the deal was signed.
A Labour economy spokeswoman branded the agreement a “backroom deal” and insisted it poses serious questions about the “transparency and competence” of SNP ministers.
“The SNP Government’s handling of this has been cackhanded from the very beginning, so it is no wonder it has been branded a shambles,” she added.
“The SNP tried to hush up this deal throughout the election, and now we find out that it fell apart months ago, and yet the Scottish people – once again – were none the wiser.
“Day after day the government’s story changed about this arrangement. The SNP needs to finally come clean and give Scotland the full story on this deal as a matter of urgency. At a time when transparency and international investment are key questions in politics, this development reveals real problems with the SNP’s approach.”