Announcing the deal while on a five-day tour of China, Osborne said the "essential" plant would go ahead with support from the China General Nuclear Corporation and China National Nuclear Corporation. Chinese funding will come "later this year, and with further amounts potentially available in the longer-term”, the Treasury said.
The chancellor said: "Britain was the home to the very first civil nuclear power stations in the world and I am determined that we now lead the way again. 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."
It is hoped the deal opens the door to unprecedented collaboration in the UK and China on the construction of new nuclear power points.
While the plant will not produce energy until well into next decade, the new plant is expected to produce enough energy to supply seven per cent of the country’s needs, powering around six million homes.
Vincent de Rivaz, chief executive of EDF Energy, said: "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."
He stopped short of saying the project was back on track.
The Hinkley Point project - the UK's first nuclear power plant for 20 years - has already been beset by delays. Last October Austria threatened to sue the European Commission after it gave the project the stamp of approval, on the ground subsidies such as those awarded to Hinkley were for alternative sources of energy, rather than nuclear.
The government also warned earlier this month that the project will not start generating power in 2023, as previously expected