China's Strategy to Secure Natural Resources: Risks, Dangers, and Opportunities

China's Strategy to Secure Natural Resources: Risks, Dangers, and Opportunities

by Theodore Moran
China's Strategy to Secure Natural Resources: Risks, Dangers, and Opportunities

China's Strategy to Secure Natural Resources: Risks, Dangers, and Opportunities

by Theodore Moran

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Overview

The rapid emergence of China as a major industrial power poses a complex challenge for global resource markets. Backed by the Chinese government, Chinese companies have been acquiring equity stakes in natural resource companies, extending loans to mining and petroleum investors, and writing long-term procurement contracts for oil and minerals. These activities have aroused concern that China might be "locking up" natural resource supplies, gaining "preferential access" to available output, and extending "control" over the world's extractive industries. On the demand side, Chinese appetite for vast amounts of energy and minerals puts tremendous strain on the international supply system. On the supply side, Chinese efforts to procure raw materials can either exacerbate or help solve the problems of high demand.

Evidence from the 16 largest Chinese natural resource procurement arrangements shows that Chinese efforts—like Japanese deployments of capital and purchase agreements in the late 1970s through the 1980s—fall predominantly into categories that help expand, diversify, and make more competitive the global supplier system. Investigation of smaller projects indicates the 16 largest do not suffer from selection bias. However, Chinese attempts to exercise control over mining of rare earth elements may constitute a significant exception. The investigative focus of this analysis is deliberately narrow and precise, assessing the impact of Chinese resource procurement on the structure of the global supply base. The broader policy discussion in the concluding chapter raises other separate important issues, including the impact of Chinese resource procurement on rogue states, on authoritarian leadership, on civil wars, on corrupt payments and the deterioration of governance standards, and on environmental damage. Such effects may make patterns of Chinese resource procurement objectionable, on grounds quite apart from the debate about possible "control" of access on the part of China and Chinese companies.

Product Details

ISBN-13: 9780881325126
Publisher: Peterson Institute for International Economics
Publication date: 07/15/2010
Series: Policy Analyses in International Economics , #92
Pages: 66
Product dimensions: 5.80(w) x 8.90(h) x 0.20(d)
Age Range: 18 Years

About the Author

Theodore H. Moran, nonresident senior fellow, has been associated with the Peterson Institute since 1998. He holds the Marcus Wallenberg Chair at the School of Foreign Service in Georgetown University. He is the founder of the Landegger Program in International Business Diplomacy at the university and serves as director there. He also serves as a member of Huawei's International Advisory Council. From 2007 to 2013 he served as Associate to the US National Intelligence Council on international business issues.

Table of Contents

Preface vii

Acknowledgments xi

1 Introduction 1

2 Strategic Patterns of Securing Access to Natural Resources 5

Types of Natural Resource Producers 6

Procurement Patterns of a Large Buyer 6

China's Arrangements 7

3 Chinese Investments to Secure Natural Resource Supplies 11

China National Petroleum Company and the Greater Nile Petroleum Operating Company, Sudan, 1996 11

China National Petroleum Company and Sinopec with Petrodar Operating Company, Sudan, 2001 12

China National Offshore Oil Corporation (CNOOC) and North West Shelf Venture, Australia, 2002 13

Sinopec and CNOOC, Angola, 2004 14

CNOOC and Union Oil Company of California (Unocal), 2005 (Aborted) 15

China National Petroleum Company and PetroKazakhstan, 2005-09 17

CNOOC and Akpo Oilfield, Nigeria, 2006 17

Chalco and Aurukun Bauxite Project, Queensland, Australia, 2007 18

Sinopec and Yadavaran Oilfield, Iran, 2007 19

Socomin Joint Venture, Democratic Republic of the Congo, 2008 20

Chinalco and Rio Tinto, 2008--09 (Aborted) 21

China Development Bank Loan to Rosneft and Transneft, Russia, 2009 23

Sinopec and Petrobras, 2009 24

Sinopec's Acquisition of Addax Petroleum, 2009 25

China National Petroleum Company's Development of South Pars Gasfield, Iran, 2009 26

China National Petroleum Company's Development of South Azadegan Gasfield, Iran, 2009 27

Appendix 3A: Background on Smaller Cases 35

4 Rare Earths: A Sophisticated New Resource Model for China? 41

China Surpasses California 42

New Sources of Rare Earths 43

Lithium Supply 44

5 Policy Implications 45

References 49

Index 51

Table

Table 2.1 Strategic patterns of China's 16 largest natural-resource procurement cases 8

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