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Shopaholic China

From Ecuador to Iraq, Chinese energy giants have used the financial crisis to snap up oil, gas and metals deals, shifting power over global resources east, says Michael Klare.

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Think of it as a tale of two countries. When it comes to procuring the resources that make industrial societies run, China is now the shopaholic of planet Earth, while the United States is staying at home. Hard-hit by the global recession, the US has experienced a marked decline in the consumption of oil and other key industrial materials. Not so China. With the recession’s crippling effects expected to linger in the US for many years, analysts foresee a slow recovery when it comes to resource consumption. Not so China. 

In fact, the Chinese are already experiencing a sharp increase in the use of oil and other commodities. More than that, anticipating the kind of voracious resource consumption that goes with anticipated future growth and worried about the availability of adequate supplies, giant Chinese energy and manufacturing firms – many of them state-owned – have been on a veritable spending binge. They have acquired oil fields, natural-gas reserves, mines, pipelines, refineries and other resource assets in a global buying spree of almost unprecedented proportions. 

Like most other countries, China suffered some ill effects from the Great Recession of 2008. Its exports declined and previously explosive economic growth slowed from record levels. Thanks to a well-crafted 4 trillion yuan (US$586 billion) stimulus package, however, the worst effects proved remarkably short-lived and growth soon returned to its previous high-octane pace. Since the beginning of 2009, China has experienced significant jumps in car ownership and home construction – along with worries about the creation of a housing bubble – among signs of returning prosperity. This, in turn, has generated a rising demand for oil, steel, copper and other primary materials. 

Take oil. In the United States, oil consumption actually declined by 9% over the past two years, from 20.7 million barrels per day in 2007 to 18.8 million in 2009. In contrast, China’s oil consumption has risen in this same period, from 7.6 to 8.5 million barrels per day. 

Like the United States, China obtains a certain amount of oil from domestic wells, but must acquire a growing share from overseas suppliers. In 2007, the country produced 3.9 million barrels per day and imported 3.7 million barrels, but that proportion is changing rapidly. By 2020, it is projected to produce only 3.3 million barrels, while importing 9.1 million barrels. This situation has “strategic vulnerability” written all over it, and so leaves Chinese leaders exceedingly uneasy. In response, like US officials in decades past, they have moved to gain control over foreign sources of energy – and many other vital materials, including natural gas, iron, copper and uranium. 

Chinese energy companies initially started buying up foreign firms and drilling ventures (or, at least, shares in them) as the twenty-first century began. Three large state-owned oil companies – the China National Petroleum Corporation (CNPC), the China National Offshore Oil Corporation (CNOOC), and the China Petroleum & Chemical Corporation (Sinopec) – took the lead. These firms, or their partially privatised subsidiaries, began gobbling up foreign energy assets in AngolaIranKazakhstanNigeriaSudan and Venezuela. On the whole, these acquisitions were still dwarfed by those being made by giant western firms like ExxonMobilChevronShell and BP. Nonetheless, they represented something new: a growing Chinese presence in a universe once dominated by the western “majors”. 

Then along came the Great Recession. Since 2008, western firms have, for the most part, been reluctant to make major investments in foreign oil ventures, fearing a prolonged downturn in global sales. The Chinese companies, however, only accelerated their buying efforts. They were urged on by senior government officials, who saw the moment as perfect for acquiring crucial resources for a potentially energy-starved future at bargain-basement prices. 

“The international financial crisis… is equally a challenge and an opportunity,” insisted Zhang Guobao, head of the National Energy Administration, at the beginning of 2009. “The slowdown… has reduced the price of international energy resources and assets and favours our search for overseas resources.” 

The Chinese government has worked hard to facilitate the accelerating rush to control foreign energy resources. Among other things, it has provided low-interest, long-term loans to major Chinese resource firms in the hunt for foreign properties, as well as to foreign governments willing to allow Chinese companies to participate in the exploitation of their natural resources. In 2009, for example, the China Development Bank (CDB) agreed to lend CNPC US$30 billion over a five-year period to support its efforts to acquire assets abroad. 

Prodded in this fashion and backed with endless streams of cash, CNPC and the other giant Chinese firms have gone on a global binge, acquiring resource assets of every imaginable type in staggering profusion in central Asia, Africa, the Middle East and Latin America. A very partial list of some of the more important recent deals would include: 

* In April 2009, CNPC formed a joint venture with Kazmunaigas, the state oil company of the energy-rich Central Asian state of Kazakhistan, to purchase a Kazakh energy firm, JSC Mangistaumunaigas (MMG), for US$3.3 billion (22.5 billion yuan). This was just the latest of a series of deals giving China control over about one-quarter of Kazakhstan’s growing oil output. 

* In October 2009, a consortium led by CNPC and the oil heavyweight BP won a contract to develop the Rumaila oil field in Iraq, potentially one of the world’s biggest oil reservoirs in a country with the third largest reserves on the planet. If the consortium is a success, China will have access to one of the world’s most-promising future sources of petroleum and a base for further participation in Iraq’s underdeveloped oil industry. 

* In November 2009, Sinopec teamed up with Ecuador’s state-owned Petroecuador to develop two oil fields in Ecuador’s eastern Pastaza Province. Sinopec is already a major producer in Ecuador, having joined with CNPC to acquire the Ecuadorian energy assets of Canada’s EnCana Corp. in 2005 for US$1.4 billion (9.6 billion yuan). 

* In March 2010, CNOOC International announced plans to buy 50% of Bridas Corporation, a private Argentinian energy firm with oil and gas operations in Argentina, Bolivia, and Chile. 

* In March, PetroChina joined Shell to acquire Arrow Energy, a major Australian supplier of natural gas derived from coal-bed methane. The two companies are paying about US$1.6 billion (10.9 billion yuan) each. 

And that’s only in the energy field. Chinese mining and metals firms have been scouring the world for promising reserves of iron, copper, bauxite and other key industrial minerals. In March, for example, Aluminum Corporation of China, or Chinalcoacquired a 44.65% stake in the Simandou iron-ore project in the African country of Guinea. Chinalco will pay Anglo-Australian mining giant Rio Tinto US$1.35 billion (9.2 billion yuan) for this share. 

Chinese companies like CNPC, Sinopec and Chinalco are hardly alone in seeking control of valuable foreign resource assets. Major western firms as well as state-owned companies in India, Russia, Brazil and other countries have also been shopping for such properties. Few, however, have been as determined or single-minded as Chinese firms in taking advantage of the relatively low prices that followed the global recession, and few have the sort of deep pockets available to such companies, thanks to the willingness of the China Development Bank and other government agencies to offer munificent financial backing. 

When the United States and other western nations finally recover from the Great Recession, they will discover that the global resource chessboard has been tilted strongly in China’s favour. Energy and mineral producers that once directed their production – and often their political allegiance – to the United States, Japan and western Europe now view China as a major customer and patron. In one eye-catching sign of this shift, Saudi Arabia announced recently that it had sold more oil to China last year than to the United States, previously its largest and most pampered customer. 

For now, Chinese leaders are avoiding any hint that their recent foreign resource acquisitions entail political or military commitments that could produce friction with the United States or other western powers. These are just commercial transactions, they insist. There is, however, no escaping the fact that growing Chinese resource ties with countries like Angola, Australia, Brazil, Iran and Saudi Arabia have geopolitical implications that are unlikely to be ignored in Washington, London, Paris and Tokyo. Perhaps more than any other recent developments, China’s global shopping spree reveals how the world’s balance of power is shifting from west to east. 

Michael Klare is a professor of peace and world security studies at 
Hampshire College in Amherst, Massachusetts, and the author, most recently, of Rising Powers, Shrinking Planet

An earlier version of this article was published by TomDispatch.com. It is used here with permission. 

Homepage image from gov.cn


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Default avatar
匿名 | Anonymous






American media doesn't always tell the full story.

i think American "experts" and media are quick to make assumptions. there are 1.7 billion people in China. There are only 300 million people in the U.S. (yes the US hoards a bit too). So there is 5 times as many people in China than there is in the U.S. American journalists and "experts" always forget to mention that. Whose to say that China... See More doesn't need that fuel or the metals? The American experts were discussing this after NAFTA was signed. The traders were speculating that China would buy up a lot of oil. And they may be. Instead of preparing for increased demand (a general rule in economics is when demand goes up, companies increase supply to maximize profits), the media simply places the blame on speculation.

I'm not convinced that China is "gaining control" but China has to look out for almost 2 billion people.

The US media has in the past attracted an audience by slanging it. Other times the American media and "experts" slant information to shill on behalf of their sponsors for politics or one business. So it could be typical of the American media to unnecessarily sensationalize things.

Nobody is talking about solutions, we can deal with this.

Default avatar
匿名 | Anonymous





(本评论由荆华Hua Jing-Legrand翻译)

Buying assets in a declining market

African and South American politicians are laughing all the way to their secret bank accounts - China in particular has being buying assets for which there will probably be an insufficient market.

Given recession in most of the countries to which China's exports and given increasing efforts to reduce carbon emissions from product life-cycles, excess production capacity is likely to become increasingly apparent.

Oversupply will tend to reduce prices, generate unsustainable levels of apparent demand and help rich countries like China gain market share.

Default avatar
匿名 | Anonymous




thr group of 77

According to this report will become soon, this group inside the UN, not a group bound by the target of the development but a group of countries hold together by the Chinese interests.

Default avatar
匿名 | Anonymous


看看美国的人均能源消耗, 再看看中国的人均能源消耗。 如果美国的人均消耗能源能像中国那样, 那,很多危机就不再是危机了。

Energy Consumption Per Capita

Take a look at the energy consumption per capita of the United States, and then another look at energy consumption per capita in China. If energy consumption per capita in the US was like it is in China, then many crises would no longer be crises.

Default avatar
匿名 | Anonymous



Humans can solve resource and environmental problems caused by their own development

Humans can solve resource and environmental problems caused by their own development. The resource needs in developed countries are relatively stable, as their socioeconomic development is relatively stable too. On the other hand, China is in the process of rapid industrialization and its resource needs are relatively big. In a global market, China cannot and does not need to entirely depend on its own resources. It thus naturally turns to foreign supplies. The current problem is that stagnant western nations focus entirely on China’s overseas resource purchases and recklessly hype up the their prices by methods such as manipulating speculative capital, causing China’s development costs to soar dramatically. Meanwhile some interest groups in China are benefiting from the chaotic oil price system. What is certain is that China’s development is facing a huge predicament, as there never has been a country in the world that realized industrialization on the basis of oil costing 50 U.S. dollars a barrel.

Default avatar
匿名 | Anonymous




艾莉森 来自 Facebook

China envy

I wonder what Tom Friedman has to say on this? He discussed his 'China envy' are clean energy with me on the Fresh Dialogues interview series. http://www.freshdialogues.com/2009/09/16/tom-friedman-china-envy-explained/

Alison via Facebook

Default avatar
匿名 | Anonymous


西方国家只不过打了一张能源危机牌,中国能源巨头就乐呵呵的接盘了 ,这个红花太扎眼。

Is it worth getting happy over?

Western countries merely played their energy crisis card and China's energy giants happily foot the bill, this sticks out like a sore thumb.

Default avatar
匿名 | Anonymous



Developing new energy resources

The consequences of the fierce energy competition determine the future of the country and its people! We need to hurry if we want to persist with the new energy resources developing process!

Default avatar
匿名 | Anonymous



America is still a big player

As a matter of fact, in the past there was not much balance, but now there's a trend towards it. Therefore the people who had vested interests in the past started to shout and wrangle, to make a lot of fuss which is impossible to ignore, but which at the same time can't be taken too seriously. At least up to now, America still firmly holds the world's energy initiative.