China`s Global Investment in Natural Resources

CHINA`S GLOBAL INVESTMENT IN NATURAL RESOURCES 5

China`sGlobal Investment in Natural Resources

China`sGlobal Investment in Natural Resources

Theneed to ensure sustainable use of natural resources has remained akey area of focus to many governments and stakeholders across theglobe. Since the emergence of the concept of sustainable developmentin the 1970’s, a lot of emphasis has been placed on planned use ofnatural resources such as fossil fuels, minerals, water, air amongothers. Owing to the fact that not all countries are equally giftedin natural resources, some of them have to import for the purpose ofindustrialization. However, others have turned to be net importers ofnatural resources owing to their heavy consumption motivated by highlevels of industrialization and increased demand for some products inthe domestic market.

Oneof the countries where demand for natural resources has drasticallysurged is China. As noted by Scissors (2014), the steady growthwitnessed in China over the last decades has resulted tounprecedented appetite for steady and reliable supply of naturalresources that are inexpensive. On the same note, POLINARESConsortium (2012) notes that, although China is rich in naturalresources, rapid economic growth coupled with the country’s growingsignificance as place of global manufacturing has resulted to raiseddemand for natural resources that are externally-sourced (Stiftung,2008). Consequently, this has resulted to rapid increase in FDI(foreign direct investment) that stretch from Latin America toAfrican countries such as Zambia, Kenya, Malawi among others. Infirst half of 2005, the country invested $4.1 billion and thisrepresented a 250% increased as compared to the previous year(Stiftung, 2008). In 2005, outward investment in non-financialenterprises was $12.3 billion representing a 20% rise as compared to2004 as summarized below.

(Scissors,2014)

Thereare several notable state-owned corporations which have taken a leadin penetrating international markets as well as making foreignacquisitions (POLINARES Consortium, 2012). Some of them includeSinopec, CNPC, CNOOC among others. For instance, during the 2009financial year, these companies spent above $45 billion for thepurpose of acquisition as well as licensing deals globally. As at2012, Kazakhstan, Sudan and Venezuela continues to be highlysignificant source for equity oil, which accounts for above 50% ofthe foreign oil that is controlled directly by the above statedChinese companies. In the same note, PetroChina indicated that, thefirm will invest $60 billion between 2010 and 2020, with the aim ofboosting overseas businesses (POLINARES Consortium, 2012).

Oneof the areas where Chinese FDI has become pronounced is in Africa.Although the objectives stated by this Asian giant are similar tothose offered by the Western counterparts, the way in which Chinaconducts its business in Africa is much different (Corcoran, 2014).China has embraced the idea of “non-interference”, thus notinterfering with the internal affairs as well as not imposingpolitical preconditions when dealing with African nations. As aresult, China stock in various sectors in Africa including naturalresources has increased from $900 million to $21.7 billion between2004 and 2014, representing above 2000% raise. Among the top tierbeneficiaries include South Africa, Algeria, and Zambia among others(Corcoran, 2014). Generally, the non interference policy has helpedto strengthen the relation existing between China and otherdeveloping countries, thus making it easy for the country topenetrate international markets as well as the acquisition of naturalresources (Sun, 2014).

References

Corcoran,B. (2014). China trades investment for resources in Africa. TheIrish Times.Available at

http://www.irishtimes.com/news/world/africa/china-trades-investment-for-resources-in-africa-1.2023138

POLINARESConsortium (2012). China’sForeign Investment in Natural Resources.Available athttp://www.polinares.eu/docs/d4-1/polinares_wp4_chapter12.pdf

Scissors.D. (2014). ChineseOutward Investment: More Opportunity Than Danger.The Heritage Foundation. Available at

http://www.heritage.org/research/reports/2011/07/chinese-outward-investment-more-opportunity-than-danger

Stiftung,H. (2008). RethinkingInvestments in Natural Resources: China’s Emerging Role in theMekong Region.Available at

http://d2ouvy59p0dg6k.cloudfront.net/downloads/china_study_executive_summary.pdf

Sun,Y. (2014). Africain China`s Foreign Policy.Available athttp://www.brookings.edu/research/papers/2014/04/10-africa-china-foreign-policy-sun