Yao
Yang of Peking University writes that China needs to improve its international
image as it expands its resource-acquisition activities across the world.
It is news to none that China is
expanding its resource-acquisition activities across the world.
And in its search for mining and
drilling rights, China seems more than willing to work with any government that
will help secure such investments, including those accused of rampant
corruption or severe human rights violations.
Even in countries with more
benign governments, resource exports still may not help to improve living
standards for ordinary people, as resource exploitation often leads to
environmental degradation and adverse effects from the so-called Dutch disease.
China is routinely accused of
importing resources from countries caught up in this ‘disease’, before then
‘dumping’ cheap manufactured goods on them. As a result, Chinese international
investment is often seen as a form of ‘new colonialism.’
The reality is that Chinese
resource companies differ very little from resource companies the world over —
except that Chinese companies often operate in more marginalized countries,
mostly because the markets in more secure countries are already controlled by
Western companies.
In addition, China’s
resource-acquisition projects have been shaped by its domestic priorities,
including those formulated by its domestic politics.
China’s desire to acquire natural
resources is determined by its domestic industrial policy. While the government
aims to lower China’s energy intensity to 40 per cent below 2005 levels by
2020, China’s energy policy does not encourage progressive savings on energy
consumption, with the country’s energy prices currently set lower than in most
other countries.
For example, gas prices are about
the same as those in the U.S. and less than half of those across many European
countries. But China’s low energy prices are supported by companies and
ordinary consumers alike. Raising energy prices would be a very unpopular move
for the government; hence its general lack of action on this particular front.
In addition to low prices, the
growth of energy consumption is also supported by China’s industrial structure.
The share of heavy industry in China’s economy has steadily increased since the
early 2000s.
China now produces more than half
of the world’s steel and cement output, and the growth of heavy industry is one
of the major factors responsible for China’s rising energy consumption.
While the fast growth of China’s
real estate sector and infrastructural building has increased the country’s
demand for cement, steel, copper and other metals, the government’s role in this
development strategy cannot be ignored. By providing subsidies and capital to
the manufacturing sector, the Chinese government is effectively encouraging
capital-intensive industries.
It is also worth noting that
large state-owned enterprises are themselves active players in shaping the
government’s policy on resource acquisition.
Take, for example, the three big
oil companies that have been at the forefront of China’s drive for natural
resources — CNOOC, CNPC and Sinopec. The Chinese government often insists that
the reason for supporting their purchases of overseas oil fields is that equity
oil is crucial for China’s energy security.
Chinese oil companies are
newcomers to the global oil market and there is now little room for them to
enter politically stable countries; instead, they have focused their
investments in countries with less favorable political environments.
In turn, the Chinese government
has also played a vital role in providing a guarantee for its oil companies by
entering into country-to-country agreements with host country governments.
China’s overseas energy and
mineral policy is the combined result of narrowing international investment
space and domestic interest-group politics. Given this situation and the
options now available to Chinese companies investing abroad, China should be
aiming to wisely manage its international image. It has done a great deal of
work on the ground by building schools, hospitals, stadiums and conference
facilities, and by undertaking other public projects in resource exporting
countries.
But China also needs to learn to
improve its international image in ‘softer’ areas, such as winning the support
of intellectuals in recipient countries. Intellectuals shape the public
discourse in the international community as well as inside those countries.
It is crucial for China to win
their support to manage a more positive image.
Yao Yang
Yao
Yang is Director at the China Center for Economic Research and Deputy Dean at
the National School of Development, Peking University.
——
Source: East
Asia Forum.
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