Hello, my name is Liisa Kauppila. I work at the Center for East Asian Studies, University of Turku, southern part of Finland. In this session, we're going to talk about China and the Arctic. The structure of the presentation is as follows. We'll first talk about China's growing global outreach. Second, we'll talk about Chinese economic interests in the Arctic. We'll then proceed into talking about Chinese investments and economic engagement in the Arctic. Finally as a conclusion, we'll discuss the implications of China's growing global role. Over the past 40 years, China has developed from a backward country to an economic superpower that actively shapes global economy. At the moment, one-fifth of the global wealth lies in China, and one-fifth of the world's consumers are Chinese. China's economic transformation has been dependent on the forces of globalization and global interaction, especially imported resources and technological and managerial learning have been crucial in the country's economic and social development since 1978. So, basically, China has gone global, defined the resources, and gained the skills that each states of its economic development has called for. Unlike in the past, China's overseas investments in developed economies are now growing faster than the country's engagement with the developing world for three major reasons. First, the structure of the Chinese economy is changing. China is developing from the world's factory to an innovation economy. Consequently, China's investments in Western technology companies have grown rapidly. Second, China has experienced problems in investing in regions with weak governance such as Africa. This has had a negative impact on China's public image. Third, the existence of energy resources elsewhere attracts China to other regions as well. This larger context gives a frame for understanding China's interest and entrance to the Arctic. The Arctic plays a role in three of China's major long-term economic goals. First, securing and diversifying the country's energy portfolio. As China's middle class is growing and becoming wealthier, China's energy consumption is also growing rapidly. In this situation, China must actively seek new frontiers for energy, the Arctic steps in there. The Arctic liquefied natural gas, LNG is seen as a more green form of energy, which is important in a country whose economic growth has been fueled by coal, and whose pollution problems are huge. Diversifying the country's trade and energy transportation routes. The Northern Sea Route and the Northwest Passage are seen as alternative piracy-free sea lanes with politically stable operating conditions. Expanding the country's network of alternative energy routes is important for China since 90 percent of its important energy is transported by sea. The Northern Sea Route is 30 percent shorter than the route via the Strait of Malacca, and this at least in theory means that Chinese companies can have significant savings in the cost of cargo. Then, interestingly enough in June 2017, the Northern Sea Route became officially the Ice Silk Road. This means that the route might be much more actively used in the future. Third, technological catch-up. Chinese companies are learning new technology in extreme conditions of the Arctic from some of the best countries in the world. For example, the Chinese are learning new LNG transportation technology in Yamal LNG project and the skills that they learned there are highly applicable elsewhere as well. Together these three goals support the continuation of the country's economic growth and the task of finding a balance between growth and pollution, and these are core challenges to the legitimacy of the ruling Communist Party, meaning that there're life and death questions that must be solved. However, China is not a monolith. The Arctic also plays a role in the independent economic agendas of local governments and companies while they're tackling the economic challenges that the Chinese economy faces in the current situation. Unlike in the past, Chinese state-owned energy companies are under an increasing pressure to make profit. For them, the Arctic represents the lost frontier of fossil fuels, and fossil fuels is what they base their income profit on. The Chinese energy companies don't go to the Arctic because the central government tells them to do so. They go there if they see a long-term profit-making business opportunity. Chinese local governments in turn, are heavily indebted. Northeastern landlocked provinces in particular are not ideally located for foreign trade. For the province of Jilin, the opening of the Northern Sea Route is seen as a viable economic opportunity to improve the socio-economic development aspects of the province. In order to advance this strategy, Jilin province local government officials have made harbour lease agreements with Russia's Zarubino and North Korea, and they're planning on constructing a cross-border hub by the Sea of Japan to feed goods to the Northern Sea route at the Asian end. At the moment, there are more perspective than existing Chinese investments and activities in the Arctic. The status of the Northern Sea Route as the Ice Silk Road may possibly encourage more engagement in the future. This is related to the fact that investments related to One Belt One Road tragedy are favored at the moment by the Chinese central government. The strong Chinese presence in Yamal LNG project, a pioneering Russo-Sino-French Arctic energy seem in Russia's Northern Siberia. One-third of the project is in Chinese ownership. Twenty percent is owned by CNPC, one of China's biggest state-owned energy companies. A 9.9 percent of the shares belongs to Silk Road Fund and investment vehicle of the Chinese central government. In this project, China participates and learns all phases of LNG production from extraction to transportation, and China is also participating in making major investments in the critical infrastructure of the Russian Arctic. They're building airports, harbors, and gas fields. Other major Arctic energy deals with Chinese state-owned energy companies have either ended or they remain on a prospective level. Chinese state-owned company CNOOC pulled out from resource exploration and development in Canada's British Columbia in mid 2017 and in Dreki region in the waters of Iceland and Norway in early 2018. A third company, Sinopec, is currently negotiating about constructing Alaska LNG export terminal and pipeline, this started in late 2017. Several Chinese companies are also exploring opportunities for mineral and metal extraction in Greenland. What China want from Greenland are rare earths, which can be used for high-tech products, and uranium, which can be used for nuclear power production. There is great interest in investing in the energy and transport infrastructure in the European Arctic as well. Iceland and Norway are seen as strategically important future partners for China. The countries possess relevant technological know-how, they have potent fishing industries, and potential energy resources. China has also expressed interest in the possibility to invest in the prospective Rovaniemi-Kirkenes Arctic railway connection between Finland and Norway. Finally, China's largest shipping company, COSCO, plans to open a frequent route on the Northern Sea Route. This plan was announced in October 2015. So far, COSCO has made six test sailings on the Northern Sea Route by Eternal Life, Yongheng since 2013. To support this goal, China's domestic icebreaker production started in 2016. China's existing and prospective investments in the Arctic region have fueled China threat theories. The core question of these theories is whether something else comes along with China's economic power as well. China's past environmental record and labor, human rights questions are seen as particular sources of unease. At the moment, China is making an effort to build trust. The country published its first ever Arctic White Paper in January 2018 as an effort to make its policy making more transparent. Furthermore, the Chinese energy industry representatives are viewing the Yamal LNG project as a showcase of China's responsible behavior. China cannot afford to make mistakes in the Arctic. However, when thinking of these important questions, we should also think whether China is actually doing anything different from the rest of the actors in the region, or with the emerging great powers of the past in terms of securing the material well-being of its citizens. Thank you.
