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.
