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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 United States 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 U.S. 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 when it comes to locking down
resource supplies for the twenty-first century. 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
$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.
According to the most recent
projections from the U.S. Department of Energy, this is no fluke.
The Chinese demand for oil is expected to continue climbing throughout
the rest of this year and 2011, even as American consumption remains
nearly flat.
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 American
officials in decades past, they have moved to gain control over foreign
sources of energy -- and similarly many other vital materials, including
natural gas, iron, copper, and uranium.
China Binging on Energy
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 Corp. (CNPC), the China National Offshore Oil Corp.
(CNOOC), and the China Petroleum & Chemical Corp. (Sinopec) -- took
the lead. These firms, or their partially privatized subsidiaries -
PetroChina in the case of CNPC, and CNOOC International Ltd. in the case
of CNOOC -- began gobbling up foreign energy assets in Angola, Iran,
Kazakhstan, Nigeria, Sudan, and Venezuela. On the whole, these
acquisitions were still dwarfed by those being made by giant Western
firms like ExxonMobil, Chevron, Royal Dutch Shell, 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 valuable 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 favors our search for
overseas resources."
As a
policy matter, 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 $30 billion over a five-year period to support its efforts to
acquire assets abroad. Similarly, CBD has loaned
$10 billion to Petrobras, Brazil's state-controlled oil company, to
develop deep offshore fields in return for a promise to supply China
with up to 160,000 barrels of Brazilian crude per day.
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:
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 Corp. of China, or Chinalco, acquired
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
Ltd. $1.35 billion for this share. Keep in mind that Chinalco already
owns a 9.3% stake in Rio Tinto, and has been prevented from acquiring a
larger share mainly thanks to Australian fears that China is absorbing
too much of the country's energy and minerals industries.
Shifting the World's Resource Balance
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, therefore, they will discover that the global
resource chessboard has been tilted strongly in China's favor. Energy
and mineral producers that once directed their production -- and often
their political allegiance -- to the U.S., 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. "We believe this is a long-term transition," said
Khalid A. al-Falih, president and chief executive of Saudi Aramco, the
state-owned oil giant. "Demographic and economic trends are making it
clear -- the writing is on the wall. China is the growth market for
petroleum."
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, Kazakhstan, Saudi
Arabia, Sudan, and Venezuela 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.
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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 United States 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 U.S. 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 when it comes to locking down
resource supplies for the twenty-first century. 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
$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.
According to the most recent
projections from the U.S. Department of Energy, this is no fluke.
The Chinese demand for oil is expected to continue climbing throughout
the rest of this year and 2011, even as American consumption remains
nearly flat.
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 American
officials in decades past, they have moved to gain control over foreign
sources of energy -- and similarly many other vital materials, including
natural gas, iron, copper, and uranium.
China Binging on Energy
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 Corp. (CNPC), the China National Offshore Oil Corp.
(CNOOC), and the China Petroleum & Chemical Corp. (Sinopec) -- took
the lead. These firms, or their partially privatized subsidiaries -
PetroChina in the case of CNPC, and CNOOC International Ltd. in the case
of CNOOC -- began gobbling up foreign energy assets in Angola, Iran,
Kazakhstan, Nigeria, Sudan, and Venezuela. On the whole, these
acquisitions were still dwarfed by those being made by giant Western
firms like ExxonMobil, Chevron, Royal Dutch Shell, 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 valuable 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 favors our search for
overseas resources."
As a
policy matter, 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 $30 billion over a five-year period to support its efforts to
acquire assets abroad. Similarly, CBD has loaned
$10 billion to Petrobras, Brazil's state-controlled oil company, to
develop deep offshore fields in return for a promise to supply China
with up to 160,000 barrels of Brazilian crude per day.
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:
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 Corp. of China, or Chinalco, acquired
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
Ltd. $1.35 billion for this share. Keep in mind that Chinalco already
owns a 9.3% stake in Rio Tinto, and has been prevented from acquiring a
larger share mainly thanks to Australian fears that China is absorbing
too much of the country's energy and minerals industries.
Shifting the World's Resource Balance
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, therefore, they will discover that the global
resource chessboard has been tilted strongly in China's favor. Energy
and mineral producers that once directed their production -- and often
their political allegiance -- to the U.S., 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. "We believe this is a long-term transition," said
Khalid A. al-Falih, president and chief executive of Saudi Aramco, the
state-owned oil giant. "Demographic and economic trends are making it
clear -- the writing is on the wall. China is the growth market for
petroleum."
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, Kazakhstan, Saudi
Arabia, Sudan, and Venezuela 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.
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 United States 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 U.S. 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 when it comes to locking down
resource supplies for the twenty-first century. 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
$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.
According to the most recent
projections from the U.S. Department of Energy, this is no fluke.
The Chinese demand for oil is expected to continue climbing throughout
the rest of this year and 2011, even as American consumption remains
nearly flat.
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 American
officials in decades past, they have moved to gain control over foreign
sources of energy -- and similarly many other vital materials, including
natural gas, iron, copper, and uranium.
China Binging on Energy
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 Corp. (CNPC), the China National Offshore Oil Corp.
(CNOOC), and the China Petroleum & Chemical Corp. (Sinopec) -- took
the lead. These firms, or their partially privatized subsidiaries -
PetroChina in the case of CNPC, and CNOOC International Ltd. in the case
of CNOOC -- began gobbling up foreign energy assets in Angola, Iran,
Kazakhstan, Nigeria, Sudan, and Venezuela. On the whole, these
acquisitions were still dwarfed by those being made by giant Western
firms like ExxonMobil, Chevron, Royal Dutch Shell, 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 valuable 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 favors our search for
overseas resources."
As a
policy matter, 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 $30 billion over a five-year period to support its efforts to
acquire assets abroad. Similarly, CBD has loaned
$10 billion to Petrobras, Brazil's state-controlled oil company, to
develop deep offshore fields in return for a promise to supply China
with up to 160,000 barrels of Brazilian crude per day.
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:
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 Corp. of China, or Chinalco, acquired
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
Ltd. $1.35 billion for this share. Keep in mind that Chinalco already
owns a 9.3% stake in Rio Tinto, and has been prevented from acquiring a
larger share mainly thanks to Australian fears that China is absorbing
too much of the country's energy and minerals industries.
Shifting the World's Resource Balance
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, therefore, they will discover that the global
resource chessboard has been tilted strongly in China's favor. Energy
and mineral producers that once directed their production -- and often
their political allegiance -- to the U.S., 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. "We believe this is a long-term transition," said
Khalid A. al-Falih, president and chief executive of Saudi Aramco, the
state-owned oil giant. "Demographic and economic trends are making it
clear -- the writing is on the wall. China is the growth market for
petroleum."
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, Kazakhstan, Saudi
Arabia, Sudan, and Venezuela 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.