China’s Global Shopping Spree
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 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 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 trategic 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 ajors.
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.”
