China's Orchestration of Resource Diplomacy

China's diplomatic efforts have been actively engaged in its quest for natural resources, to satisfy its ever increasing needs for energy. China's energy efficiency is low: comparing its level of consumption (converted to oil), it is number one in the world, surpassing the United Stated, and five times Japan - a country with high energy efficiency. China's energy consumption will continue to increase and, not too far in the future, it will be ten times that of Japan.

70% of China's energy needs are met by coal, which comes from domestic production. In comparison to coal, China's dependence on oil and natural gas is still relatively low but their consumption has increased dramatically. As for oil, China formerly had been an exporter, but it now is a major importer and, in 30 years, 80 to 90% of China's demand will be dependent on imports. Accordingly, it is no wonder that China is trying desperately to secure sources for oil to import.

The amount of oil available for importation is insufficient to satisfy Chinese demand and, so, it is making enormous investments. Not only is China buying oil fields and oil companies, but it also is engaged in new development of oil fields in remote locations and in the ocean. With its oil exploration, China also builds necessary infrastructure, such as roads, bridges, ports, communication facilities, and worker housing.

China's resource diplomacy is noticeable, particularly in Africa and Central Asia. In the latter region, it is building pipelines to transport extracted oil to China. For example, in Kazakhstan, China started building pipelines in 2006 and the first and the second phases of the project are now complete and operational. Construction has been remarkably speedy and, soon, these pipelines will connect China and the Caspian Sea.

Since1998, the Chinese government, pursuing a strategy of fostering the international competitiveness of its corporations, has been restructuring its oil businesses; in a relatively short period of less than ten years, China National Petroleum Corporation (CNPC) and China Petroleum & Chemical Corporation (SINOPEC) have become highly competitive businesses. China also owns China National Offshore Oil Corporation (CNOOC) and, together, the trade in oil of these three national corporations is the world's second largest.

The tremendous growth of these Chinese oil businesses signifies the intensity of the country's resource-oriented diplomacy. Along with these businesses, Chinese corporations that are contractors for infrastructure are also growing rapidly. Of the world's 225 leading contractors, 54 are Chinese. Measured by sales, in Africa, these Chinese infrastructure businesses are number one, with a 42.4% market share. One has to add together the sales numbers from the former colonial powers of Britain, France and Italy, plus the United States, to be in the same league as China.

These Chinese contractors mostly hire their own countrymen as laborers, together with some locals, in every African country where Chinese are present there are tens of thousands of Chinese workers. Some criticize that Chinese workers in such large numbers take away jobs from locals; however, African countries have a dispersed population density and it is questionable whether their workers' abilities and aptitude will be able to satisfy the requirements of large Chinese investments.

The Chinese presence is large, not only at construction sites, but also in town, exemplified by Chinese restaurants and gas stations. At the airports, there are Chinese drivers and some Japanese, upon their arrival, may wonder just where they have landed.

In short, China's energy imports, investments, corporations, and workers are increasing rapidly. One should note that these all are a result of a coherent strategy by the Chinese government. Chinese leaders visit African countries and conclude comprehensive agreements to promote cooperation in such fields as energy, communication, infrastructure, trade, and investment, playing the role of maestro for the resource diplomacy orchestra.

For China, pursuing a forceful strategy to raise the living standards of its 1.3 billion people is natural. China's economic development is very rapid, however, and, compared with other countries, its market openness is very limited. Its efforts are characterized as a national enterprise promoted by a one-party dictatorship. Therefore, antipathy toward China for distorting or taking advantage of the free market is unavoidable. The U.S. Congress has regarded China's approach as a problem and, along with exchange rates, this view by Congress will be a sticky issue for China's resource diplomacy and for its national corporations that implement it.

In several respects, China's development is something that the international community has not previously experienced, which has resulted in some friction. We have to try to avoid friction and to come up with creative ways for cooperation between China and the rest of the world.