DIIS Policy Brief

China in Greenland

Companies, Governments, and Hidden Intentions?

 

Recommendations

■ Denmark signs an agreement of cooperationwith China on Greenland and Arctic issues, clearlystipulating the possibilities and limitations.

■ Greenland makes rules about transfer oflicences, commercial feasibility studies and risk
management about mining and infrastructureprojects.

■ Denmark and Greenland try to clarify which kindsof projects fall into the area of defence and securityas an attachment to Greenland’s Self-Government
Act of 2009.

Much has been said among observers and policymakers about China’s ‘hidden intentions’ in Greenland, but in fact, China’s intentions for the Arctic are anything but hidden. Explicitly,they include shipping and natural resources.Chinese companies, whether state-owned orprivate, regard Greenland as a new frontier forbusiness, but they are also trying to alignthemselves with Chinese government policy.

Chinese activities in the Arctic have recently attractedwide attention among observers and policymakers.Anxieties abound about what hidden intentions Chinamay have behind its mining, construction, shippingand research activities. China’s publication of its firstwhite paper on its Arctic Policy in January 2018,identifying itself as a ‘Near-Arctic State’ and with aprominent goal of establishing a Polar Silk Road, hasnot dampened these worries: to some extent it hasexacerbated them.

Laying speculation aside, this policy brief seeks to
analyse Chinese government and corporate interests
in Greenland, drawing on information about five projects with Chinese involvement (see box).

 

 

Project initiation and government involvement
All five projects were initiated by the Greenlandicgovernment or Western companies. Greenland has generally been proactively trying to attract Chineseinvestors and contractors at trade fairs and meetings with Chinese officials and major companies in themining, construction, hydropower, and harbourengineering sectors, etc. Chinese companies havejoined the projects by buying licences, investing in theoriginal company, or contracting for the projects. Thishas predominantly been for commercial reasons asthey see Greenland as a strategic place to invest forthe long term. It is notable that the projects have beendirectly initiated between the Greenlandic governmentor Western companies operating in Greenland andChinese companies, without the intervention of theChinese central government. However, the Chinese companies always try to align themselves withChinese government policy, irrespective of whetherthey are state-owned or private. This is because, in theChinese domestic sectors of mining, construction andshipping, it is difficult for companies to survive withoutgood relations with the government, and whenChinese companies invest overseas, they hope toobtain financing from Chinese state banks.

Among the Chinese companies engaged in the fiveprojects, NFC and CCCC are national state-owned enterprises (SOEs), Shenghe is a local SOE, whileJiangxi Zhongrun and General Nice are privatecompanies. The two latter have both got closer to thegovernment after they obtained licences in Greenland.Some Chinese commentators believe that there werepolitical considerations at stake in General Nice’s 2015investment in the Isua iron ore project: i.e. to paveway for more Chinese companies to enter Greenland.Plans to speed up China’s interests and organize funding for Chinese mining investments in Greenland have also been mentioned by the general’s staff¹. General Nice has profited from goodrelations with the Chinese government, and two localSOEs from Tianjin have increased their shares in thecompany².

In the Chinese domestic sectors of mining, construction
and shipping, it is difficult for companies to survive without
good relations with the government.
Kilde ...

In the case of Jiangxi Zhongrun, since its investmentin the Wegener Halvø copper site, the company hastransferred its ownership of the project to a jointventure between Nordic Mining and Jiangxi UnionMining, a company established by Zhongrun togetherwith the provincial SOE, Jiangxi Copper, and aprovincial state-owned asset investment company. Inother words, Zhongrun has been helpful in carrying outthe province’s goal of expanding its copper industry
through new overseas resources.

In the case of Kvanefjeld rare earth mine, Shenghe (alocal SOE) originally invested because it was excludedfrom China’s domestic Rare Earth IndustryDevelopment Plan 2016-2020, which was overseen bythe Chinese Ministry of Industry and InformationTechnology (MIIT) . However, Shenghe’s largestshareholder, Chengdu Institute for the MultipurposeUtilisation of Mineral Resources (a local researchinstitute under the Ministry of Land and Resources),later said that the investment was implementing thecountry’s ‘going out’ strategy and was the fruit of themeeting between Chinese Minister of Land andResources, Daming Jiang, and Greenlandic officials in2015. In contrast, an official at MIIT has said that thegovernment has quotas and controls over exploitationand refining of domestic rare earths, and Chinesecompanies’ involvement in overseas rare earth projectsis company behaviour which the government neithersupports nor opposes. However, the publication ofChina’s white paper on its Arctic Policy has made itclear that government agencies should supportChinese companies to invest in natural resources inthe Arctic and to explore Arctic shipping routes.

The Chinese Ministryof Land and Resources has been active in bridging Chinese and Greenlandic interests, receiving Greenlandicdelegations and leading Chinese delegations to visitGreenland. Other national government actors thatappear prominently in the media are Chinese banks,in particular policy banks such as ExIm Bank andChina Development Bank (CDB). ExIm Bank was apossible partner for the expansion of three airports inGreenland, and CDB has organised visits to Greenlandby Chinese construction and mining companies tomeet with Greenlandic officials and companies. In thecase of the Citronen base metal project, the prospectof NFC obtaining debt financing from Chinese banks isan important element of its partnership with Ironbark.

 

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China’s hidden intentions?
China’s intentions for the Arctic are stated explicitly in the Arctic Policy white paper published in January 2018. It states that China is an important ‘stake-holder’ in Arctic affairs and envisages itself playing ‘a major role’ in expanding shipping routes and facilitating social-economic development of the coastal states. The white paper also argues that non-Arctic states have rights in navigation, overflight, scientific research, fishing and cable laying, and rights to resource exploration and exploitation in the area, pursuant to international law and treaties. For China, infrastructure projects in the Arctic and dialogue with Russia on Arctic issues since 2013 may lead to Arctic arrangements, which would help China prevent other countries from blocking shipping routes. The white paper says that China encourages its companies to participate in the infrastructure construction for Arctic shipping routes and conduct commercial trial voyages, as wellas to participate in the exploitation of oil, gas andmineral resources in the Arctic, but it also emphasisesrisk assessment, local laws and sustainabledevelopment. Implicitly, China is not satisfied with thecurrent arrangements, and thus calls for strongerinternational cooperation between Arctic and non-Arctic states and cooperation on infrastructureconstruction and operation of the Arctic sea routes.

Chinese companies’ interest in Greenland’sunderground resources and infrastructure is thereforeconsistent with the government policy outlined in thewhite paper, and companies will receive even morediplomatic and financial support from Chinesegovernment actors in the future thanks to the Arctic Policy. Many projects may start as company behaviourin search of commercial opportunities, and SOEs,private companies and Chinese banks have an interestin the economic feasibility of the projects. It is,however, possible that the companies will try to alignthe projects to Chinese government policy principlesand accept funding from state banks or SOEs.

Some Chinese scholars have commented on thegeo-strategic importance of Greenland, and advocatefor China to consider the possibility of Greenland’sindependence within the next ten years, so that Chinamakes the right economic and strategic investmentsin a potential new partner in the Arctic. In particular,Chinese analysts think that the Arctic Five have abasic position of excluding non-Arctic states fromparticipating in Arctic affairs. This includes Russia,despite Russia being an important partner inChina’s Arctic diplomacy. However, the Chinesegovernment has been trying to avoid giving theimpression of supporting Greenland independence,not least because it is against the independence ofXinjiang, Tibet and Taiwan. When similar issuesof independence arise in other countries, Chinahas held to the principle of non-interference indomestic affairs.

 

 

NOTES

¹Jichang Lulu, ‘China, Greenland and Competition for the Arctic’, 3 Jan. 2017, https://international.thenewslens.com/article/58284

² Jichang Lulu, ‘Since you asked so Nicely: Greenland’s Isua mine and its new Chinese owner’, 19 Mar. 2015 http://jichanglulu.tumblr.com/general-nice.

³Correction has been made to an earlier draft that states Shenghe would increase its shares to 60% in the Kvanefjeld rare earth project once the project is running. It’s been clarified that Shenghe does not have the contractual right to do so.

 

DIIS Experts

Yang Jiang
Migration and global order
Senior Researcher
China in Greenland - Companies, governments and hidden intentions?
China in Greenland
Companies, Governments, and Hidden Intentions?