A Chinese language flag connected to the again of a ship flaps within the wind as cargo containers sit on the dock of Shenzhen Port in Shenzhen, China.
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China is diversifying its provide of important pure assets — a transfer that may shore up Beijing’s potential to weaponize commerce in opposition to its geopolitical rivals, in line with a newly revealed report by danger consultancy Verisk Maplecroft.
“If China has a delicate underbelly, it’s its excessive dependency on overseas pure assets,” learn the report launched on Thursday.
China is a big shopper of main commodities together with crude oil and iron ore. However the nation depends closely on imports to satisfy its home demand for these commodities.
A technique the nation is diversifying its import sources is by shopping for stakes in abroad corporations, stated Verisk Maplecroft. Doing that may improve the proportion of Chinese language-owned assets within the nation’s complete imports, the report stated.
For instance, the consultancy stated the variety of Chinese language-owned base metals and gold corporations in Oceania rose from zero within the yr 2000 to 59 final yr. It represented round 22.6% of complete overseas possession in such corporations, the report confirmed.
Oceania is a area that features Australia, Papua New Guinea, New Zealand, Fiji and quite a few island nations.
“China is searching for to strengthen its management over international provide chains through abroad investments and partnerships with worldwide majors. Beijing has been supporting Chinese language SOEs [state-owned enterprises] to ‘go international’ and set up management of useful resource bases abroad because the late Nineteen Nineties,” stated the report.
Pivoting towards ‘autocratic regimes’
China imports important commodities corresponding to crude oil, pure gasoline, metallurgical coal and iron ore from a “extremely concentrated” group of buying and selling companions, stated Verisk Maplecroft.
In diversifying its import sources, China prefers suppliers from “steady autocratic regimes” to democracies that will contain frequent adjustments in governments or potential shifts in coverage, it added.
By securing diversified sources, China can be in a greater place to weaponise commerce with geopolitical rivals, whereas on the identical time rising the financial dependence of latest and present companions.
“Our knowledge reveals China is pivoting in the direction of extra autocratic regimes that signify better stability for its provide traces than democracies which can be, or might turn out to be, hostile to Beijing. However it is usually utilizing its huge market as a supply of diplomatic leverage,” the consultancy stated.
“By securing diversified sources, China can be in a greater place to weaponise commerce with geopolitical rivals, whereas on the identical time rising the financial dependence of latest and present companions,” it stated.
However democratic international locations dominate the manufacturing of some assets — certainly one of them is iron ore.
China’s largest provider of iron ore final yr was Australia, an American ally that was just lately hit by Beijing’s commerce restrictions.
Australia shipped a month-to-month common of 60.86 million tonnes of iron ore to China in 2020, accounting for greater than 60% of total Chinese language imports of the commodity, Refinitiv knowledge confirmed.
That is why China has been strengthening commerce ties with different iron ore producers corresponding to Brazil and Guinea, in line with the Verisk Maplecroft report.
“Regardless of a more durable line on Beijing beneath President Bolsonaro, Brazil stays a precedence in China’s diversification technique, whereas Guinea is politically nicely disposed to Beijing amid democratic backslide,” the report stated.
Weaponizing commerce
Firms and traders are within the direct sights of Beijing’s diplomatic strikes and might want to put together accordingly.
Such geopolitical tensions may persist as China accelerates its effort to scale back its reliance on “unfriendly” useful resource suppliers, stated Verisk Maplecroft.
“Banning imports of coal from Australia was a main instance however extra are prone to comply with, with vital impacts on the commerce in international commodities and the geopolitical panorama probably,” it stated.
“Firms and traders are within the direct sights of Beijing’s diplomatic strikes and might want to put together accordingly.”
