A new study suggests that China is turning to more authoritarian regimes in search of stability in natural resource supplies, further bolstering its efforts to weaponize trade against geopolitical rivals.
To support its massive economic volume, China is highly dependent on foreign imports of natural resources, and bridging this gap by diversifying its supply chain has become a strategic priority for Beijing beyond its push for self-reliance.
A new report by risk consulting firm Verisk Maplecroft notes that China’s imports of key resources such as Crude Oil, coal, natural gas and iron ore are “highly concentrated,” and that many of the major oil and gas producers, such as Saudi Arabia and Russia, are countries that lack democratic freedoms.
The report reads, “In addition to maintaining friendly relations with China, political stability and regime type are the two main non-commercial factors that Beijing consistently considers when diversifying its supplies. …… Beijing prefers suppliers from stable authoritarian regimes to democracies with frequent changes of government and potential policy changes. countries.”
China has also recently been increasing its oil imports from Iran and Venezuela, despite the fact that both countries are under U.S. sanctions.
Meanwhile, another way China is diversifying its import sources is by supporting state-owned enterprises to “go global” and buy stakes in overseas companies in order to increase the share of Chinese-owned resources in China’s total imports.
The report cites the number of Chinese-owned base metals and Gold companies in Oceania as an example, which increased from zero in 2000 to 59 last year, accounting for about 22.6 percent of foreign ownership of such companies.
However, China has hit a roadblock in diversifying its iron ore imports because the major iron ore producers are democracies. According to energy information agency Wood Mackenzie, more than 60% of China’s iron ore imports come from Australia.
That doesn’t mean the Chinese government doesn’t have plans to actively seek alternative suppliers. That’s why China has been trying to strengthen its trade ties with Brazil, according to the report. Brazil is China’s second-largest supplier of iron ore.
“Brazil remains the focus of China’s diversification strategy, despite the tougher line it has taken with Beijing under President Bossonaro,” the report reads.
In addition, China is increasing its imports of scrap steel as a raw material as a way to reduce its dependence on Australian iron ore.
Weaponizing trade
The report argues that supply chain stability has helped China weaponize trade, leveraging its trade advantage in imports and exports to suppress rivals and gain greater geopolitical influence.
The report cites China’s restrictions on coal imports from Australian interests as an example. Australia’s call for an investigation into the origins of New Crown after it broke out angered China, and Canberra’s exports of key products to China were then restricted.
This is not an isolated case. Back in 2010, China began restricting exports of 17 rare earth materials to Japan after a dispute between China and Japan over territorial sovereignty escalated. Since then China has increasingly used tariffs, bans and other means to hammer its trading partners.
James Laurenceson, director of the Australia-China Relations Institute at the University of Technology in Sydney, Australia, told Voice of America that more geopolitical tensions are likely to emerge as China accelerates its move away from resource dependence on democratic countries.
Laurenceson said, “We will likely see China accelerate its quest to diversify its supply chain and strengthen its coercive (economic) leverage over a longer period of Time.”
The report also notes that China is attempting to strengthen its economic ties with Russia to counterbalance Western influence.
The report writes, “Despite a history of mutual distrust, the economic and political interests of Russia and China have converged over the past decade. The deterioration of relations with the West has prompted the two countries to cooperate more closely in a number of areas.”
China’s diversification strategy will also increase trade and investment in a number of countries, mostly those that have embraced the Belt and Road Initiative, which in turn will strengthen their economic dependence on China and create new economic leverage.
According to the report, “These partnerships will reshape multilateralism and create a more China-centric economic order.”
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