Chinese Mining Companies Needs More in The Future
China's huge appetite for energy and minerals to fuel its expanding economy has strained international markets for oil, natural gas, iron ore, coal, copper, nickel, aluminum, and other resources. To satisfy China's hunger for raw materials, Chinese companies, backed by the government, have been acquiring equity stakes in natural resource companies, extending loans to mining and petroleum investors, and writing long-term procurement contracts for oil and minerals in Africa, Latin America, Australia, Canada, and other resource-rich regions.
In fact, more than half of Chinese foreign direct investment (FDI) in natural resources is in Latin America. It is concentrated in 34 major projects that stretch from Venezuela and Ecuador through Brazil, Bolivia and Peru to Argentina and Chile. Since China launched its 'going out' strategy, encouraging companies to become more competitive.
As Chinese FDI in Latin America has grown, so have concerns about the practices of Chinese companies.
Egregious violations of international labor and environmental standards, particularly in the mining sector, have been uncovered in Chinese-led investments in the Democratic Republic of the Congo, Angola and Zambia, to name a few examples. And persistent allegations of corruption and bribery offer an additional cautionary note for Latin American policymakers. 'China has difficulty regulating what its companies do abroad,' writes Cynthia Sanborn of Peru's Universidad del Pacifico, who has conducted an extensive study of Chinese investment in Latin America. 'There are no incentives for Chinese leaders to take a stand on social and environmental responsibility.'
The controversial activities of Chinese companies abroad underscore the larger question about the implications of such a huge investment-and its impact on individual countries and the region as a whole. How can host-country policies in Latin America be structured (and enforced) to achieve the most benefit from Chinese resource investments-while ensuring that those benefits do not cause harm?
Moreover, the sheer volume of the investment raises a political question not just for Latin America but for its traditional trading partners. It has aroused concern that Chinese efforts to procure raw materials might be exacerbating the problems of strong demand-locking up natural resource supplies, gaining preferential access to available output and extending control over the world's extractive industries.
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