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Mapping Chinese Mining Investment in Latin America: Politics or Market?*

  • Ruben Gonzalez-Vicente (a1)
Abstract
Abstract

Analyses of Chinese foreign direct investment (FDI) sometimes question the investment criteria of Chinese firms, suggesting that market rules are not fundamental but secondary to political and geostrategic concerns. Questioning the apolitical nature of markets, the present article uses the internationalization of China's mining industry as a case study to ascertain the criteria that guide Chinese FDI. It first examines quantitative data from 2000 to 2010 which suggests that Chinese mining investment in Latin America and worldwide gravitates towards liberal economies. Second, by focusing on the projects of Chinese mining firms in Peru, the article illustrates how China's overseas mineral quest is best explained by probing into the integrated strategies of individual mining firms which seek to capitalize their comparative advantage in accessing Chinese markets and the political momentum of the “Going Out” strategy.

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1 Johnston Alastair Ian, Social States: China in International Institutions, 1980–2000 (Princeton: Princeton University Press, 2008).

2 Gonzalez-Vicente Ruben, “The internationalization of the Chinese state,” Political Geography, Vol. 30, No. 7 (2011), pp. 402–11.

3 Dorian James P., Minerals, Energy and Economic Development in China (Oxford: Clarendon Press, 1994), p. 119.

5 Bateman Beijing Axis, “China's role in the global iron and steel sector: a perspective on demand and strategic capital from China,” http://www.batemanbeijingaxis.com/en/news-a-media/bba-presentations/doc_download/6-chinas-role-in-the-global-iron-and-steel-sector-a-perspective-on-demand-and-strategic-capital-from, accessed 22 February 2011.

6 China's central government standpoint on mining industry decentralization has evolved through the reform era. While in the 1990s central planning was relaxed and companies at different levels were allowed to pursue autonomous economic targets, there is a more recent trend towards consolidation in order to phase out inefficient mining town and village enterprises and create a group of national champions capable of competing with leading global mining giants. Huaichuan Rui, “Development, transition and globalization in China's coal industry,” Development and Change, Vol. 36, No. 4 (2005), pp. 691710.

7 Oil and gas are not covered in this article due to the political and strategic singularities of these energy resources, and as the Raw Materials database used here does not provide data on them. However, resonating with some of the findings in this article, a recent report prepared by the International Energy Agency argues that Chinese state-owned oil firms are not government-run, and that instead “their observed behaviour is the result of a complex interplay between individuals and groups associated with the firms, and whose interests are not always aligned, and where commercial incentive is the main driver.” Jiang Julie and Sinton Jonathan, Overseas Investments by Chinese National Oil Companies (Paris: International Energy Agency, 2011).

8 Brautigam Deborah, The Dragon's Gift: The Real Story of China in Africa (Oxford: Oxford University Press, 2009).

9 Chang Ha-Joon, “Getting capitalism right,” The Guardian, 16 September 2010, http://www.guardian.co.uk/commentisfree/2010/sep/16/getting-capitalism-right-lehman-brothers-collapse, accessed 21 March 2011.

10 Nevertheless, as Haglund indicates in a study of Chinese investment in Zambia, this does not necessarily materialize in incentives to engage constructively with labour and social issues. Haglund Dan, “In it for the long term? Governance and learning among Chinese investors in Zambia's copper sector,” The China Quarterly, No 199 (2009), pp. 627–46.

11 Herz Steven, Viña Antonio La and Sohn Johathan, Development Without Consent: The Business Case for Community Consent (Washington DC: World Resources Institute, 2007).

12 However, the listing of Chinese companies in Hong Kong and the theoretical independence of the special administrative region's judiciary can represent a window of opportunity for civil society organizations seeking to open legal cases.

13 Haastard Håvard and Fløysand Arnt, “Globalization and the power of rescaled narratives: a case of opposition to mining in Tambogrande, Peru,” Political Geography, Vol. 26, No. 3 (2007), pp. 289308.

14 Two widely cited examples are CNOOC's unsuccessful bid for Unocal in the US, and Chinalco's equally unsuccessful attempt to increase its share ownership in Rio Tinto.

15 For an empirically and theoretically enlightening account of these dynamics view for instance Mitchell's classical analysis of the collusion between the US government and the Arabian American Oil Company. Mitchell Timothy, “The limits of the state: beyond statist approaches and their critics,” The American Political Science Review, Vol. 85, No. 1 (1991), pp. 7796.

16 Wilson Jeffrey D., “Resource nationalism or resource liberalism? Explaining Australia's approach to Chinese investment in its minerals sector,” Australian Journal of International Affairs, Vol. 65, No. 3 (2011), p. 287.

18 Mawdsley Emma, “Fu Manchu versus Dr Livingstone in the Dark Continent? Representing China, Africa and the West in British broadsheet newspapers,” Political Geography, Vol. 27, No. 5 (2008), pp. 509–29.

19 Agnew John and Corbridge Stuart, Mastering Space: Hegemony, Territory and International Political Economy (New York: Routledge, 1995).

20 Buckley Peter J., Clegg L. Jeremy, Cross Adam R., Liu Xin, Voss Hinrich and Zheng Ping, “The determinants of Chinese outward foreign direct investment,” Journal of International Business Studies, Vol. 38, No. 4 (2007), pp. 499518.

21 Kaplinsky Raphael and Morris Mike, “Chinese FDI in Sub-Saharan Africa: engaging with large dragons,” European Journal of Development Research, No. 21 (2009), pp. 551–69.

22 Nally David, “The biopolitics of food provisioning,” Transactions of the Institute of British Geographers, Vol. 36, No. 1 (2011), pp. 3753.

23 Mitchell Timothy, “Rethinking economy,” Geoforum, Vol. 39, No. 3 (2008), pp. 1116–21.

24 In this sense, John Agnew contends that the current era is best understood geopolitically through the concept of American hegemony (as opposed to empire), whose most salient feature is “the sponsorship and naturalization of marketplace society.” Agnew John, Hegemony: The New Shape of Global Power (Philadelphia: Temple University Press, 2005), p. 158.

25 Bridge Gavin, “Mapping the Bonanza: geographies of mining investment in an era of neoliberal reform,” The Professional Geographer, Vol. 56, No. 3 (2004), pp. 406–21.

27 Including data on exploration could distort the information. For example, 111 Chinese companies hold exploration licences in Botswana, while at the time of the research no Chinese company was known to have projects for the construction of a mine in the country. http://www.afrik-news.com/article15849.html.

28 Ericsson Magnus and Larsson Viktoriya, “E&MJ's annual survey of global mining investment,” Engineering and Mining Journal (January/February 2010), pp. 2429.

29 Ibid.

30 Bury Jeffrey, “Mining mountains: neoliberalism, land tenure, livelihoods, and the new Peruvian mining industry in Cajamarca,” Environment and Planning A, Vol. 37, No. 2 (2005), pp. 221–39.

31 Interview with the general manager of a Chinese mining firm, Beijing, July 2010.

32 Chinamining.org, “Tongling, China Railway to invest $3b in Ecuador mine,” 16 August 2010, http://www.chinamining.org/Investment/2010-08-16/1281941036d38289.html, accessed 15 March 2011.

33 Kuecker Glen D., “Fighting for the forests: grassroots resistance to mining in northern Ecuador,” Latin American Perspectives, Vol. 34, No. 2 (2007), pp. 94107.

34 Bebbington Anthony and Bebbington Denise H., “An Andean Avatar: post-neoliberal and neoliberal strategies for securing the unobtainable,” New Political Economy, Vol. 16, No. 1 (2011), pp. 131–45.

35 Ruben Gonzalez-Vicente, “Development dynamics of Chinese resource-based investment in Peru and Ecuador,” Latin American Politics and Society, forthcoming.

36 McMahon Fred and Cervantes Miguel, Survey of Mining Companies 2009/2010: 2010 Mid-Year Update (Vancouver: Fraser Institute, 2010).

37 Interview with the general manager of a Chinese mining firm, Lima, March 2011.

38 Interview with an employee in a Chinese mining firm, Lima, April 2011.

39 Gonzalez-Vicente, “The internationalization of the Chinese state,” pp. 402–11.

40 State-owned Assets Supervision and Administration Commission of the State Council, “Main functions and responsibilities of SASAC,” http://www.sasac.gov.cn/n2963340/n2963393/2965120.html, accessed 17 October 2011.

41 Gonzalez-Vicente Ruben, “China's engagement in South America and Africa's extractive sectors: new perspectives for resource curse theories,” The Pacific Review, Vol. 24, No. 1 (2011), pp. 6587.

42 Gonzalez-Vicente Ruben, “The political economy of Sino-Peruvian relations: a new dependency?” Journal of Current Chinese Affairs, forthcoming.

43 Gonzalez-Vicente, “Development dynamics of Chinese resource-based investment.”

45 Nolan Peter, Indigenous Large Firms in China's Economic Reform: The Case of Shougang Iron and Steel Corporation (London: School of Oriental and African Studies, 1998).

46 Guzmán Isaac Fredy Serna, Cruz Juan Perry and Trelles Miguel Guevara, Informe Final del Grupo de Trabajo Encargado Seguimiento sobre las Privatizaciones de la Empresa Shougang Hierro Perú S.A.A. y Electro Sur Medio S.A.A. (Lima: Comisión de Energía y Minas del Congreso de la República, 2007).

47 Yongjin Zhang, China's Emerging Global Business (New York: Palgrave Macmillan, 2003).

48 Steinfeld Edward S., Forging Reform in China: The Fate of State-Owned Industry (Cambridge: Cambridge University Press, 1998) p. 209.

49 Interview with three employees in a Peruvian mining regulatory body, Lima, April 2011.

50 Sanborn Cynthia A., “China Inc., Las Industrias Extractivas y el Perú: Un Estudio Exploratorio,” in Sanborn Cynthia A. and Torres Victor (eds.), La Economía China y las Industrias Extractivas: Desafíos para el Perú (Lima: CooperAccion, Universidad del Pacífico, 2009), pp. 225357.

51 Notice of 2010 Annual General Meeting, http://www.zjky.cn/Portals/1/LTN20110413113.pdf, accessed 12 September 2011.

52 Zijin, “About Zijin – Development Strategy,” http://www.zjky.cn/english/tabid/175/Default.aspx, accessed 15 June 2011.

53 Sanborn, “China Inc.,” p. 279.

55 Interview with a mining engineer and manager, Lima, September 2011.

56 Zhanming Jin, “Corporate strategies of Chinese multinationals,” in Larçon Jean-Paul (ed.), Chinese Multinationals (Singapore: World Scientific Publishing, 2008), p. 23.

60 Ibid.

61 Interview with an employee in a Chinese mining firm, Lima, April 2011.

62 Interview with an employee in a Chinese mining firm, Lima, April 2011.

63 Raw Materials database.

64 Interview with Ninjinzhao's general manager in Peru, Lima, March 2011.

66 Glassman Jim, “Primitive accumulation, accumulation by dispossession, accumulation by extra-economic means,” Progress in Human Geography, Vol. 30, No. 5 (2006), p. 620.

67 Gonzalez-Vicente, “The internationalization of the Chinese state,” pp. 402–11.

* I am grateful to the Research Centre of the University of the Pacific for the assistance provided during fieldwork in Peru. My doctoral research has been funded by the Caja Madrid Foundation and the Pedro Barrie de la Maza Foundation. A travel grant from the Universities’ China Committee in London and the Philip Lake and William Vaughan Lewis Funds from the Department of Geography at the University of Cambridge supported fieldwork trips to China and Peru.

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