BUS604: Innovation and Sustainability

China is the fastest-growing great power in the world, and as the world's greatest exporter of goods 50 percent of its GDP is related to shipping. China has a great economic and strategic interest in the Far North, both for access to natural resources and trade routes. Not only does the Northern Sea Route over Russia to Rotterdam mean a 40 percent distance and fuel reduction, but the very possibility of an alternative route could greatly increase China's freedom of action. At the moment, the passage west through the Malacca Strait is a bottleneck that can easily be corked by an American carrier battle group in times of dispute.  The Bering Strait could become a strategic chokepoint between the three great powers.

China stands to gain the most from both the Northern Sea Route and the Northwest Passage, and is making generous overtures to Nordic countries and Canada with these interests in mind. China attempted to buy a large swathe of Iceland's territory, but was rebuffed. In Norway, China has invested heavily in Elkan, an electrochemical conglomerate. And China has recently shown interest in the Greenlandic rare earths, bidding alongside two Australian companies, Tanbreez and Greenland Mineral and Energy. What the Far North has not yet seen from China, however, is systematic buying of entire industries.

With about $4,000 billion in foreign currency reserves, of which approximately $3,000 billion is available for shopping around, there is no reason to believe that China may not decide at some point to engage in systematic acquisitions in the Far North.  Chinese investment tends to be more risk-averse in that it seeks out common stock of companies that are already publicly traded and scrutinized by markets and regulatory bodies. In its investment strategy, China does not appear to be venturing to explore and create new industries and markets.

China does appear to have a grand, if as yet unpublished, strategy for the region: there is clearly a long-term commercial strategy with the development of a substantial icebreaker fleet; and there is Chinese investment and integration into the scientific community.

There is also a concerted diplomatic strategy, reaching out to Iceland,

Greenland and others. The Chinese are connecting to far corners, such as the Norwegian ice-free port of Narvik, in order to develop an overland rail connection, for shipping to the American East Coast. These elements taken together reveal a grand strategic approach without a military component. China also sought to achieve permanent observer status at the Arctic Council in 2008; the application was approved in the Kiruna session of May 2013.

All in all, China is the wild card in the equation, but it seeks to secure its interests in a non-confrontational manner. With the prospect of Chinese shipping creating a situation in the Bering Strait where Russia is on one side, the United States on the other, and China in between, stability in the region will depend on the relations between the three great powers. While there is very little risk that the Arctic itself would become the source of tension, it is not unthinkable that a standoff caused in another part of the world, such as the South China Sea, Taiwan, or the Senkaku Islands, could lead to retaliation in the Arctic. The effect of connecting China through the Far North to the West means that the polar region will be exposed to the potential risks and dangers that surround China's ambitions in Asia's warmer waters.