Chinese engagement in Southeast Asian energy and mineral resources: motivations and outlook

Abstract

The energy and mineral resource base of Southeast Asia is relatively modest by international standards. Nevertheless, Chinese energy and mining companies have been investing heavily in the region over recent years, in comparison with multinational companies and state-backed companies from other Asian countries. This paper applies a framework derived from the field of business studies to analyze why the scale of China’s engagement in Southeast Asia has become so great and how the motivations vary between the different energy and resource industries. The motivations for these activities reflect a mix of corporate and state objectives. Corporate objectives include securing energy or resource supply chains, increasing or diversifying their asset base, and enhancing their profits or market share. The motivations of the government range from straightforward support of the companies for the purpose of industrial strategy and security of resource supply, to development assistance and regional strategic positioning. The different motivations of the oil and gas, hydropower, and mining industries arise from the particular character of each market, both within China and globally. Southeast Asia has the twin advantages of geographic and apparent cultural proximity to China. Nevertheless, inexperience and a desire to catch up with their international peers have resulted in companies applying low social and environmental standards in some high profile projects. The subsequent disputes, together with the current low level of resource prices, may constrain the further growth of Chinese investment in the near future.