China's energy project layout "One Belt One Road"
In the fields of energy and minerals, China's foreign direct investment in 2015 continued the downward trend since 2012. According to data from the American Enterprise Institute, as of August 2015, China had only 8 overseas direct investment projects in the energy sector with more than 100 million U.S. dollars in 2015, and only 5 overseas direct investment projects in the mining industry with more than 100 million U.S. dollars. That, the sum of the two investment amounts only accounted for 12% of China's total overseas investment in 2015, which is far below the level of over 60% each year between 2008 and 2013.
Despite this, China’s overseas investment and cooperation in the energy sector are still a focus of attention at home and abroad. Especially considering that in addition to conventional energy and mineral development and utilization, China's overseas energy projects in a broad sense cover investments in upstream and downstream industries such as power infrastructure construction, nuclear power technology output, renewable energy equipment export, and even the transfer of energy-intensive industries. And cooperation, and in 2015 China has made many big moves in these areas. For example, in the field of overseas project cooperation, also according to the data of the American Enterprise Research Institute, by August 2015, the amount of energy projects accounted for nearly half of the total amount of China's overseas project contracts. The export of nuclear power and other technologies is the current focus of Chinese leaders to promote overseas.
"One Belt One Road" is undoubtedly a core word describing China's dynamics in these fields in 2015. This is not only because in the policy documents of the strategy, international cooperation in the energy and power fields is clearly listed as one of the priority areas for development, but also because a number of large-scale projects have been implemented in 2015 under the drive of the strategy. Among these projects, some are new projects that were planned in 2014 and officially landed in 2015 after the “Belt and Road” concept was first put forward in 2013; there are also existing projects that have been re-incorporated into the scope of this strategy and received new ones. Policy support.
In many policy discussions on the “Belt and Road” initiative, these energy-related investment cooperation projects are often classified into the same type, and related companies are also happy to classify them in this way. However, a closer observation reveals that although they are all related to energy, the logic of participating in the “Belt and Road” of oil and natural gas, electricity, coal, nuclear power, renewable energy, steel, building materials and other high energy-consuming industries is very different. Their nature and prospects are very different. It's also very different. Some of these projects are in line with the inherent commercial rationality, some projects have obvious political factors, and others seem to be just on the "Belt and Road" ship, and there are risks in future implementation.
Petroleum and natural gas
In the fields of oil, natural gas and coal mining, China’s overseas investment has slowed down significantly in recent years. Under the double attack of low oil prices and the anti-corruption storm, the risks of some overseas energy projects that China has invested in in the past few years have begun to emerge. In 2015, China's central petroleum enterprises were more cautious about this type of investment, and basically did not invest in large overseas oil exploration projects. At the same time, compared with a few years ago, due to the decline in international oil prices, China's demand for direct investment in overseas oilfield projects to improve the country's energy supply security has been significantly weakened. Theoretically, in the next few years, policy factors in China's investment decision-making for such projects will be weakened, and commercial factors will be strengthened.
However, under the vision of “One Belt, One Road” and “Connectivity”, in 2015, oil and gas transportation corridor projects in areas along the “One Belt and One Road” received special attention. For example, following the Tajikistan section of the China-Central Asia Natural Gas Pipeline D line that started in September 2014, the China-Russia Eastern Natural Gas Pipeline officially started in June 2015. Also in 2015, the Silk Road Fund established by China and Novatek, the largest shareholder of the Yamal LNG integration project in Russia, signed a framework agreement to invest in the purchase of 9.9% of the world’s largest LNG project. This is also the first investment made by the Silk Road Fund in the oil and gas field since its incorporation in December 2014.
These projects have obvious "public" attributes. In addition to factors that are considered to enhance China's energy supply security, it is clear that investing in these oil and gas transportation projects also has political considerations to strengthen close cooperation with specific countries. The implementation of related natural gas projects also shoulders the task of upgrading China's energy structure and improving environmental quality.
Another important feature of China's overseas oil and gas investment and trade in 2015 is the increasing activity of Chinese private enterprises. An even more noteworthy trend is the advancement of the domestic oil and gas trading system reform marked by the gradual liberalization of the “imported crude oil use rights” and “crude oil import rights” in 2015, providing domestic small and medium-sized private energy companies with a way to participate in the international market. Rare opportunity. The liberalization of the "two rights" will not only have an impact on the international and domestic crude oil markets, but will also bring historic development opportunities for Chinese private oil and gas companies. Facing the rapidly changing international energy market, compared with large state-owned enterprises, small and medium-sized private energy companies have advantages in capturing opportunities, making quick decisions, and taking risks. Relying on China's huge demand for energy, with a certain foundation of private capital and entrepreneurial spirit, it is not known that a world-class energy and commodity trading company like Glencore will be born in Chinese private enterprises in the future.
Electricity and renewable energy
In 2015, China had many overseas investment and cooperation projects in the power sector. In addition to Chinese companies investing in the construction of conventional thermal power plants in Kazakhstan, Pakistan and other countries, a bright spot in this field is the overseas investment or engineering cooperation of Chinese companies in new energy and renewable energy projects. For example, the industrial parks invested by Chinese solar energy company Trina Solar in India and Thailand, the investment and development of nuclear power projects by Chinese nuclear power companies in the UK, Romania, and Argentina, and the hydropower projects invested by Chinese hydropower companies in Angola and Nepal. Three Gorges Group invested in wind power projects in Pakistan, CCCC won the bid for tidal power projects in the United Kingdom, etc., all made important progress in 2015. Among them, during the visit of Chinese leaders to Pakistan in April 2015, the two countries signed a memorandum of understanding to allow China to invest in the construction of Pakistan's Kalot Hydropower Project. This hydropower project with a total investment of US$1.65 billion is also the first foreign investment project after the establishment of the Silk Road Fund.
In the field of new energy and renewable energy, Chinese companies have international competitive advantages. By investing overseas, Chinese companies can avoid high tariffs on exported products, and can save logistics costs, which is economically reasonable. In the field of nuclear power, Chinese companies have gradually grasped some technological advantages. By investing in overseas nuclear power development projects, it will help Chinese technology enter the international market faster. From a broader perspective, in the export of new energy and renewable energy equipment, China's role has changed from an "energy importing country" to an "energy exporting country", which is of far-reaching significance to the structural changes in the international energy market.
Energy-intensive industries
Many analysts believe that an important original intention of the “Belt and Road” strategic design is to resolve China's domestic excess capacity, and the problem of excess capacity is particularly prominent in high-energy-consuming industries such as steel and cement. The basic idea of this design is to use China's abundant foreign exchange reserves to create new demand for domestic enterprises in the international market, and to buy time for China's economic restructuring.
According to this idea, domestic industries with overcapacity will benefit from the "Belt and Road" strategy in at least two ways. On the one hand, the products of these industries are directly needed by a large number of infrastructure projects in the "Belt and Road", which can increase the sales of domestic finished products. On the other hand, companies in these industries can also invest in setting up factories in countries and regions along the “Belt and Road” to transfer excess domestic production lines.
However, this idea of using the "One Belt, One Road" strategy to get China's energy-intensive and overcapacity industries out of trouble has some drawbacks that cannot be ignored.
First of all, because the competitiveness of these companies to expand their markets under the "One Belt One Road" strategy mainly comes from the procurement of China's investment in infrastructure projects, the essence of this idea is to continue to provide subsidies for China's high energy consumption enterprises by the finances, which goes against China's hopes to lower the market. The original intention of the transformation of the carbon and high value-added economic structure. Secondly, under China's current severe environmental pressure, if these companies produce products domestically and sell them overseas, they will not be positively helpful to China's efforts to reduce energy consumption and control pollution. Third, if these companies use idle production lines to set up factories overseas, it seems like a win-win solution, but it will not solve the most difficult problem of domestic overcapacity, that is, the reemployment of employees in their companies. As the author mentioned in a previous article, for industries that are facing structural decline such as steel, it is necessary to seriously consider the replacement of industries and the upgrading of personnel skills, rather than another round of stimulus plans.
From the above analysis, it can be seen that the motivations and logics for China's energy and its upstream and downstream enterprises to invest in the “Belt and Road” countries and regions are diverse. Some are based on the company's own competitiveness in the international market; and some projects can be promoted mainly because they have received direct financial and financial support from the government. Some companies, perhaps more through participating in the national strategy of “One Belt One Road”, obtain the legitimacy emphasized in sociological theory.
From a corporate perspective, these are all strategies that can help companies grow and are fully understandable. From the government's point of view, it is necessary to carefully analyze the different nature of various projects under the "Belt and Road", and at the same time determine different expectations and assessment targets for the projects. For projects with an aid nature, an appropriate budget needs to be established through legal procedures. For commercial projects, it is necessary to clarify the status of the company's market investment subject, and for projects involving state-owned enterprises and state-owned bank loans, set up investment return requirements that meet market standards.