[MUSIC] Hi, this is David Zweig again and welcome to module three, China's global search for energy and resources. Now let's talk first about China's going out overseas for energy and resources. Now from my perspective, energy is one of the reasons I like to this talk because it's really a terrific case study of China's going out and China's foreign behavior. As I've argued in an article I wrote back in 205 in the journal foreign affairs, energy acquisition became a major driver of China's foreign policy in the mid-2000s. And a survey by the World Bank in 2006 actually found that 39% of Chinese firms who are going overseas, going out, said that an important factor was their search for resources. Now energy is a great case study because for various reasons, right? Studying China's energy policy links China's domestic politics and its foreign policy. It illuminates the key foreign policy actors, the key actors in China engaged in this strategy. Right, it highlights key aspects of China's overseas behavior. It shows the dynamic between Chinese multinational oil companies and the state. It highlights the role of the military, the People's Liberation Army, the navy, in the going out strategy. It shows how governments and citizens overseas, in the resource rich countries how they respond to Chinese investment. It reflects on China's internalization of global norms. We talked about this in the last module. These global norms of non-proliferation, hostility to genocide, push for transparency, anti-corruption. And extent to which they been willing or unwilling to give up some of China's national interest to advance these goals. Finally, it helps address the question of whether the United States and its concern about the power transition and China's rise. I spoke about this in the last module. Will lead the United States to use China's thirst for energy to try and contain it. Now if we flip to this slide, you can see the amazing growth in China's overseas foreign direct investment in the non financial sector. And much of this money going out has actually gone for oil investment. The blue line actually tells you the oil investment. You can see in here in the early period, a lot of that money went to oil and this runs through 2013. So what is special about China's energy diplomacy? First China's state is deeply engaged in this process and this takes us back to the mercantilist idea that I talked about in the last class of active state involvement in economy and economic development. Second, China's adoption of what's called the infrastructure for oil strategy which will talk more about the case of Angola, is really, has generated a lot of debate. But a lot of people actually feel it's a very good strategy, and we'll talk, I'll explain that later. Chinese national oil companies are willing to work closely with national oil companies in developing states, unlike many companies like Exxon or the larger international oil companies. Because China I think in many ways is more sensitive than many developed countries to this idea of resource nationalism and that the resources in the ground belong to the people and the country in the developing world. Another their point is that China has been cash rich at the time when the world has really run out of money after 2008. China is willing to work with states that the United States has declared as pariah states, meaning, really, states that are accused of ignoring global norms. But as in the case of Iran, we'll see, this has its costs. A rapid growth of Chinese demand and the efforts to get oil has created anxiety within the world, particularly in democratic countries. And again, telling you the, ahead of time, we'll see this in the case of Australia. China's resource diplomacy made it the major driver for many country's economies and allows us to study how states manage economic dependence on China and their strategic dependence on the United States. And again Australia is the case in point here. Now, what also drives resource diplomacy, we can think about the domestic politics of it. And for my view, the domestic politics, there's a domestic need for resources and energy and the need for the state and the Communist Party to maintain rapid economic growth, to ensure popular support for the government and social stability. Because without this kind of growth, China could not grow quickly, be more globally influential, and this is a lot of the legitimacy for the CCP. Oil is linked to this kind of social contract that I talk about between the Communist Party and this new emerging middle class in China. The middle class basically the party says to the middle class, you can have cars, you can have nice air-conditioning in your homes, you can refurbish your homes. Just don't challenge us. Just don't challenge the Communist Party. And the state uses the reason oil is also very important for the domestic economy, is the state uses automobiles and automobile manufacturing as a major driver of economic growth. And so China's demand for oil will continue to rise. Finally, the demand is well outpacing China's own production. China became a net oil importer in 1993 and demand has been continuing to increase in the 2000s. So here we can see, I put a little red x there at the point where Chinese consumption and production met, right. And this is the end point, right in 1993, this is the point where China begins to have to import oil. And as you can see the consumption continues to grow dramatically without a major increase in production and this is a key problem for China.
