SPEAKERS HONG Nong 洪农 Executive Director and Senior Fellow, Institute for China-America Studies CHEN Gang 陈刚 Assistant Director and Senior Research Fellow, East Asian Institute, National University of Singapore REPORT For our event#69, ThinkIN China invited two distinguished speakers, Hong Nong, Executive Director and Senior Fellow at the Institute for China-America Studies, and Chen Gang, Assistant Director and Senior Research Fellow at the East Asian Institute of the National University of Singapore, to share their takes on China’s Arctic Policy and discuss the various challenges and opportunities it brings about. In her presentation, Hong examined the implications of China’s first White Paper on Arctic Policy, published in January 2018, and described the different dimensions in which China’s interest in the Arctic manifests itself. After describing how China assumed an observer status in the Arctic Council in 2013 – having worked towards that goal for five years – and shedding light on China’s effort in promoting bilateral ties with each individual Arctic country, Hong moved on to discuss the opportunities and challenges associated with shipping and resource development in the Arctic. Since half of China’s GDP depends on shipping and many of the world’s largest container terminals and most productive ports are located in China, as Hong illustrated in her presentation, the opportunities of new and shorter sea routes created by the melting Arctic are of high interest to China. The new routes are an opportunity for China to diversify its supply and trade routes and reduce its dependency on the Strait of Malacca and the Lombok Strait. At the same time, these new routes bear economic benefits not only because of the shorter distance, but also in terms of avoiding piracy issues that in the past decade had significantly increased insurance cost. However, Hong stressed that safety challenges, due to restricted search and rescue capability, as well as environmental challenges need to be considered as well. Moreover, the legal aspect constitutes another major challenge for Arctic shipping, as some states do not agree on the legal status of Arctic sea routes, which can be considered international waters, that can be used freely, or internal waters of a state, in which case passing requires the respective state’s permission. Hong used the legal divergence between Canada and the US regarding the Northwest Passage to make a case in point. Aside from shipping, resource development in the Arctic constitutes another major point of interest for China. However, as the boundaries within and beyond national jurisdiction has not been clarified due to the pending submission with the Commission of the Outer Limits of the Continental Shelf, China can currently only engage in resource development in the Arctic through cooperation with Arctic states. Furthermore, resource exploitation in the Arctic is also confronted with economic and technological challenges due to the high cost and technological requirements caused by harsh weather and difficult access; additionally, political and legal challenges are brought about by increasing and competing interest on the part of non-Arctic states, such as South Korea and Japan. The development of Arctic resources requires enormous investment and China is well positioned to facilitate this investment, to acquire a major stake and in turn, as Hong pointed out, Chinese leaders hope that Arctic states will be inclined to back Chinese interests in the region. By trying to boost cooperation between Arctic and non-Arctic states and to increase its say in Arctic affairs through a strategy of scientific diplomacy, participation in Arctic institutions and resource diplomacy, China has shown lots of potential in terms of its future role in the Arctic, Hong concluded. Subsequently, Chen Gang analyzed the Arctic Council member countries’ respective relationships with China, putting China’s Arctic Policy in the bigger context of an overall national strategy. China’s Arctic policy, as Chen put it, is not only about commercial interest, not only about tapping into natural resources or sea routes, but it is also about international relations, about the fight for global influence. China is not just building its relations with the geopolitical superpowers US and Russia, but with Northern European countries as well as Canada. Chen described China’s engagement in the Arctic region as very similar to its engagement in other areas of the world in terms of it being incremental and non-provocative and seeking win-win situations. Chen then provided a brief overview of China’s relations with Arctic countries. With Russia, China has a strategic cooperative partnership on Arctic issues, whereas under the Trump administration cooperation between China and the US has significantly decreased. China´s relationship with Canada has been quite good in the past, and especially under Trudeau. The talks between China and Canada on a free trade agreement, however, have been hampered by a new agreement among the US, Canada and Mexico. China now invests strongly in Iceland, Denmark, Sweden and Finland. Generally, Chen viewed the human rights issue, high environmental standards, the non-market economy status of China and the arms embargo of the European Union as major obstacles for China’s pursuit of its economic relations with European countries. Chen underlined his argument of increasing importance of northern countries, European countries and Canada for China, by pointing towards the big change China’s outbound investment is currently undergoing. Total FDI from China to Europe in the first half of this year reached 12 billion USD, 6 times of its FDI in the US. Investment in Europe is still growing, at a rate of about 4 to 5%, whereas investment in US dropped dramatically, by more than 90%, attributable to the ongoing trade war. In his conclusion, while Chen considered the Arctic strategy a good platform for China to improve its relations with these countries, he also pointed out that due to many uncertainties, as the geopolitical environment continues to change, and, depending on how the political actors engage with each other, the Arctic issue might also become a platform for all these relationships to deteriorate. Report written by Theresa Stubhan.