China's Rising Demand for Minerals and Emerging Global Norms and Practices in the Mining Industry

Abstract

This paper examines the disjunction between the current mining practices of Chinese state companies and emerging international norms and host community expectations in the global minerals market. The paper argues that if China does not move toward the observance of new international norms for responsible mining, especially those dealing with interests and concerns of local communities, the result may be increased tensions and conflict in those parts of the world where Chinese mining companies are operating, with potentially negative consequences for China's own interests and economic development.

Acknowledgement

FESS would like to acknowledge the valuable research assistance provided by Chase Ogden of the Croft Institute of International Studies at the University of Mississippi in the preparation of this paper.

Notes

1. For more detailed information on this trend, see http://www.intracen.org/tradstat/.

2. In 2005, China's GDP increased by approximately 10%, exports grew by 23%, and imports rose by almost 18%. The imports and exports of minerals, metals, and processed products accounted for almost 22% of this trade (Mining Journal 2006). For a review of China's demand and supply of major minerals, see Mining Magazine (2006) and Mining Journal (2006).

3. World copper consumption could reach 24 million metric tons by 2020 with China using about 5.6 million metric tons (Menzie et al. 2004).

4. China's mineral interests do not end with Africa, Latin America, and Southeast Asia, as included in the sections following. China has important oil interests in Iran and Russia, for example. Those ventures, however, have been more limited in scope. The discussions that follow, therefore, focus on Africa, Latin America, and Southeast Asia.

5. President Hu took his first African trip in 2004, visiting Egypt, Gabon, and Algeria (Xinhua Online 2006).

6. Ferrochrome is a finishing material that contains about 70% chromium. It is used when it is desired to add chromium to steel (http://metals.about.com/library/bldef‐Ferrochrome.htm).

7. Venezuela is at present the third most important source of foreign oil to the U.S. (Markman 2006).

8. However, as transportation costs to China are relatively high given the long distance and given that the oil is crude (and therefore hard for most refineries in China to process), analysts say the economic attractiveness of Venezuela oil is more likely to be an investment opportunity, where China develops the oil fields in Venezuela and sells the oil elsewhere (Graham‐Harrison 2006).

9. China is a partner with Brazil in establishing a rail link to the Pacific to cut transportation costs of iron ore and soybeans (Adams 2006).

10. The ‘missteps’ by the United States and Japan in Southeast Asia, including their response to the 1997 Asian financial crisis and generally low priority given to the region, form another important contributor to China's rise in Southeast Asia, according to Dillon and Tkacik (2005) and Kurlantzick (2006).

11. The China‐ASEAN Free Trade Zone grants a period of duty‐free entry for ASEAN member states' goods into the Chinese market. The period generally lasts for three years, commonly referred to as the ‘early harvest’, after which Chinese goods have reciprocal free entry (Dillon & Tkacik 2005).

12. The most important mineral thus far has been nickel; China has invested in two large nickel mines in Myanmar where the first investment alone was $500 million (Thu 2005a).

13. There is a tri‐level structure of legislative power whereby the lower levels are subject to, and must not contravene, the higher level. The three levels of legislative power consist of national legislation (the National People's Congress), followed by the state administrative rules and regulations, and finally, by the local regulations (provincial congresses) (Macbride and Bei 2001).

14. See, also, ‘China's Policy on Mineral Resources’, issued by the Information Office of the State Council through the People's Daily Online in December 2003.

15. Sometimes this even includes provisions on the ownership and financing of these infrastructures after the mine's closure (Zhong 2000).

16. Pneumoconiosis is a diagnosable disease of the lungs produced by the inhalation of particulate matter (International Labor Organization). See http://www.ilo.org/encyclopedia/?print&nd = 857400196

17. The bank chose the ‘free, prior, and informed consultation’ provision in spite of the recommendation by its own Extractive Industry Review of 2003 to adopt the stricter requirement of ‘free, prior, and informed consent’. The concern with respect to the latter was that ‘consent’ might be blocked by a small and unrepresentative minority within a community.

18. This attack actually marked the third incident of violence against U.S. operations in Indonesia in one week. Four Indonesian security officers were killed on 16 March 2006 in a protest against Freeport‐McMoRan Copper and Gold, also a U.S.‐based company, in eastern Papua. Three days later, Indonesian police were called in to suppress a demonstration in central Java over ExxonMobil's decision to tap the oil reserve in Cepu (Strategic Forecasting Inc. 2006).

19. Social unrest over environmental issues has been rising within China itself. In 2005 there were upward of 70,000 environmental protests, each involving a minimum of 50 people (Economy 2005; Beech 2006).

20. More than 20 Chinese companies have joined together to establish a chamber of commerce in Angola (Reuters 2006).