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China’s plan for the Arctic – and a shipping centre to rival Singapore

WASHED by the shallow waters of the Tumen River that divides Russia and North Korea, China’s Hunchun has few tourist attractions other than a coin-operated set of binoculars, on an elevated platform, that lets the occasional visitor survey the three neighbours’ only junction. But if business expands along Arctic shipping routes linking the Atlantic and Pacific, this obscure city of little more than 200,000 could become “an international shipping centre equal to Singapore”, Xinhua, China’s state-run news agency, claimed last year.

China, having styled itself as a “near-Arctic nation”, is jockeying to play a greater role in the contested High North. Beijing attained permanent observer status to the intergovernmental Arctic Council in 2013, but experts say its ambitions are beyond those of a passive onlooker.

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In July, Chinese shipping giant Cosco announced plans to send more cargo vessels to the Arctic, where they will be guided by the first Northwest Passage Chinese-language guidebook, published by China’s Maritime Safety Administration in April. Also in July the polar research vessel Xue Long conducted its seventh Arctic expedition, and the country approved tenders for its first domestically produced icebreaker.

Those developments came a month after a paper by the State Oceanic Administration referred to the Northwest Passage as a “northern link” in Xi Jinping’s ( 習近平 ) “One Belt, One Road” strategy, and complained that a negotiated settlement between Canada and the United States in their sovereignty dispute regarding the waterway would be unfair to China and other regional outsiders. Canada claims the passage as internal waters but the US views it as an international waterway.

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China’s ambitions in the Arctic may seem far-fetched. Yet it is already making investments that could start a sea change, said independent researcher Jichang Lulu.

Late last month, Shenghe Resources, a Shanghai-listed firm that processes rare earth materials, took a 12.51 per cent stake in Greenland Minerals and Energy, becoming its largest individual shareholder.

The agreement also allows Shenghe to increase its stake to 60 per cent once the firm’s flagship Kvanefjeld project enters the development stage. If Greenland were to become independent of Denmark, such economic clout could leverage significant influence, Lulu said.

“You are also seeing Chinese involvement starting to materialise in Russia,” said Lulu, who has written extensively on Chinese investments in the region. “Various Russian projects in the Arctic and the Far East are actively seeking Chinese money.”

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Russia’s participation in South China Sea naval drills last month suggests that China is making political capital out of Moscow’s own “pivot east”, but this hasn’t generated a wave of investment.

Although China’s strategic interests remain discreet on a national level, its northeastern provinces have shown explicit interest in developing cross-border infrastructure, Lulu said. “Beijing could marshal state and private firms to massively invest in Russia if it wanted but that isn’t happening, which suggests that a grand strategy isn’t being implemented,” Lulu said.

Despite the region’s potential, headwinds persist. After the first big freighter traversed the Northwest Passage in 2014, the Polar Research Institute of China predicted up to 15 per cent of the country’s annual trade would travel along Russia’s Northern Sea Route by 2020. Yet only a little over 15 ships did so this summer.

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This is because the challenges are still immense: ice-locked much of the year without any major stopping-off points – or indeed any deep-sea ports at all – the sparsely charted waters remain fraught with icebergs, dangerous shallows and other hazards that bump up insurance premiums even in “ice-free” conditions.

Experts say Beijing is playing the long game, waiting for these problems to melt away with global warming and more infrastructure. With sea ice cover at the second lowest level on record last month, it may not have to wait long. Under a high-emissions scenario, transit times between Europe and Asia could drop by two weeks this century, with shipping seasons swelling along with periods of low ice, according to a recent study by the University of Reading. In contrast to their hot-headedness over the South China Sea, Beijing officials have kept cool in the Arctic.

They back multilateral talks and the application of maritime law. They have also avoided taking an official stance on the sovereignty dispute between Canada and the US over the Northwest Passage.

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In an ironic reversal of the country’s actions nearer home, state media has even sided with Washington. The Communist Party mouthpiece Global Times argued in 2015 that “the pre-existing UNCLOS [United Nations Convention on the Law of the Sea] framework confirms most of the Arctic Ocean is international waters” and that shipping lanes “cannot be occupied by any country” even as they cleave to the coasts of Canadian islands.

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Maintaining stability and freedom of navigation here is in China’s interests. To this end, Polar Research Institute head strategist Zhang Jia said this year China must “strengthen its presence” in the Arctic, calling it “an important task for national security”. Writing in Global Times, the head of Ocean University’s Institute of Polar Law and Policy then argued that China’s economic interests had earned the country a seat at the table, despite the fact that it “has no land” there.

So far, Arctic states agreed, said University of British Columbia professor Mike Byers. “All of the Arctic countries are members of the World Trade Organisation and so are open to investment from China,” Byers said, adding that Chinese companies could play a major role in the region. “The development of Arctic shipping routes could be advanced through foreign investment in ports and other infrastructure.”

On the Shenghe deal, Greenland’s minister of natural resources said “everyone who wants to invest in Greenland is welcome [whether] they are Chinese, Canadian or Danish”, while US senior Arctic official Julia Gourley said recently that interest from China and other non-Arctic states was welcome.

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Peering through the binoculars in Hunchun, you can almost see the promised commercial armadas stretching to the horizon, rocking in the muddy swells downriver. Whether or not this becomes a new Singapore for the Arctic, it is clear that China’s growing interest has the potential to transform the High North.