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She Doth Protest Too Much: China’s Banks, Energy Firms, and Global Energy Diplomacy

August 30th, 2011 by Matthew Rudolph

Erica Downs and other have been trying for some time to persuade those interested in Chinese foreign policy and global energy politics that China’s energy companies and associated corporates in finance and infrastructure are “relatively independent” of central control.  Others include, Bo Kong, China’s International Petroleum Policy.

Why does Erica Downs keep insisting that the corporate actors in China’s energy sector are increasingly independent?

The objective may be to disarm aggressive, un-nuanced anti-Chinese actors in the US who regularly point to China’s energy diplomacy as yet another facet of Chinese malign grand strategic intent.

As if American energy companies have been any less central to US grand strategic intent and that the various tax and other benefits such firms enjoy do not reflect “coordination” (to use Downs’ terms) within the US political system.

This is an important goal for Downs.  Yet, HC wonders if her analysis helps the case, since her conclusions fail to prove that the actors in overseas Chinese energy engagement are not controlled by China’s central leadership.

Here are the relevant passages from Downs recent report.

First, each of the state-owned firms involved had its own interests, including profitability, to pursue. This conclusion is especially true for CDB, which has a proven track record of advancing its own objectives, including its long-standing commitment to profitability, in tandem with those of the government.The EBLs did not simply further the State Council’s objectives of enhancing access to energy, supporting the international expansion of Chinese firms and diversifying China’s foreign exchange reserves. They also promoted CDB’s own agenda of increasing profits, expanding its overseas business portfolio, and protecting its privileged position in China’s banking system. In addition, the loans also dovetailed with the NOCs’ strategic priority of expanding their international exploration and production portfolios.

All of these indicators of autonomy, except “protecting its privileged position in China’s banking system.” are consistent to the interests of the state and the leadership and I don’t know how Downs can assert with any confidence that they ‘prove’ the independence of CDB.

Second, coordination is not synonymous with top-down decision- making. The loans to energy companies in Brazil and Russia demonstrate that cross-border deals that advance both national and commercial interests can originate with any of these actors. Whereas CDB developed the deal with Brazil, the State Council and China National Petroleum Corporation (CNPC) drove the transaction with Russia.

Top-down decision making or coordination;  what is at stake in the distinction?  Is Downs implying that Chinese banks and state-owned energy companies are able to act independently of China’s central government state council?  Or, even that CDB is taking the initiative?  One does not have to impute dark or sinister motives, or even grand strategic intent to Chinese global energy policy if one accepts the obvious truth that China’s banks and energy companies are some of the most important instruments of state power used by the Chinese leadership.  Coordination or top-down decision making are a difference that makes hardly any difference.

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