13 June 2023

Increased Chinese interest in countries around the Arctic

China is showing an increasing interest in the countries around the Arctic. FOI, in collaboration with the American research organisation, RAND Corporation, has investigated Chinese activities in the Arctic and considered how they play a part in China’s economic statecraft.

The Chinese sign for Arctic and a Chinese flag.

Economic statecraft is the use of economic means to achieve strategic goals. It is considered China’s most useful foreign policy instrument, also in the Arctic. Images from Shutterstock and Poring Studio/Samuray Studio.

FOI and RAND published their respective reports in 2022. Researchers from FOI analysed Chinese activities in the Nordic countries and Russia, while RAND’s analysts studied the North American aspects. Few completely new activities were identified by FOI, although it was possible to discern a number of areas that could be of interest to China in future.

“For example, we flagged scientific research, the use of advanced technology and the expansion of infrastructure along the northern sea route,” says Christopher Weidacher Hsiung, a China researcher at FOI who, together with his colleague, Oscar Almén, wrote the report, China’s Economic Influence in the Arctic Region: The Nordic and Russian Cases.

Economic statecraft is the use of economic means to achieve strategic goals. It is considered China’s most useful foreign policy instrument.

“In general, China uses not only incentives, such as the potential for more trade and investment, but also punitive measures, such as sanctions, or import and export bans,” says Christopher Weidacher Hsiung.

Some findings regarding Nordic and Russian economic exposure to China

  • While China has been an active investor in several of the Nordic countries and Russia, few of those investments are located within the Arctic Circle. Chinese actors have had many intentions and expended much effort in attempting to invest, but few of these plans have actually resulted in completed deals.
  • For the Nordic region, while both trade with China and Chinese FDI in the region keep increasing, the general economic exposure to China is still limited. China’s share of trade with the Nordic countries remains between 5–9 per cent.
  • In the Nordic countries, an elevated awareness among governments and society in general of the risks regarding Chinese economic influence, together with recent and coming legislation restricting foreign investments, are factors that should work to reduce the risk that China will invest in sensitive sectors in the future.

Limited success for China in the North American Arctic

The RAND report, China’s Strategy and Activities in the Arctic: Implications for North American and Transatlantic Security, concludes among other things that:

  • The efforts of Chinese companies, investment firms and scientific organisations to invest in the Arctic regions of North America have been largely unsuccessful. An important reason for this limited success is that the United States, Denmark and Canada have blocked or restricted Chinese investments in industries considered to be critical for security.
  • Arctic countries have a tradition of managing Arctic affairs on their own, without involving other states.
  • Investing in the Arctic is expensive, negatively affecting China’s interest.

“This research was conducted as a collaborative effort between RAND and FOI, which allowed for fruitful discussions and exchanges of ideas during our entire research collaboration,” says Stephanie Pezard, associate research department director at the RAND Corporation.

FOI and RAND continue to cooperate

In mid-June, representatives from RAND will visit FOI’s offices in Kista, for a two-day workshop. One of the purposes of the meeting between the two organisations is to plan the continuation of their joint activities on a number of topics. These include the future military capabilities of Russia, lessons learned from Russia’s war against Ukraine, civil defence and Western collective defence against Russia, as well as new technologies and long-term planning. Itis possible that, in future, other joint studies will follow, modelled along the lines of the present collaboration on studying China’s Arctic presence.

The RAND Corporation (the name is a contraction of the term, research and development) is an American think tank founded in 1948 with the goal of increasing public welfare and security in the United States. Its headquarters are located in Santa Monica, California. The collaboration with FOI receives strong support from the Swedish Ministry of Defence, with the aim of achieving long-term cooperation in research that is important for Sweden’s security and defence. RAND has around 1850 employees.

According to the report, China’s Economic Influence in the Arctic Region: The Nordic and Russian Cases, the most concrete investments that may have consequences for Swedish security are a number of acquisitions of companies in sensitive technologies, such as semiconductors, and companies with a background in the defence industry. These could potentially be used to strengthen China’s military capabilities. China is also active in the area of critical infrastructure, especially in Sweden. In addition to concern over Chinese ownership in Swedish wind power, most scrutiny has been directed at the procurement of Chinese companies to build infrastructure for, or operate, for example, trains and metro systems. According to the report, the fact that the Chinese Communist Party gains direct influence over Swedish infrastructure strengthens China’s ability to exert economic pressure on Sweden.