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China Briefings

Reports on China issued by Samsung Economic Research Institute

Strategies to Secure Foreign Resources and Implications

Strategies to Secure Foreign Resources and Implications

Samsung Economic Research Institute Beijing Office

Aug. 26, 2011

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For China , the energy issue is urgent not only for the economy but also for politics and society. As it needs energy for urbanization to maintain economic growth and justify the communist government's rule, the energy diplomacy has emerged as one of three key diplomacies. However, China's energy self-sufficiency has plunged and forced the country to look for overseas sources.

To address the issue, the government established the "National Energy Committee," a higher level government-wide consultative body responsible for the comprehensive planning and coordination of important issues with respect to energy development and international cooperation. This contributed to establishing an organic division of labor between the party, government agencies, state-owned firms and policy banks, thereby enabling the acquisition of stable sources of energy.

To reduce excessive reliance on oil imports from the Middle East and North Africa , the Chinese government has beefed up foreign assistance towards resource-rich developing countries other than those in the region. Furthermore, China has implemented "Loans for Oil," a strategic partnership between national policy banks and state-owned energy companies. In particular, the China Development Bank (CDB) has led large-scale overseas resource development projects through such loans.

China is expected to focus on expanding its energy supply and diversifying energy sources based on labor division. China 's intensified efforts to secure overseas energy resources will likely deepen international competition, striking a blow to Korea . However, it is an exaggeration to say that the resource development markets of developing countries are cannibalized by China , and Korea should actively pursue a strategy to differentiate itself.

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