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Arctic Foreign Direct Investment

Policymakers in the US and other Arctic nations are increasingly aware that China uses economic statecraft as a key instrument of Beijing’s foreign policy. In the Arctic, China does not yet pose a military threat — but it does already pose an economic challenge to US and other Arctic interests.

Congress mandated that a federally funded research and development center independently study Chinese foreign direct investment (FDI) in the Arctic. The Department of Defense selected CNA, and asked its analysts to explore these questions:

What is the nature and scope of current FDI in the Arctic?

What are the legal conditions that govern FDI in the Arctic countries?

How does Chinese Arctic FDI relate to China’s strategic regional objectives?

How can the US mitigate negative implications of Chinese Arctic FDI?

Study Conclusions and Recommendations

Chinese FDI in the Arctic is largely concentrated in energy and mining and sectors related to Arctic shipping routes.

Moderate levels of Chinese FDI contrast with much higher levels of general Chinese economic activity in the Arctic. Investment generates different risks than other forms of economic activity and requires different correctives, so it is important to distinguish between the two.

Based on Beijing’s stated policies, we expect Chinese pursuit of Arctic FDI to grow and the scale of such efforts to present concerns on case-by-case bases given their potential scale.

The moderate level of Arctic FDI we detected from Chinese firms suggests that existing FDI screening mechanisms are broadly effective and afford policymakers a window of opportunity to address risks associated with specific investments.

Use the US government’s (USG) unilateral buying power.

Increase USG Arctic commercial investments

Increase US foreign aid to select Arctic communities

Foster multilateral Arctic investment ecosystems.

Launch an Arctic FDI transparency initiative

Encourage allied and partner state-affiliated policy banks to invest more in the Arctic

Pursue institutional FDI frameworks.

Pursue an intra-Arctic investment fast-track

Establishing an Arctic Development Bank

Arctic Foreign Direct Investment Contacts

Dr. Joshua Tallis, Project Director, Strategy and Policy Analysis Program
Cornell Overfield, Research Analyst
Heidi Holz, China Strategy Lead Analyst