September 04th, 2011 | Global Times Chinese investments face low risk from Libyan rebels
With Libyan rebels occupying Tripoli and most of the rest of Libya, rumors are circulating that those countries, including China and Russia, which didn’t completely support rebels in the civil war, will be forced to withdraw from the post-war reconstruction. On August 23, Reuters quoted a senior official of an oil company controlled by rebels. He claimed that Libya would use oil contracts to punish China and Russia for not supporting the rebels, which drew wide attention.
Many people held that China’s commercial interests in Libya might be at risk. In fact, in consideration of China and Libya’s actual strength and their mutual dependence on the state economy, it is really unnecessary for us to care about this.
The rebel officials who propose cooperation with Russia and China are the majority, and are more senior. After capturing Tripoli, the rebels in charge of the post-war reconstruction declared that the new regime would abide by the agreements such as on oil and project contracting signed by Gaddafi government. They claimed that these agreements, including those with Chinese companies, were absolutely holy and inviolable.
When the Gaddafi regime and the rebels were engaged in fierce battle, both sides took a series of actions to build good relationships with China. For example, the rebels dispatched troops to safeguard the construction projects of Chinese companies and dispatched a tanker of crude oil to China.
Besides, post-war Libya is beset with numerous contradictions so that voices inside some NATO countries claim the rebels’ victory to be a Pyrrhic one. To gain a foothold as soon as possible, they need reconciliation both at home and abroad instead of clearing all their enemies and taking revenges. Although China does not like to throw its weight around and show off its power, it is a great power, after all, and neither side wants to offend it.
Chinese companies are obviously outstanding when it comes to cheap and efficient construction projects. Rebuilding a country after civil war is critical to win the popular support. So the new Libyan regime has much less reason to exclude Chinese companies.
All the exports from China to Libya and the contracting projects are being done for the sake of people’s livelihoods instead of the military. If the rebels offend China and Russia for no reason, such a regime will not follow the right track of reconciliation at home and accordingly a stable order could not possibly be established.
In that case, long-term investment projects would be too risky anyway.
Thirdly, we won’t lose much in the near future even if the rebels betray us – nothing more than a few proposed contracts. However, politically and economically speaking, it is Libya who is more dependent on us.
The Sino-Libyan trade volume reached $6.6 billion last year, taking up merely 0.22 percent of China’s total volume.
Yet 11 percent of Libya’s total crude output went to China, but it makes up at most 2-3 percent of China’s overall imported oil.
The total amount of Sino-Libyan project contracting hit $5.8 billion in 2009 and projects worth of $1.9 billion were completed, occupying 4.6 percent of China’s total overseas projecting turnover in that year – a figure said to have remained stable till now.
China had directly invested some $42.7 million in Libya by the end of 2009, making up 0.02 percent of the nation’s total amount of foreign?direct investment ($245.8 billion).
Libya ranks a mere 31st on the list of China’s African investments by volume. No Chinese firm is allowed to exploit crude oil in Libya since their Western counterparts have captured the market already. All that’s left for China’s famous oil trio, CNPC, Sinopec and CNOOC, is to provide drilling services and import oil.
In that case, why are we worrying about losing the Libyan market?
The author is a researcher at the Chinese Academy of International Trade and Economic Cooperation.
By Mei Xinyu