Arctic Prospecting: Measuring China’s Arctic Economic Footprint

This report is part of a series that CNA produced to fulfill requirements outlined in the fiscal year (FY) 2020 National Defense Authorization Act (NDAA), Sec. 1260E. The FY 2020 NDAA mandates that a federally funded research and development center “complete an independent study of Chinese foreign direct investment [FDI] in countries of the Arctic region, with a focus on the effects of such foreign direct investment on United States national security and near-peer competition in the Arctic region.”1 The Department of Defense selected CNA to conduct this analysis, for which CNA produced four reports. In this report, we examine the nature and scope of PRC investors’ FDI in the Arctic contextualized by activity by investors in other states.2

Our analysis of economic activity in the Arctic by PRC-based actors assessed the issue from two perspectives:

1. FDI in the Arctic, with FDI strictly scoped
2. Broader large-scale economic activity with Arctic implications

Key Findings

Distinguishing between FDI and other forms of economic activity yields a novel finding in the study of economic activity in the Arctic originating in the PRC:

FDI in the Arctic from PRC-based sources appears to be an important but niche tool, whereas large-scale economic activities with Arctic implications and involvement by PRC-based firms are more substantial than investments.

This finding leads to several important conclusions. First, concerns about FDI from PRC-based entities are likely spurred in part by the accurate perception of broadly high overall PRC regional economic activity. Second, US and other Arctic policy-makers have a clear window within which to implement further rules or structures to mitigate risks of highly concentrated investments controlled by PRC-based entities. Third, policy-makers concerned with overall PRC economic activity in the Arctic face a much broader and more complex set of obstacles to implementing countervailing policy measures.