Skip to content

Understanding China’s Economic Presence in the Arctic

Are tangible investments following the hype?

Words: Yue Wang
Pictures: Willian Justen de Vasconcellos

In January 2018, China published its first-ever Arctic policy, emphasizing the role China sees for itself in Arctic affairs. China has extended its interests in the region beyond the country’s previous focus on scientific research to also engaging in economic activities along with the “Polar Silk Road” (PSR). As a new expansion of China’s grand and crucial foreign policy strategy, the “Belt and Road Initiative” (BRI), the PSR aims to develop “a blue economic passage linking China and Europe via the Arctic Ocean”.

China calls itself a “Near-Arctic State” that is still a non-Arctic state, and “an important stakeholder” in the region. Among its economic activities, China’s engagement strategy primarily revolves around investments, including foreign direct investment (FDI) and foreign portfolio investment (FPI). China’s investment attempts have mainly focused on the resource extraction industry, such as Yamal LNG, the Kvanefjeld mining project, and critical infrastructure projects, such as the Kemijärvi airport in Lapland, the Arkhangelsk deepwater seaport, and the submarine cable system in Greenland.

China’s growing involvement in the Arctic and several of its particularly controversial investment attempts — such as the Greenland airport project and the land purchase proposal in Iceland — lead to the impression that China’s investments in the Arctic are increasing and alarming. Many reporters, politicians, and analysts have expressed mounting concern regarding China’s true intentions in the Arctic behind its investment attempts. In 2019, then US Secretary of State Mike Pompeo aggressively questioned China’s real intentions in the Arctic and warned of the potential debt trap and other dangers, such as corruption, economic destruction, and militarization, caused by China’s investments in the Arctic. Nordic states also highlighted the importance of conducting foreign investment screenings, driven by the security concerns in critical infrastructure and 5G systems, which seems like a not-so-subtle reference to China’s activities, considering that these are the primary foci of Chinese investments.

To better understand China’s economic presence in the Arctic, we need to determine if China’s investments in the Arctic are really growing and explore how the Arctic investment destinations can respond better.


Unlike the “standard” narrative that Chinese investment is rapidly growing, “I always ask people to list the Chinese investments in the Arctic…. unfortunately that list is quite short,” said Mads Qvist Frederiksen, the Executive Director of the Arctic Economic Council, in January 2022. A group of Nordic researchers also pointed out that China’s investment and overall economic activities in the Arctic are limited, with most investments occurring in the Russian Arctic region.

In many reports and analyses, the references to China’s investment are usually without a clear distinction between FDI and FPI, although fundamental differences exist. For example, FDI is generally considered stable with long-term development strategies, and the investors typically hold a high level of control of the firm. However, FPI is more short-term interest-driven, and the investors have little interest in being involved in the firm operation and management. In this regard, it is primarily Chinese FDI that worries China-watchers since FDI implies a high level of control by Chinese shareholders in which the state could easily insert its strategic interests.

There is a gap between peoples’ idea of China’s investments in the Arctic and the observed investments on the ground.

CNA, a think tank dedicated to national security research, systematically reviewed China’s FDI in the Arctic. Its reports conclude that China’s FDI does not seem to be increasing overall and indicate a gap between peoples’ idea of China’s investments in the Arctic and the observed investments on the ground. What could be the reasons for this gap?

First of all, Chinese investors tend to announce high-value deals and the corresponding contribution to the Chinese Government’s strategy, which is newsworthy and catching for the local Arctic and international media, especially in the context of the intensified China-US great power competition and the controversy of the massive BRI. However, many announced investments are usually significantly watered down or never occur in reality, but the grandiose announcements are rarely followed to completion or revealed to the public. Failed large-scale investments are far from something Chinese investors are proud of, and they may be afraid of possible consequences of media storms both domestically and abroad. One such example is that of the rejected investment by Huang Nubo, a Chinese property tycoon who tried to purchase 300-square kilometers of Icelandic land (0.3% of Icelandic national land mass) in 2011. Because of this failed investment, Huang and his Zhongkun Group got caught in a media controversy, especially in China and Iceland. Huang believed the failure of this investment was due to political reasons, and that the high level of media exposure may negatively affect his future investments. In addition, for the media, it is obvious that diluted Chinese investments are less newsworthy and eye-catching.


The tight connections between Chinese investors (both state-owned and private) and the Chinese Government are the primary causes of China’s threat perception and the main reasons for the failed deals.  Chinese investments are usually portrayed as advancing Chinese political and security interests in the Arctic regardless of the investment source. Unlike state-owned enterprises, private enterprises, in principle, are not supposed to serve the state’s political goals. However, the line between state and private enterprises in China has become increasingly blurred, and the government’s influence has been expanding in all Chinese enterprises, especially since the OFDI regulation was tightened in 2017. In the new regulation, Guiding Opinions on Further Directing and Regulating the Direction of Overseas Investment, many so-called “irrational” investments are restricted or prohibited, but the Belt and Road Initiative-related projects are marked priority. What’s more, the new regulation stresses national interests and national security in OFDI, and the involvement of the Ministry of Foreign Affairs, an unusual FDI regulator, further indicates the Chinese Government’s increasing political and strategic interests in its enterprises’ investments overseas, including the Arctic.

Although OFDI by both Chinese state and private enterprises are influenced by the Chinese Government to varying degrees, at the end of the day, enterprises are commercial first and foremost. No doubt, these enterprises — at least some of them — have realized that their connections with the Government may hinder their OFDI and profit-seeking, so why do these enterprises still highlight how their investment may contribute to the national agenda in documentation? A plausible reason could be their need to gain state support for their investments, including financial support from the state banks and regulatory support. Therefore, Chinese enterprises, especially private ones, seem to face a crucial dilemma. Addressing the state’s strategic concerns is a premise to obtain state support for their overseas investment, but such claimed commitments make the promised economic goals of their investments suspicious in the eye of the recipient countries and then lead to barriers for their profit-seeking economic activities.

It remains unknown to what extent Chinese private enterprises sincerely care about serving the national strategies in their overseas economic activities, but it seems at least some of them merely regard strategically framing their investments as a technical approach to attract financial and regulatory support from the state.

There is no doubt that attracting responsible foreign investment can boost economic and societal development in the Arctic, but making smart decisions on investment proposals by the Chinese private enterprises is a great challenge for the Arctic states and local communities because of the non-transparent investment information and the confusion of the relationship between the state and Chinese private enterprises in China.

FDI screening with up-to-date proper measures is necessary to make these smarter decisions. Most of the Arctic states have an FDI screening framework in place already, but they need a more tailored approach to differentiate FDI from Chinese private investors for the sake of both investors and the locals. For example, open and transparent information exchanges between the screening agencies and the investors may help both sides understand each other’s concerns better and more effectively. The relationship between the private investor and the state should be assessed case by case, carefully considering the changes in Chinese domestic politics and OFDI regulations.

Yue Wang is a Doctoral Researcher in International Relations at Tampere University in Finland and a Visiting Researcher at the Arctic Centre, University of Lapland. His main research interests are international politics in the Arctic, unintended consequences of international cooperation, and China-EU FDI. @ 

Yue Wang

Hey there!

You made it to the bottom of the page! That means you must like what we do. In that case, can we ask for your help? Inkstick is changing the face of foreign policy, but we can’t do it without you. If our content is something that you’ve come to rely on, please make a tax-deductible donation today. Even $5 or $10 a month makes a huge difference. Together, we can tell the stories that need to be told.