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Why Is China So Anxious About Energy Abroad?

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Energy security is a pressing policy issue for many governments. Energy is the lifeblood of modern society – whether it is powering manufacturing industries, households or transport systems, economies could not function without a stable, affordable and reliable supply of energy. And as an energy transition from hydrocarbons to new energy sources gathers pace, policymakers are again turning attention to how 21st century energy systems can be designed. Nearly every government today maintains some kind of energy security policy.

Yet China cares about energy more than most. With a rapidly industrialising and urbanising economy, the Chinese government has made energy security a centrepiece of its economic reform program. Since the Twelfth Five-Year Plan (2005-10), it has gone to great lengths to develop its energy systems. On the domestic front, it has rapidly built-out its electrical distribution system, while actively promoting a range of new energy sources – including nuclear, hydro, solar, wind and natural gas – in order to foster a move away from high-polluting oil and coal sources.

China has also looked abroad for its energy supplies. Since 2004, the Chinese government has actively encouraged its energy firms – especially, but not only, its state-owned enterprises (SOEs) – to Go Out and acquire energy projects in other countries. This was supported through extensive investment subsidies through the state banking system, as well as forms of ‘resource diplomacy’ targeted at energy-rich governments in Asia, Africa and Latin America. In the decade to 2016, Chinese companies spent $827 billion acquiring over 1,000 energy projects in foreign countries. No other government has so aggressively bought-up foreign energy supplies.

China’s overseas energy acquisitions have proven extremely controversial. Critics have suggested it is attempting to ‘lock-up’ global oil supplies in competition with other importing countries, particularly Japan and South Korea. Others have criticised its resource dealings with several ‘pariah’ states – such as Libya, Sudan and Zimbabwe – noting that Chinese diplomatic support has propped up regimes with poor human rights records. It has also been suggested that China is triggering a neo-imperialist ‘scramble for Africa’, as other countries ramp up their energy investments in the continent to match Chinese efforts. Both the EU and US have publicly criticised China for what they view as a mercantilist approach to energy security, that threatens to undermine the transparency and openness of world energy markets.

Why has China adopted such a contentious strategy for securing its energy supplies?

First, China faces an accelerating ‘external dependence’ problem. While well-endowed with coal, its lack of high-quality domestic reserves has seen the Chinese economy become reliant on imports for oil and gas. As rapid industrialisation has driven energy demand upwards, China’s import dependence rate for oil has risen from 27 percent in 2000 to 60 percent today. This means China is far more exposed to the vicissitudes of international markets than previously, as energy costs are no longer captured within the Chinese economy, but are lost abroad as imports. Acquiring oil at the site of production thus provides a hedge against price movements, by enabling prices rises to be ‘internalised’ by Chinese firms.

China’s energy SOEs have also played a role. Three SOEs – CNPC, Sinopec and CNOOC – dominate the oil sector. These are highly powerful within the Chinese political system, with their heads holding vice-ministerial rank – a higher political rank than the energy agency heads, which supposedly regulate them. The SOEs have been one of the principal beneficiaries of China’s overseas energy investment program, as it has given them preferential access to subsidised credit through the state banking system. Indeed, the initial impetus for foreign energy investments came from the energy SOEs, who wished to use foreign investment as means to escape the unprofitable and declining domestic oil sector.

Geopolitical considerations have also loomed large, given China’s emerging rivalry with the US. Because most multinational energy firms are domiciled in the US, Chinese policymakers believe that global energy markets are ‘controlled’ by, and thus serve, US interests. It is also feared that during any future military confrontation, the US could use its naval supremacy in the Pacific to interdict China’s seaborne energy imports in the Straits of Malacca. The fact that approximately 45 percent of China’s oil and gas imports come from the Middle East – a region dominated by the US Navy, and comprised of US-aligned states – further contributes to these concerns. The consequence is a tendency to view energy security as a matter of national security, and to look for solutions that minimise Chinese dependence on US-secured energy supplies. Chinese investment in ‘independent’ energy producers assists this agenda.

For these reasons, China suffers from a much greater degree of ‘energy angst’ than other comparable economies. While energy is a major concern for many governments, it is of almost existential importance for China given its external dependence, powerful SOEs and geopolitical rivalry with the US. Unwilling to leave its energy supplies to the international market, it has instead committed to a strategy of acquiring energy at the site of production through a massive, multi-billion dollar state-backed investment program. And as this has put China on a diplomatic collision course with the US, Japan and EU, it threatens to further destabilise energy relationships between the world’s major economic powers.

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About the Author

This article was written by Dr Jeffrey Wilson of Elgar Blog. Dr Jeffrey Wilson is Senior Lecturer in International Political Economy, Murdoch University, Australia. His new book International Resource Politics in the Asia-Pacific is out now.

Callum Connects

Trung Nguyen, Founder & Managing Director of Advertising Vietnam

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Having initial success with his first start up in the ad industry, Trung Nguyen went on to start other ventures in the ad world in Vietnam. He now has the largest agency community in Vietnam.

What’s your story?
Three years ago I got my first job in the advertising industry. I worked for a local agency in town, and I fell in love with the creative industry. In June 2015, I founded Agency Life Community in Vietnam. It quickly became the most engaging community in the ad industry. The main content focuses on entertainment. After six months we had over 30,000 organic followers, now we have 120,000 followers.

Because the industry had been good to me, I decided I had to something for the industry to help the industry be better. So, I opened http://AdvertisingVietnam.com – a creative industry ad site which keeps advertising informative, creative and inspiring.

After more than a year in the ads industry in Vietnam, I figured the industry needed a better solution for the recruitment of good staff. Given I own the largest advertising community platform, why don’t I utilise Agency Life to help connect talent with ad agencies. So, I founded job site, AdJob.Asia in January 2017.

What excites you most about your industry?
The ad industry is a creative one with very passionate people who are always challenging themselves. The exciting part for creatives, in the morning they might be working on a baby brand and in the afternoon they are answering a beer brief. There is so much diversity. Every day is the new journey.

What’s your connection to Asia?
I am Vietnamese.

Favourite city in Asia for business and why?
Thailand. The Thais are the kings of the creative industry in SEA. Thai ads are very smart and creative.

What’s the best piece of advice you ever received?
Do what you love.

Who inspires you?
My friend, mentor and partner Mr Nghi Nguyen, founder of BrandsVietnam.com. We started our businesses at a similar time. He doesn’t see us as a competitor but rather, he believes that we share the same passion and we are working to provide better knowledge for the ad community.
Mr Nghi also guided me a lot when I first opened the business. I am inspired by his vision to make our marketing industry better.

What have you just learnt recently that blew you away?
Our business is a startup company and as a founder I do everything from operations, business development, planning and strategy. However, this is not the good way grow our business. You have to share the workload – find a co-founder or hire a great employee to help share the workload. “If you want to go fast, go alone. If you want to go far, go together.”

If you had your time again, what would you do differently?
Quit my full time job sooner.
During the first year of running my business, I was still working as an ad manager for an agency. However I lacked focus at work due to the overload of work and it affected the company I used to work for. I strongly recommend people who have an idea to start their own business, quit their job early on and focus 100% on it from the get go!

How do you unwind?
Play with my cat.

Favourite Asian destination for relaxation? Why?
I love to travel throughout all of Asia. I enjoy new places and meeting new people.

Everyone in business should read this book:
The Carpenter: A story about the greatest success strategies of all.

Shameless plug for your business:
AdvertisingVietnam.com is a site where you can quickly update yourself on the advertising news in Vietnam. We have 15,000 unique monthly readers who are professional people in the advertising and communications industries.

The Agency Life, https://www.facebook.com/agencylife is largest agency community in Vietnam. This is the right place for ad agencies to share their creative work.

AdJob.Asia now has more than 160 agencies in Vietnam who use our services. We are a leading recruitment service for the advertising industry in Vietnam.

How can people connect with you?
You can connect with me:
Facebook: https://www.facebook.com/trungnx26
Email: [email protected]
LinkedIn: https://www.linkedin.com/in/trungnx26/

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started, built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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Entrepreneurship

Women on Top in Tech – Minette Navarrete, Co-Founder, Vice-Chairman, and President of Kickstart Ventures

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(Women on Top in Tech is a series about Women Founders, CEOs, and Leaders in technology. It aims to amplify and bring to the fore diversity in leadership in technology.)

Here is our interview with Minette Navarrete, Co-Founder, Vice-Chairman, and President of Kickstart Ventures. Kickstart is an investment firm that funds early-stage digital startups, providing capital, incubation and mentoring, and market access.  Minette has held CEO/COO positions in various industries, ranging from Philippine startups to iconic multinationals.

What makes you do what you do?
I’m keenly interested in innovation and ecosystem development, and committed to contributing to nation-building. I love that my job combines all of that, and allows me to leverage all my past experiences into a new role that creates value for founders and fund-providers alike.

How did you rise in the industry you are in?
Counter-intuitively! I don’t have a background in tech; nor do I have a long history of venture investing. My skill sets are in strategy, general management, and marketing; and my experience has largely been in innovation and business turnaround. But I have a broad range of work experience (FMCG, apparel, property, and online game publishing in a startup), and that has helped inform my views. More than anything, though, Kickstart has made this progress because of the trust of our principals, and the initiative of a wonderful team. Truly, people make the difference.

Why did you take on this role/start this startup especially since this is perhaps a stretch or challenge for you (or viewed as one since you are not the usual leadership demographics)?
All throughout my career, I’ve only taken on difficult roles. There’s little growth in a role that is easy; and the challenges are what makes a role worth doing.

Do you have a mentor that you look up to in your industries or did you look for one or how did that work?
I’ve had the benefit of a number of good mentors through my career.

How did you make a match if you and how did you end up being mentored by him/her?
First off: I have had both male and female mentors. Generally, I’ve met mentors in work situations: i.e. they started out being an immediate superior, or being on my Board of Directors. The close work association evolved as both sides found the experience productive, intellectually satisfying, and fun.

Now as a leader how do you spot, develop, keep, grow and support your talent?
Mostly through the same process: nothing compares to actually working together. That said, with more and more experience, I think people develop a sharper instinct about talent, and the potential for development. It’s also important to build the relationship over time, and to invest in actively supporting talent by both seeing things through their eyes as well as helping them find other lenses with which to view the situation they find themselves in.

Do you consciously or unconsciously support diversity and why?
Yes, we care about diversity, although the primary filter for Kickstart is always ability and performance. Many studies have shown that diverse teams are closely correlated to better results; and given the kind of work we do, it’s important that we all sharpen our ability to deal with varied types of people and situations.

What is your take on what it takes to be a great leader in your industry and as a general rule of thumb?
It’s important to be trustworthy, especially given that venture investing deals with the highest-risk asset class. Trust is earned through competence, diligence, honesty, clarity, and courage.

Advice for others?
I say this a lot: Build strong foundations. Be clear about your values, principles, and priorities. Volunteer for the toughest jobs. Do the unsexy stuff. And work with conviction, commitment, courage, and honour. None of this is particularly glamorous, and they don’t deliver instantaneous results, but the value-creation is real, authentic, and sustainable over a longer period.


If you’d like to get in touch with Minette Navarrete, please feel free to reach out to her on LinkedIn: https://www.linkedin.com/in/minettenavarrete/

To learn more about Kickstart Ventures , please click here.

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