Chinese Overseas M&A In Natural Resources (Causes)

735 words - 3 pages

Recent years, natural resource is always the hot sector for M&A, especially for those predominant state-owned enterprises that represent national will. Therefore, these M&As in natural resources are not the pure commercial operations and causes of them will be categorized into two levels, enterprise and country.
First, let’s focus on the causes of enterprises and it is easily found that M&A is able to provide them with an access to wider resource market and advanced exploit technology. No matter in case of China National Petroleum Corporation acquiring PetroKazkahstan in 2005 or China National Offshore Oil Corporation Limited (CNOCC Limited) merging Nexen in 2013, the latter ones either possess larger overseas marker like Kazakhstan or more diverse business and technology like Nexen’s oil sand exploitation technology. (Appendix 1) These M&As will facilitate the expansion and internationalization of Chinese enterprise in terms of market and technology. However, this is not the core cause of energy M&A, since enterprises involving in the business are almost all nation-owned and natural resource is more a strategic material than usual traded commodity for companies.
Therefore, let’s mainly concentrate on the causes at national level. This section will divide the causes into three aspects, supply, stability and long-run effect. In resource supply, let’s take oil as an example. In coordinate with appendix two, we can find that around 1993, oil consumption already caught up with domestic production and has overtaken it. Since then, the supply gap has been rapidly enlarging as a result of great domestic demand. It is estimated that China production and consumption of oil per day are 4416000 barrels and 10276000 barrels (May 2013,US Energy Information Administration), which is scare and means that more than half of oil demand needed importing. Obviously, this is not good for the long-term development of a country in t temporary situation because oil and other natural resources as strategic materials are not supposed to be controlled by other countries. Furthermore, the supply of natural actually fluctuates greatly due to the price floating or political and military issues. Particularly during some special periods, like Iraq War, the export of Iraq...

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