Greenland, a frontier market unlike any other for China

Picture Greenland through the eyes of a Chinese mineral baron or the boss of a state-owned construction giant.

The quasi nation, which is slowly becoming independent from Denmark, possesses some of the largest reserves of gold, iron, copper and zinc in the world. After China, Greenland has the biggest deposits of rare earths – materials essential to tech devices such as smartphones. Its uranium resources, should they be mined, could put the arctic country among the top exporters of the elements.

All of this is becoming available in a space of land the size of Germany, as climate change melts the ice and opens up access. The country also has oil, an estimated 32 billion barrels worth, which could put it among major producing nations such as Nigeria and Kazakhstan, although the reserves have not been commercially proven yet. More than half of the island has yet to be explored.

What Greenland doesn’t have is roads, or many ports – or really any of the infrastructure or human resources needed to get at this buried treasure. Chinese mining outfits, construction companies and state banks no doubt envisage Chinese miners hauling their spoils down Chinese-leveled and -financed roads to a port that China built and paid for specifically to access the minerals.

“With a population of 56,000, our biggest challenge is that we have no infrastructure,” Kai Holst Andersen, Greenland’s deputy foreign minister, said at an address last week at Shanghai’s Polar Research Institute. “Can you imagine, on the world’s largest island, there is no road between two cities. There are no ports in the places where the mines need to be. There are no people in many of the places where mines need to be constructed.”

A hugely significant new bill means that’s about to change, and Greenland seems highly welcoming of China’s hand in its natural resources.

This year, Greenland will open its doors to foreign labor and could, in a single gulp, boost its total population by more than 5% with foreign workers, most of whom would be Chinese. Last fall, Greenland’s parliament, the Inatsisartut, passed the Large-Scale Projects Act, a controversial measure that gives foreign workers stronger rights. The act isn’t final yet. The Danish parliament, which still controls Greenland’s immigration policy, must first approve it, “but that’s a minor part of it,” to put it in Andersen’s words.

Once the bill is enacted, some 3,000 Chinese workers from Sichuan Xinye Mining Investment Company could be flown over to operate a major iron-ore mine, known as the Isua project, located about 150 kilometers from the capital Nuuk. At the same parliamentary session that passed the large projects act, the Greenlandic government awarded London Mining a 30-year license to build and operate the mine. As the technical advisor, London Mining plans to hire Sichuan Xinye to do the digging.

There’s a caveat though – one that the Chinese mining barons might want to pay attention to. Greenland may not have roads or the people it needs to open huge mining pits. But the country does have laws, and strict ones at that. As part of the Kingdom of Denmark for more than three centuries, the country has developed strong institutions and a mature legal system.

“We are, in mining terms, a frontier country. But we are not a frontier country like frontier countries in Africa or South America. We are something very different – perhaps unique,” Andersen said. “We have evolved over 300 years a solid legal framework, a well-educated population, rules, democratic institutions and a strong society.”

When it comes to environmental regulation, Andersen claims that the country has some of the tightest regulations in the world. Greenlanders live much as their ancestors did: Highly dependent on local resources such as fish. Yet, with climatic zones moving north by about two kilometers per year, the country’s northernmost zone will disappear within 10 years, delivering a major blow to indigenous lifestyles. Tight environmental laws aim to protect what they can of the people’s way of life.

The Large-Scale Projects Act, while allowing foreign workers to come into the country, is also designed to protect Greenland from bad practices and step up the level of monitoring done on projects during the construction phase.

Tough mining regulations will put Chinese companies out of their element. Chinese state-run firms are active in frontier and emerging markets across the globe but their success often relies on corrupt governments and a lack of regulations.

In countries such as Cambodia, where several state-owned Chinese firms are building everything from hydropower dams and roads to bridges and ports, civil society groups have protested the negative effects the projects have had on local people and the environment. These often-poor governments rebuke such complaints, saying that without China’s cheap labor, technical skills and willingness to finance the projects on long-term, low-interest loans, development would not be possible.

At present, only one exploration project in Greenland has been awarded to China. A Chinese company is exploring copper resources on the island’s east coast. Since 2002, when Greenland opened bidding on oil projects, China has participated but not won.

But the message from the Greenlandic government seems clear: China’s hunger for resources will compliment well a nation looking for cheap roads and ports. As Andersen put it, “We particularly welcome investments from China because we can see that you can do a lot of what we need.”