After decades of striking cushy natural resources deals in Myanmar under terms that Western corporations governed by anti-bribery legislation would probably balk at, Chinese natural resources companies are about to find their investments in the former hermit kingdom are coming under the spotlight.
Myanmar, which counts China as its biggest investor, has signed up to (paywall) a global scheme known as the “Extractive Industries Transparency Initiative” (EITI) that requires governments to publish payments they receive from resources companies in return for handing out access to lucrative projects such as mine developments or oil fields.
Having such a shaft of sunlight hovering over their operations in a developing country will come as a shock to many large Chinese resources companies. A January report (pdf) by NGO Global Witness which studied disclosure by the 15 largest Chinese resources companies that operate overseas found (p.16) that their reporting on payments to overseas governments was “fragmented and irregular.”
There are also mysteries surrounding the exact financial relationships between Chinese resources firms and African governments. Often, the Chinese companies and the host governments decline to say. For years, questions have been raised over a group of mysterious, privately held Hong Kong companies known as the Queensway Group which appears to get extremely cheap prices from the Angolan government for oil, which it then sells into China for huge profits. The Queensway Group has extremely strong ties to Chinese state-owned oil major Sinopec, according to this 2009 report (pdf) by the U.S.-China Economic & Security Review Commission, which mentioned Sinopec 79 times over 56 pages.
But such opacity is going to get much harder for large Chinese companies whose shares trade in the US. North America has ruled that all US and foreign resources companies who file annual reports with the SEC must start disclosing payments to foreign governments from September this year. That requirement covers several major Chinese corporations including Sinopec, its oil industry rival PetroChina and Aluminum Corporation of China (known as Chalco).