In this post on Newsweek's "Wealth of Nations" blog (also published in the March 22, 2010 issue of Newsweek) it is stated that China is looking to invest in Iceland. China's new embassy in Reykjavik will be the largest in the capitol, and China has increased its inquires to Iceland's official investment agency. Known for it's "ask-no-questions checkbook diplomacy," China is interested in Iceland as it looks for new trade routes across the Arctic as polar ice melts. Iceland could serve as an optimal way station for China. Iceland would benefit from Chinese investment as it is currently battling billions of dollars in debt to Britain and the Netherlands.
This article made me think of the reading we did this week from Bad Samaritans. Ha-Joon Chang writes about international organizations such as the WTO and IMF loaning money to debt-ridden countries with harsh conditions attached. These conditions can interfere with aspects of the country that are very indirectly related to the country's ability to pay off the debt. While China will be investing rather than loaning, and it is not an international organization, it is possible for China to interfere with Iceland's internal affairs. If China becomes Iceland's main investor, Iceland will have much more incentive to go along with China's policies. While increased investment will serve Iceland well now, it could possibly hinder the country later on. This problem is not specific to China and Iceland, but rather all countries that rely heavily on foreign investment.
The end of the blog post mentions that Iceland's relationship with the rest of Europe is currently strained because of the debt it owes. It concludes by posing the question "So why not some new friends from Asia?" I wonder what the rest of Europe's response would be to increasing Chinese influence in Iceland. Would Britain and the Netherlands, the countries that Iceland is indebted to, welcome the investment because it helped Iceland pay off its debt? Or would it be hostile to Chinese investments, fearing the possibility of the North Atlantic controlled largely by the Chinese?
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