China is pouring another $7bn (£4.4bn) into Brazil's oil industry, reigniting fears of a global "land grab" of natural resources.
State-owned Sinopec clinched the deal with Spain's Repsol yesterday to buy 40 per cent of its Brazilian business, giving China's largest oil company access to Repsol Brasil's estimated reserves of 1.2 billion barrels of oil and gas. The whopping price tag for Repsol Brasil – which values the company at nearly twice previous estimates – is a sign of China's willingness to pay whatever it takes to lock in its future energy supplies and avoid social unrest. It will give the company enough cash to develop all its current oil projects, including two fields in the Santos Basin.
The Repsol deal is not China's first in Brazil. In February last year, Sinopec stumped up a $10bn loan to Petrobras, the state-owned oil company, in return for guaranteed supplies of 10,000 barrels of oil every day for the next 10 years.
It also follows a slew of similar deals across the world. While much of the developed world is baulking at its debts in the aftermath of the financial crisis, China has continued a global spending spree of unprecedented proportions, snapping up everything from oil and gas reserves to mining concessions to agricultural land, with vast reserves of US dollars.
This year alone, Chinese companies have laid out billions of dollars buying up stakes in Canada's oil sands, a Guinean iron ore mine, oil fields in Angola and Uganda, an Argentinian oil company and a major Australian coal-bed methane gas company.
"China is rich in people but short of resources, and it wants to have stable supplies of its own rather than having to buy on the open market," Jonathan Fenby, China expert and director of research group Trusted Resources, said.
But it is a strategy causing anxiety elsewhere in the world. Rumours in recent weeks that China's Sinochem may make a bid for Canada's Potash Corporation raised fears that the Middle Kingdom would corner the global market for fertiliser.
Similarly, when BP's share price plummeted after Barack Obama's criticisms in the wake of the Gulf of Mexico oil spill, there was concern that the company would be driven into the hands of the Chinese.
More explicitly still, when the aluminium giant Chinalco was trying to buy Anglo-Australian Rio Tinto last year, television ads protesting against the scheme from no less than the Senate opposition leader bellowed "Keep Australia Australian".
"Chinese acquisitions are increasingly on the political radar," said Robin Geffen, the chief executive of Neptune Investment Management, which runs a leading China investment fund. "The pinch points come when people feel that supplies affecting national security could be threatened by China buying them all up."
Contrary to the conspiracy theories, China is not looking for world domination. It has seen economic growth averaging a massive 10 per cent for the best part of three decades, and although it is expected to drop into the high single-digits in the coming years – in response to a dip in export demand – the natural resources required to support even slightly moderated growth are an overwhelming priority.
China is already the second-largest oil consumer in the world and far outstrips its domestic supplies. Neptune estimates that it will need to buy two companies the size of BP each year for the next 12 years to meet its growing domestic energy demand. Demand for electricity alone is growing each year equivalent to Britain's entire output.
"These are massive, massive numbers," Mr Geffen said. "The deal with Repsol today, and all the others we have seen in recent years, are wholly strategic, to nail down what they estimate future demand will be."
But, despite the concerns that China is cornering the market and will push up prices, the developed world also has a vested interest in China pursuing a successful strategy.
Notwithstanding qualms about a change in the global balance of power, China's continued economic growth has been vital to hauling the world out of recession – and will continue to do so for the foreseeable future. The threat from political instability if Chinese growth stalls has similarly global implications. "The whole world needs China to have these resources to help pull us out of recession and avoid local unrest," said Ian Sperling-Tyler, a partner and oil and gas expert at the consultancy Deloitte.
But concerns remain about China's involvement in politically difficult countries, particularly in Africa. China is not squeamish about the politics of its business partners. It follows a simple formula, offering premium prices and massive infrastructure investments in return for long-term concessions for key resources. There are several well-documented deals on the continent – including a recent $2.5bn tie-up with Britain's Tullow Oil in Uganda and off-shore production in Angola and Nigeria. And the positive impact is evident in spanking new infrastructure including hospitals, ports, and road and rail links being built with the influx of Chinese money.
But China is also involved in some of Africa's more controversial countries. It came in for widespread criticism in 2008 for arms sales to war-torn Sudan, a major trade partner, and its alleged refusal to help resolve the humanitarian crisis in Darfur. It has also been accused of paying multimillion-dollar backhanders in return for African leaders repudiating Taiwan at the UN, although nothing has ever been proved. And because the majority of the deals are done on a government-to-government basis, there is no way to be clear on the extent of the relationships.