THE EPOCH TIMES -- A new source of energy can be found at the forefront of electric-vehicle development in the 21st century, and China is beginning to dominate in controlling the world’s supply of this so-called new petroleum: the mineral cobalt.
Cobalt is one of the key components of the lithium-ion batteries used to power electric vehicles (EVs).
While Japanese electric carmakers are struggling to acquire the mineral and called for government assistance during a July 24 industry meeting in Tokyo, Chinese companies have been able to control one of the world’s key sources: mines in the central African nation of the Democratic Republic of Congo, which is one of the world’s poorest countries.
More than half of the world’s cobalt originates from Congo, and China’s control of the cobalt industry is as if it “had total control over oil fields in the Middle East,” an unidentified official with Japan’s Ministry of Economy, Trade and Industry told Nikkei.
Nikkei, citing information from the government agency, Japan External Trade Organization, pointed out that China had provided $9 billion in financial aid to Africa from 2007 to 2009.
A woman and a man separate cobalt from mud and rocks near a mine between Lubumbashi and Kolwezi, Democratic Republic of the Congo, on May 31, 2015. (Federico Scoppa/AFP/Getty Images)The aid is a perfect example of China’s “dollar diplomacy,” whereby the Chinese regime provides large sums of loans and investments to foreign countries in order to exert its influence in the region.
Most recently, in November 2017, China provided financial aid of $6 million in emergency humanitarian assistance to Congo, according to an announcement at the time by China’s Ministry of Commerce. This investment allowed China to gain certain mining rights to copper and cobalt deposits in Congo. China’s deep-rooted connections in Congo have thus prevented Japanese companies from accessing these mineral deposits.
Poor Labor Practices
However, the Congolese cobalt mining industry has come under scrutiny because of unlawful labor practices. A November 2017 report by Amnesty International documented the exploitation of Congolese child labor. Cobalt mined by children and adults ended up at a Chinese processing company called Huayou Cobalt, according to the Amnesty International report. The cobalt, in turn, ended up in batteries used for electronics and electric cars.
Some electronics-makers that have begun investigating their supply chains in relation to Huayou Cobalt include Apple, Dell, and Hewlett Packard.
Huayou Cobalt, a publicly listed company on the Shanghai Stock Exchange, is headquartered in the coastal province of Zhejiang.
“Everything has become Chinese,” said Richard Muyej, the governor of Lualaba Province in Congo, at a mining conference on June 15, according to Bloomberg. Lualaba has most of the country’s copper and cobalt deposits.
A child breaks rocks extracted from a cobalt mining at a copper mine quarry and cobalt pit in Lubumbashi, Democratic Republic of the Congo, on May 23, 2016. (Junior Kannah/AFP/Getty Images)China’s grip of Congo cobalt was further cemented this June, when the 35-member Union of Mining Companies with Chinese Capital (USMCC) association was founded under the initiative of China’s embassy in Congo, according to Bloomberg. Included in the association are Huayou Cobalt and state-run China Nonferrous Metal Mining Group.
CATL and Government Subsidies
China’s desire to control the cobalt supply is connected to its desire to develop its electric-vehicle industry. Contemporary Amperex Technology (CATL), founded in 2011 and headquartered in Ningde City in southern China’s Fujian Province, is currently the world’s largest manufacturer of battery cells to power EVs.
CATL has a strong presence in Congo. According to multiple Chinese media, CATL has control over the mining company, Societe de Mines d’Or Resources SARLU, which has mining rights to lithium deposits in Congo. Lithium is another key mineral used to manufacture lithium-ion batteries used to power EVs.
According to a May 25 article by Chinese news portal Sina, CATL is also a shareholder of Canadian company Tanalex Resources, which has mining rights in Congo to lithium, cobalt, and tantalum deposits.
In March, CATL announced that it increased its stakes in the Quebec-based mining company North American Lithium to become the controlling shareholder with 90 percent of the company’s shares, according to China’s state-run English media China Daily. It mines in the Quebec region, where there are significant lithium deposits.
CATL’s meteoric rise to become a world battery manufacturer has much to with the Chinese regime’s subsidy programs. According to a July report by a state-run publication The Time Weekly, Beijing provided a subsidy of 59 billion yuan (about $8.6 billion) in 2015, and 83 billion yuan (about $12.1 billion) in 2016, based on incomplete central government data and The Time Weekly’s own estimates.
While there is no public data available detailing how much in total CATL had received from the state over the years, Yicai, a major Chinese business newspaper, reported that CATL had openly admitted it received a total of 440 million yuan (about $64.2 million) from government authorities in 2017.
In China, local governments also provide subsidies to local businesses. According to the Chinese regime’s mouthpiece newspaper People’s Daily, the provincial government of Fujian, where CATL is based, provided a total of 110 million yuan (about $16 million) in research and development subsidies to 431 tech companies, 12.7 million (about $1.85 million) of which went to CATL.
BYD, a Chinese battery manufacturer based in the southern Chinese city of Shenzhen, received 630 million yuan (about $92 million) in government subsidies in the first quarter of this year, according to a May 22 report by Chinese newspaper Southern Metropolis Daily.
The Chinese regime also put in place preferential policies to protect domestic battery makers from foreign competition.
For example, back in 2014, three South Korean lithium-battery makers—Samsung SDI, LG Chem, and SK Innovation (SKI)—all began to invest in China through joint ventures that would manufacture lithium batteries in Chinese factories. But in June 2015, Beijing rolled out a preferential subsidy program, open only to domestic EV makers if they used a domestically produced battery, according to state-run magazine Electronic Engineering & Product World (EEPW). The subsidy program forced the three South Korean companies into a limbo by the end of 2016: SKI halted its battery production in Beijing, while struggling to deal with dwindling orders from Chinese EV makers.
Overseas Recruitment Program
Aside from hefty government subsidies, China’s rapidly growing battery industry also relied on another national policy: recruitment programs to lure Chinese and foreign professionals to come work in the country.
One such recruitment program is the Thousand Talents Plan, begun in 2008 to attract workers in science and tech fields to work in China through offering lucrative financial packages. The objective of the program is to advance China’s tech sectors and eventually enable China’s industries to supplant global supply chains.
Two employees at CATL were recruited under the plan. Liang Chengdu is the research and development director at CATL’s research institute. After getting his doctorate in chemistry from the University of Tennessee in Knoxville in 2005, Liang was hired as a scientist at the nearby Oak Ridge National Laboratory (ORNL), where he led a number of projects funded by the U.S. Department of Energy.
Meanwhile, Robert Galyen, currently the CFO (chief financial officer) of CATL, was recruited under the plan in 2012. According to China’s state-run news site China.com.cn, Galyen was given a financial package of 4.1 million yuan ($598,932). According to his LinkedIn page, he had an extensive career in the United States, including 21 years at General Motors; nine years at Tawas, a battery testing company; and two years at the e-car division of Magna International, a Canadian automotive supplier based in Ontario.
In 2014, Galyen was awarded the title of “national distinguished expert” by the Thousand Talents Plan program, according to his LinkedIn page.
CATL was also able to recruit overseas talent through a recruitment program under the Fujian provincial authorities. According to multiple Chinese media, CATL hired seven professionals through the local recruitment program known as the Hundred Talents Plan.