Melting sea ice in the Arctic is opening up significant economic development opportunities in the mining, energy, and shipping sectors.

In addition to territorial claims from the U.S., Canada, Norway, Sweden, Denmark, and Russia—China has also recently come out with its own broad ambitions for the Arctic.

On Jan. 26, China released its first ever Arctic policy paper, vowing to actively participate as a major player in the region.

“Geographically, China is a ‘Near-Arctic State,’ one of the continental states that are closest to the Arctic Circle,” according to the statement from the Chinese State Council information Office.

While the white paper doesn’t mention Greenland specifically, Arctic experts say the island of 56,000 people plays a pivotal role in China’s strategy. It has a wealth of natural resources, in addition to serving as a scientific research base, and its possible emergence as an independent state could give China more influence in Arctic affairs.

“These issues are vital to the existence and development of all countries and humanity, and directly affect the interests of non-Arctic States, including China,” according to the paper.

Fast Change in the Arctic

Last February, a weather station at Cape Morris Jesup, on the northern tip of Greenland, recorded temperatures above freezing on nine separate days, according to the Danish Meteorological Institute.

In other words: In the dark of winter, on one of the northernmost pieces of land in the entire world, someone could stand outside in a T-shirt and not quickly die from exposure. February temperatures average minus 30 degrees Fahrenheit.

During the winter months, sea ice around the polar ice cap grows. But this year, the final size registered on March 17 was 448,000 square miles less than the 1981-2010 average, according to the National Snow and Ice Data Center.

“This is the second lowest Arctic maximum in the 39-year satellite record,” reported the NSIDC. “The four lowest maximum extents in the satellite record have all occurred in the past four years.”

This has profound implications for Greenland, which is normally about 80 percent covered by a thick glacial ice sheet. The less ice, the more solar radiation is absorbed by the ground and ocean. This creates a feedback loop, melting even more ice and exposing more land.

A Play for Rare-Earth Metals

Greenland’s mineral resources aren’t precisely known, but based on the nation’s similar geology to northern Canada and Norway, it’s widely believed to hold vast stores of copper, gold, iron ore, zinc, lead, nickel, uranium, and rare earth elements.

The rare earths—which have a wide range of uses, including in smartphones and guided missiles—could be especially tantalizing to a country such as the the U.S., which has no domestic supplies of the minerals.

“Mining is going to play a very important role in our economic development,” said Inuuteq Holm Olsen, head of Greenland’s representation in Washington, D.C.

“We have ports and airports, but we need outside investment to build more, and then tie it all together,” he told Bloomberg Environment.

But the costs of mining in Greenland are quite high, not only because of the aforementioned lack of infrastructure but also the harsh environment and short summers.

According to a 2014 Brookings Institution report, a company that wanted to start mining in Greenland would have to spend considerable sums connecting to the nation’s power grid and building roads or rail lines to transport their workers, equipment, and extracted minerals.

Partly for those reasons, mining company executives ranked Greenland’s investment attractiveness 54th out of 91 countries in a 2017 Fraser Institute survey.

‘Small Growth Phase’

Investors are apprehensive about lingering questions over Greenland’s geologic database, said Kenneth Green, senior director of the Fraser Institute’s Centre for Natural Resource Studies.

Other concerns are tied to access to skilled labor, Green told Bloomberg Environment.

“They’re trapped in the small growth phase,” Green said. “And all of this takes place within the context of a soft commodity market, which makes certain plays more attractive than others.”

Greenland Minerals (an Australian firm) and China’s Shenghe Resources are developing a strategic partnership. When up and running, it is projected to be one of the largest global producers of magnet metals, along with by‐production of uranium and zinc.

Polar Silk Road Coming to Nuuk?

Chinese interest in Greenland also stems from a desire to exploit shorter shipping lanes opened up by global warming—what China is calling “The Polar Silk Road.” China has only one icebreaking ship, the Xuelong, but plans to add another in 2019.

The Chinese white paper also notes that “the Arctic has the potential to become a new fishing ground in the future.” Seafood accounts for more than 90 percent of Greenland’s exports, creating vulnerability to price fluctuations.

Nine nations and the EU reached a deal last December to place the high Arctic sea off-limits to commercial fishers for 16 years, to give scientists time to understand the region’s marine ecology before fishing becomes widespread.

Chinese tourists are also booking trips to the Arctic in record numbers, becoming the largest group of travelers to the Russian Arctic, according to government statistics.

“Greenlands’ biggest priority is improving the livelihood of citizens and tourism, eco-tourism is definitely one way to do that,” said Max McGrath-Horn, a partner at Arctic Tern Consulting, based in Washington.

McGrath-Horn points to the success of tourism in diversifying Iceland’s economy away from fishing. He said China could be a great partner for Greenland, as long as it meets best practices for sustainability.

“China actually has a pretty good track record in the Arctic,” he said. “They have been active partners in the Arctic Circle Assembly and as an observer to the Arctic Council—they’ve also put out a significant amount of funding for research.”

Independence Vote Looming

Greenland has been a self-ruling constituent of the Kingdom of Denmark since 2009. Most of Greenland’s political class is committed to eventually leaving the Kingdom completely but worry how to replace the $607 million annual subsidy it receives from Denmark.

“As we negotiate with foreign investors, we also need to be careful that we don’t give away too much,” said Asii Chemnitz Narup, the mayor of Nuuk, Greenland’s largest city.

Greenland plans to court “all potential investors” but also worries about giving away too much, Chemnitz Narup told Bloomberg Environment.

“We’re a very small population, with a limited amount of education,” she said, “I’m excited about the opportunities, but I think it’s also important to make sure it doesn’t happen too fast.”

But others say the case to invest in Greenland is also very different than other emerging economies.

“I think it would be a mistake for China, or any other country, to look at Greenland as a place to get rich quick and leave,” said Inuuteq Holm Olsen.

“If you are going to go invest here, you have to be there for the long term,” he said. “It’s not a low-cost country in terms of operating.”

Greenland shares the same commitment to environmental protection and social-welfare policies that other Nordic countries have, Holm Olsen said.

“Greenland is not the wild-wild west, we’re going to protect our interests.”