China needs the US and Australia to keep the lights on
Up to 50% of the country’s liquefied national gas is imported from Beijing’s biggest critics
President Xi Jinping’s Communist Party regime has a shady secret. It needs arch critics Australia and the United States to keep the lights on, and the factories humming.
Earlier this year, China buckled under an energy crisis that sparked power cuts across the country and threatened economic recovery from the Covid-19 pandemic.
Surging coal and natural gas prices along with a crackdown on fossil fuel emissions created the perfect storm for Beijing.
But the full cost of the crisis was highlighted by Beijing’s reliance on two outspoken opponents of Xi’s administration, Canberra and Washington.
“China is getting half its LNG [liquefied national gas] from Australia and the US – that can’t make Beijing happy. But they have to go where the projects are, and that’s where they are right now,” Nikos Tsafos, the head of energy and geopolitics at the Center for Strategic and International Studies, a Washington think-tank, told the Financial Times on Tuesday.
Power points:
- Imports of coal and natural gas have jumped sharply this year.
- In September, China imported 32.9 million tons of coal.
- That was a 76% increase compared to the same period in 2020.
- Natural gas imports also expanded by 23% to 10.6 million tons.
- The data was released by the General Administration of Customs.
- Factories and businesses were forced to ration power in September and October.
There is a debate inside the Chinese government about [the] level of import dependency.
Oxford Institute of Energy Studies
What was said: “The US-China relationship in many respects is at a very low point. But energy and climate are a potential bright spot where there can be more co-operation notwithstanding the tension and conflict,” Jason Bordoff, of the Columbia Climate School and a former energy official under President Barack Obama, told the FT.
Delve deeper: Stability is the bedrock of the Party’s rule. Xi would rather use the fires of Hell to power the world’s second-largest economy than allow the sparks of social unrest to burn his administration to the ground.
Demand and supply: “Governments of various levels should [consider] the practical needs of enterprises, businesses and residents before limiting or cutting the power supply,” state-controlled China Daily warned in an editorial earlier this year.
Economic hit: “The power-supply shock in the world’s second-biggest economy and the biggest manufacturer will ripple through and impact global markets,” analysts at financial group Nomura, said in a research note as reported by the Reuters news agency.
Big picture: “There is undoubtedly a debate inside the Chinese government about what level of overall import dependency for natural gas is acceptable,” the Oxford Institute of Energy Studies, stated in a report back in 2019.
China Factor comment: Volatility in the energy sector threatens to create volatility in society. The CCP will be aware of the risks and will move heaven and earth to contain them. Even if that means doing deals with the US and Australia.