China's Game is at Many Tables

China's Game is at Many Tables

Emilio Fabio Torsello
Beijing knows how to move carefully on the energy market, maintaining relations with important countries that are often at odds with one another, and the Asian giant's energy demand will continue to grow

An economic powerhouse is getting ready to dominate multiple energy sectors and positioning itself on the market through decisions that bypass existing international political scenarios, aimed at consolidating energy reserves and imports. China has natural resources, a robust domestic supply and demand dynamic and the possibility of exporting raw materials anywhere in the world. This leadership position which Beijing has been building over the years, starting in 1970 when the country began the gradual transition from a centrally planned economy to one open to international markets. Now it competes with the United States, Russia and Saudi Arabia.
While in 2010 China was the world’s largest exporter of goods, today, with a population of 1.3 billion, half of which between 25 and 65 years old, it is also playing a key role in importing from other nations, holding an intermediate position in the international market that enables it to pursue different strategies in different situations – especially in the energy sector.


Overproduction helps with the diversification of imports

Between #SaudiArabia and #Iran: when it comes to #energy, #China's strategy is deft, says Matthew Smith of @ClipperData

"China," explains Matthew Smith, Director of Commodity Research at ClipperData, "has been one of the major beneficiaries of the tensions in the oil market, especially the nasty rivalry between Iran and Saudi Arabia. China changes its market strategy from month to month, depending on who is offering the best conditions. In fact, partly also due to overproduction, it has been more of a sellers’ market than a producers’ market during the last two years, and China has taken advantage of this to build up its own strategic oil reserves."
According to Bloomberg, for example, during the first seven months of 2016 China has imported oil from Saudi Arabia and Russia, with the former covering 14% of Chinese imports and the latter close behind with 13.6%. China has constructed this virtual tie in their rivalry over the years, moving on the international market according to what proves most advantageous. In 2011, Saudi Arabia covered nearly 20% of the Chinese market share, while Russia had just 8%. In August of this year the greatest number of supplies came from Angola. And in spite of the tense relations between Riyadh and Tehran, China is also beginning to pursue energy cooperation with Iran.

But the energy demand also regards Liquified Natural Gas

The same goes for liquid natural gas (LNG), which China needs in order to satisfy its energy demand. "Beijing," Smith adds, "is in a strong position in the LNG market as well, again thanks to global overproduction, which is showing no signs of letting up but, on the contrary, is expected to rise. This will lead to major flexibility in sales."
Beijing thus knows how to move deftly on the chessboard of the international energy market, and – according to Smith’ analysis – is also taking full advantage of tensions between the EU and Russia: "China has benefited from the geopolitical tensions between Russia and Europe," he explained, "signing a long-term supply deal with Russia, thereby allowing it to diversify and become less reliant on European buyers. China’s oil & gas demand is set to rise in the coming years, with Russia now considered a key supplier for both pipelines and imports by sea. Relations between the two nations will be further strengthened once work is completed on infrastructure currently underway."
In such a complex geopolitical scenario as the current one, then, in which the USA is dealing with troubled relations with key players like Turkey – which is edging closer and closer to Russia – and the EU is under energy and demographic pressure from the Middle East, China is able to play its cards at many tables, guaranteeing for itself a variety of sources for its energy storage.