An oil tanker leaves Yangpu Port in Hainan Province, south China, on September 23, 2020 (XINHUA)
Can the China-U.S. relationship bottom out after the severe setbacks caused by Washington's hostile policy during Donald Trump's presidency? To Li Qiangmin, the answer is "sure" and he believes expanded energy cooperation could help ease tensions between the two countries.
Li, former Chinese Consul General in Houston, the U.S., said energy trade with China is essential for increasing U.S. exports, a priority of the upcoming U.S. administration under Joe Biden.
China is the world's largest oil and natural gas importer. According to Forbes, the U.S. will become the world's largest exporter in just a few years. Li said this makes the two countries natural trading partners.
"The U.S. needs a promising market and China can provide that market," Li said at the China International Energy Conference in Beijing on December 11, 2020. "The export of energy products, especially oil and natural gas, is an excellent means to reduce U.S. trade deficit with China."
Back on track
The economic disruptions caused by the novel coronavirus disease (COVID-19) and a slump in oil prices led to a remarkable decline in the value of China's crude oil imports from the U.S. in the first quarter of 2020, but it recovered quickly from May onward. According to the U.S. Energy Information Administration (EIA), in the first 10 months of 2020, China overtook Canada to become the largest destination for U.S. crude oil exports, importing more than 125 million barrels. Generally, one ton of crude oil equals 7.3 barrels.
"Over the past year, engagement [between China and the U.S.] has still increased steadily during the pandemic. This tells us that the economic ties between the two are inseparable and undeniable," Eric Fang, President of the National Center for Sustainable Development (NCSD) in Washington, D.C., the U.S., told Beijing Review.
EIA Data indicated that U.S. crude oil exports to China reached a peak of about 390,000 barrels per day in the first half of 2018. But in 2019 the annual volume was 40 percent off from the previous year after the Trump administration launched a trade war against China, falling to less than 50 million barrels. China declined from the second to the seventh largest importer of U.S. crude oil.
The United States' exports of liquefied natural gas were also affected, with China falling out of its top 15 buyers from the third largest importer before the trade war.
On January 15, 2020, China and the U.S. signed the phase-one economic and trade agreement. China agreed to increase its imports of U.S. energy commodities by $52.4 billion from a 2017 baseline. This deal, as well as China's economic recovery from COVID-19, has facilitated an increase in energy trade between the two countries.
Fang anticipates continuous growth in bilateral energy trade under the Biden administration. "Energy cooperation will continue very strongly as both countries require a stable political climate," he said.
Workers install solar panels at a photovoltaic power station in Gonghe County, Qinghai Province in northwest China, on December 15, 2020 (XINHUA)
A promising market
China is the world's largest energy consumer. In the face of increasingly severe global challenges such as climate change, environmental degradation, and energy and resource constraints, China will accelerate transformation toward green and low-carbon development in both its economy and society.
But the process will be gradual. Sun Renjin, a professor at China University of Petroleum, said though China's demand for oil and gas may decline over the coming decades because of the need for environmental protection and development of alternative energy sources, it will remain at current levels in the coming five to 10 years.
At the China International Energy Conference, Xu Changdong, President of the Western Returned Scholars Association's Entrepreneur Alliance of China, said, "China's rapid development will continue to boost its consumption of energy, creating a huge market for oil and gas exporters."
China currently depends on imports for about 70 percent of its oil and gas consumption. Data from the General Administration of Customs of China showed in the first 11 months of 2020, the country imported 504 million tons of crude oil and 90 million tons equivalent of natural gas, 9.5 percent and 3.9 percent more than a year ago, respectively.
Energy collaboration between China and the U.S. is not limited to fossil fuels. The two countries should collaborate on new energy, clean energy and energy innovation in response to global climate protection, said a white paper on China's energy development released by the State Council Information Office in December 2020.
Despite the tensions in bilateral relations over recent years, Neil Bush, President of the George H.W. Bush Foundation for U.S.-China Relations, told Beijing Review that he hopes shared interests in addressing climate change will be a catalyst for U.S.-China collaboration.
China has achieved the target of replacing 15 percent of its total energy consumption with non-fossil sources by 2020 and will lift the figure to 25 percent by 2030. According to Sun, China will continue to develop its clean energy and renewable energy capabilities. "In regard to global cooperation on clean and new energy, technology is key," he said.
The white paper said China has invested $818 billion in new-energy power generation since 2010, accounting for 30 percent of the global total over that period. Additionally, China has eased market access for foreign investment in the sector of new energy, and it is willing to work together with other countries to expand cooperation on global energy governance.
Some U.S.-based energy companies, such as ExxonMobil and GE, are steadily expanding investment in China. "The wide application of renewable energy technologies in the Chinese market is helping to reduce the cost of renewable energy and accelerate the green transition process across the globe," the white paper said.
In addition to large companies, Fang said many small businesses in the U.S. are also looking to China as a major opportunity. Small U.S. manufacturers have produced many innovative petroleum and chemical products and chemical derivatives, however, they do not understand the Chinese market, have no resources to deal with developing it, and most Chinese small businesses do not know the U.S. market either, he added.
During the conference, energy exchange company Guangdong-Hong Kong-Macao Greater Bay Area International Energy Transac-tion Center announced the trial operation of its Da Yang Energy Mall, an international energy spot trading platform.
Mitchell F. Stanley, Chairman of NCSD, said the digital platform would provide channels for small and medium-sized U.S. energy enterprises to enter the Chinese market.
It is essential that the governments of both countries focus on methods to cultivate collaboration and exchange between small businesses on technological solutions of energy, environmental and water resource issues, Fang said.
(Print Edition Title: An Energetic Boost)
Copyedited by Garth Wilson
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