For much of the past decade the answer to almost any major economic question had at least a little bit of “China” in its answer, and for energy the growth of what has become the world’s second largest economy and remains its most populous nation has been central to market growth and disruption.
Without China’s growth, oil prices would have been lower, leavening the expensive and much-debated fight over the race to renewable power in the US. With less growth in China, natural gas companies in the US might have had fewer buyers for their barely profitable (or even loss-making) fields as the technology developed to expand production in turn brought down prices.
The “what ifs” are manifold, but the underlying reality is that China has continued to grow at a remarkably – many say even worryingly, should the numbers be massaged – steady pace (that’s World Bank data) for the past decade, even with recent “moderating” to a pace any developed country would be ecstatic about.
The country’s political handover this year has been tidy and unexciting; there’s no version of the US fiscal cliff to send heartbeats racing. But China is no longer secondary for the US energy sector, much less for the global economy: Expansions there by US firms and growing investment by Chinese firms in the US and Europe mean the fate of the countries are now less in opposition than linked.
That makes paying attention to the details in China’s growth strategy is essential. The boringly-named Central Economic Work Conference happened earlier this month, and amid the general panic over fiscal cliff the Chinese event barely even rated notice in the developed world. True, as Gwynn Guilford over at QZ reports, the resulting report is almost rigorously vague, but that in itself should be a factor that American businesses should note. Any slowdown in infrastructure spending, any moves to spend its cash haul on a better life for its citizens rather than commodity dominance or full-bore economic expansion, would ripple across the global energy sector in ways we’re just starting to understand.
We’ve talked extensively about China on Breaking Energy before, and as 2013 dawns we’ll be examining in greater detail the tightening links between the North American energy sector and Chinese economic managements (of which PetroChina’s recent multibillion-dollar investment in Canada’s Encana is a perfect example.)