China’s vast oil buffers and booming clean energy exports are helping shield its economy from the fallout of the Middle East conflict, but rising global energy prices still pose a risk to growth, according to an Asian Development Bank (ADB) economist.
Yothin Jinjarak, ADB senior economist for East Asia, said China is “relatively resilient” to the ongoing turmoil because it is both one of the world’s largest oil importers and the biggest exporter of clean energy technologies.
“China has several buffers against higher oil prices, including significant energy reserves, a diversified energy supply, and a rapidly growing renewable energy sector,” Jinjarak said in a webinar on Friday.
China’s clean energy industries – from solar panels and batteries to electric vehicles and wind turbines – have grown into a major export engine, with clean-tech exports reaching record highs in recent years and contributing more than a tenth of the country’s gross domestic product.
Oil and gas accounts for only a third of China’s power generation, with more than half of the installed capacity coming from hydropower, wind, solar, nuclear and other low‑carbon sources, said Jinjarak.
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Higher global energy prices still risk costs and can add upward pressure on inflation…The net effect is that the economy remains relatively resilient, but there is a clear downside risk that requires continued monitoring.
Yothin Jinjarak, senior economist for East Asia, Asian Development Bank
Meanwhile, its combined strategic and commercial oil reserves are at roughly 1.2 to 1.5 billion barrels, the largest emergency stockpile in the world, covering up to four months of net crude imports.
Although it cannot fully avoid the Strait of Hormuz, it has several alternative supply routes that partly reduce its vulnerability, including pipelines from Russia and Central Asia, along with the Eastern Siberia-Pacific Ocean pipeline and Central Asian networks.
The Asian super power’s clean energy manufacturing strength, together with strategic oil stockpiles and alternative supply routes gives it more room to maneuver than many other large fuel-importing economies, suggested Jinjarak.
Japan and South Korea import most of its crude from the Middle East, making them highly exposed to supply shocks. Around half of India’s crude imports pass through the Strait of Hormuz, so any blockage or attack there immediately raises import costs and threatens its energy security.
Most Southeast Asian countries are net fuel importers with relatively thin reserves of up to 65 days, and governments from Indonesia and Vietnam to Thailand grappling with rising fuel bills, debating subsidy and tax reforms, and in the Philippines’ case, declaring a national energy emergency and moving to ramp up coal-fired generation.
However, Jinjarak cautioned that China is not immune to the broader macroeconomic fallout from sustained high energy prices. Elevated oil and gas costs could weigh on global activity and trade, weakening demand in key export markets and eventually feeding back into China’s own external sector.
“Higher global energy prices still risk costs and can add upward pressure on inflation…The net effect is that the economy remains relatively resilient, but there is a clear downside risk that requires continued monitoring,” he said.
China’s key export markets include the United States, Hong Kong, Vietnam, Japan, South Korea, India, Malaysia and Thailand, which together take well over half of its total exports.
The Middle East conflict can affect these markets indirectly by not only pushing up oil prices, but increasing shipping and insurance costs, and slowing global growth, which then reduces demand for Chinese goods from major customers in North America, Europe and Asia, said analysts.
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