Introduction
The beginning of the trade war between the magnanimous superpowers, namely- China and the United States of America, marked a massive decline in China’s liquefied natural gas (LNG) imports from the USA. The tensions pertaining to the trade war which was going on between the People’s Republic of China and the United States of America, has given rise to a number of issues and a lot of countries and their analysts are deliberating upon who would emerge as the true winner in this war. Some analysts are of the view that perhaps there would be no winner at all. However, it is quite imperative to understand what these two super mega powers aim to achieve and where does the answer to the question, with regards to who would emerge as a winner lie in. Perhaps, the true answer to this question lies in the energy sector as energy is an industry which can be deemed to be regarded as an industry which aids in the functioning of all other industries and all other sectors. China, which can be deemed to be regarded as a superpower, is tilted towards this direction and is hoping to develop itself and mark its niche in the energy sector in an attempt to triumph over the United States of America and thereby emerging as a winner in the trade war. However, it is quite imperative to take cognizance of the fact that there can be no winner in a trade war and a trade war, at all times, ends up with a massive fall in trades conducted by the respective countries at war, which in turn, leads to a downfall of the global economy.
At present, China can be regarded as the largest producer of greenhouse gases. It is time that China needs to increase its imports of fossil fuels in order to become an environmentally viable country, which, in turn, could help it to attain its goal of becoming a cleaner country and also lead to the development of cleaner sources of energy. There have been innumerable concerns with regards to the protection of the Earth and countries are constantly striving to shift their resources into the renewable energy sector, in order to have an upper-edge over other dominating super powers. It is also pertinent to note that China has been facing tremendous issues in terms of the level of air pollution rising in its territorial boundaries, which has in turn, created an enormous global pressure upon China. Beijing has taken a number of steps in order to become a cleaner nation. It is pertinent to understand how the withdrawal of the United States of America, from the Paris Agreement in 2017, with a vision to develop and become an environmentally viable nation has made way for China to mark its solid position when dealing with the matters concerning climate negotiations. [1]
Analysis
China has been tremendously working towards establishing alternative and cleaner sources of energy, which is quite evident from the policy paper which it issued on renewable energy and how it wishes to increase the usage and consumption of renewable sources of energy. China’s National Energy Administration published its policy paper on 15th May, 2020 and the paper highlighted on how China aims to become a cleaner and a greener nation in coming five years. [2] The New Policy called as the Renewable Portfolio Standard (RPS) targets to establish a standard wherein the different sources of renewable energy would be utilized for varied uses in a number of provinces. The aim of this move is to ensure that companies which are already in this sector benefit tremendously as relying on renewable sources of energy would lead to an increase in their profit levels over a period of time. However, the companies which are in the business of providing non-renewable sources of energy or companies whose operations majorly run on the basis of non-renewable sources of energy would tend to run into losses, in line of the Renewable Portfolio Standard which is proposed by China.
Regardless, China is still the largest user of coal. China aims to consume less than 58% of the coal that it imports as a source of energy by the end of the year 2020. However, this move can be a little difficult to achieve, as since the last four years, the overall coal consumption in China has risen tremendously as businesses in the power, steel and petrochemical sectors have a huge demand for coal.[3] With regards to this increasing demand from the power, steel and petrochemical industries, it is imperative to understand that the Chinese steel industry, in the first quarter of 2019, demanded huge quantities of Australian coking coal[4] and it can be said that Australian coking coal has been proven to be a very important source of energy generation for the companies involved in the steel business in China. The increase in the demand for Australian coking coal has proven to be beneficial for Australia as well and these imports have improved the trade negotiations between Australia and China. As a result of these amicable relations which Australia and China share, China’s aim of becoming a cleaner and a greener country is not far-fetched. The symbiotic relations with countries are sure to help China, in its goals of diversification. [5]
The reason why China imports coal, in spite of it having enough domestic reserves is because of the price difference which exists. The amount of coal which China imports from the USA has risen in the year 2020, despite there being tariffs imposed by the USA on thermal and coking coal. However, the coal which China imports from the USA does not have an edge [6] when it comes to the quality and the total time taken for the delivery of the material. The prices and the other factors, when taken into consideration, explain that China is profiting if it imports from countries like Australia and Indonesia. President Trump, as a matter of fact has imposed a number of other tariffs on Chinese goods and this has eventually led to China resorting to Australia and Indonesia for its supply of coal.
In order for China to become a cleaner and a greener nation, it needs to resort to alternative sources of energy in order to limit the consumption of coal in the households and at the same time, it is also working towards ensuring that industries which rely upon coal as a means of energy generation, shift to alternate sources, however, it can be deemed to be regarded as a challenging task, since coal is being consumed as a source of energy from about 65% of the overall households in the country.[7] China’s decision to import coal from Australia and Indonesia has been quite a wise move. It is imperative for China to stay away from the US coal imports and rely upon the other countries as this would lower China’s dependence on coal as a source of energy, however, it’s mission to become a cleaner and greener country would become slightly complicated.
China’s aim to develop a new policy concerning the increased use of renewable sources of energy and an aim to curtail, the use of fossil fuels as a means of energy would surely enable China to reach its goal of becoming a cleaner and a greener nation. China has already taken innumerable steps in this direction, however shifting resources of energy supply from non-renewable sources of energy to renewable sources of energy could take quite a while, as China needs to shift its resources and shifting of resources is never an easy or a feasible task, and in fact, China has an increasing demand for Natural Gas. According to Yao Li, the CEO of a Chinese consulting firm, SIA Energy, contended at an annual Canada Gas and Energy Conference that China’s demand for liquefied natural gas is growing and is, “almost infinite.” [8] China is importing natural gas at a huge scale and it is fulfilling 43% of its demand by importing from various countries and China can clearly be deemed to be regarded as one of the largest importers of Natural Gas. As a matter of fact, LNG is one such commodity upon which China has imposed tariffs, especially on the LNG coming from the United States. The beginning of the trade war between China and the United States has marked the end of the LNG import. The quantity of LNG which China used to previously import from the USA has declined significantly with the commencement of the trade war. The United States of America, previously supplied huge quantities of Liquefied Natural Gas to China, however, with the imposition of tariffs, in line with the commencement of the trade war has left the US market to look for new buyers of natural gas, however, China, on the other hand is still importing Liquefied Natural Gas significantly by relying upon countries such as Qatar and Australia and it is even supposedly importing LNG from Russia. [9]
It is a conceived notion that LNG could act as a means to end the trade war. President Trump’s strategy shows a considerable amount of its ability when it comes to LNG being exported as this would help the USA to lower its trade deficits.[10] China is regulating energy and as a matter of fact has announced new tariffs as well; China, if resorts to import from the US energy market, then it could be deemed to be regarded as a win-win situation for either parties, however, the trade war is making China reconsider its options and therefore, it is resorting to energy exports from other countries. However, it would be ideal for both nations, if they end the trade war and start their trading activities, as this can be deemed to be regarded as an ideal scenario for both the countries. China is already under the process of becoming a cleaner and a greener nation, however, the fact that it may seek help from the USA, when it comes to importing LNG, seems too far-fetched. In such a scenario, a third country could act as a middle source, in order to ensure that the trade negotiations between both the countries take place and function smoothly and systematically. Japan, is one such country which could act a middle ground for China and the USA, as even Japan is aiming to become a cleaner and a greener nation and is hoping to become a huge hub for LNG. [11] Japan, could act as a mediator and could purchase LNG from the United States and export the excess supplies of LNG to China, making it a win-win situation for all three nations. Japan, could act as a mediator and could purchase LNG from the United States and export the excess supplies of LNG to China, making it a win-win situation for all three nations. In this scenario, China, if opts to import LNG from the USA, will enable the US to get out of its trade deficit and this can also perhaps end the ongoing trade war between these two nations. It is, however, imperative to also understand the position that China has taken while dealing with Oil. So far, China has not imposed any tariff upon the oil which is imported from America, despite that the imports of American oil have rapidly declined. This could be deemed to be regarded as a move by China to get back at the US, for the US has imposed various sanctions on the crude exports from Iran and Venezuela [12] dwindling tensions in the Middle East and both Iran and Venezuela crude oil has been an important source for Chinese imports. China, however, is maintaining itself and is still importing Iranian crude oil, but at the same time, it is also heavily investing its capital in African Oil Reserves [13] and is planning to develop a strategic petroleum reserve for itself and this is precisely why it is still going easy on US Crude Oil and not imposing its tariff wrath upon this commodity.
China has significantly made a number of improvements when it comes to dealing with its oil refining capacity. According to an energy expert, Philip Verger, China has an aim to increase the production in the oil manufacturing sector and would improve its refining capacity while witnessing a fall in the demand for oil in its own country. [14] This move by China would tend to lower the prices of crude oil across the globe and in fact, this has already been experienced in the year 2019. If China goes ahead with this move, then it would drastically impact the United States of America, who is now the biggest oil producer and it is expanding continuously. It is imperative to understand that China would very well take this step, in order to have an upper hand over the US in the ongoing trade war.
Conclusion
The Liquefied Natural Gas trade between the US and China can help in easing the tensions that persist between them. China is working towards making itself a cleaner and a greener country by curtailing the use of coal as a source of energy and instead it is resorting to LNG as a means of a cleaner source of energy. If China imports LNG from the United States of America, then it would certainly pull America out of the trade deficit which it is stuck in. However, it seems quite a far-fetched thought, as China is already relying upon countries like Australia, Qatar and Russia to fulfil its LNG requirements, plus, it would certainly hesitate to import LNG from the US as then it would have an upper edge over the US, in terms of the Trade War as well as in terms of becoming a cleaner and a greener super power, thereby surpassing the United States of America. If at all China imposes tariffs upon the US Crude Oil, then it would surely intensify the relations between these two magnanimous super powers.
[1] “As America retreats on Climate, China and Russia confirm commitments.” By Dave Keating- https://www.euractiv.com/section/energy/news/as-america-retreats-on-climate-china-and-russia-confirm-commitments/.
[2] “Policy Initiatives to trigger massive growth of Renewable Energy in China”- https://www.forbes.com/sites/gauravsharma/2019/05/21/policy-initiatives-to-trigger-massive-growth-of-renewable-energy-in-china/#52024ca6c63a.
[3] “China expects to hit 2020 coal cap targets; demand overshadows”- https://www.reuters.com/article/us-china-energy-coal/china-expects-to-hit-2020-coal-cap-targets-demand-overshadows-study-idUSKCN1SZ17M.
[4] “China buys coking coal; India looms larger”- https://www.mining-journal.com/bulks/news/1363761/china-buoys-coking-coal-india-looms-larger.
[5] “Energy in China-US Trade Negotiations- https://www.orfonline.org/expert-speak/energy-china-us-trade-negotiations-52163/.”
[6] “China’s importers to apply for tariff wavers on U.S. goods- https://www.reuters.com/article/us-usa-trade-china-tariffs/chinese-importers-to-apply-for-tariff-waivers-on-us-goods-idUSKCN1T60LP.”
[7] “How is China’s energy foot print changing?- https://chinapower.csis.org/energy-footprint/.”
[8] “Chinese Demand for Gas- LNG ‘almost infinite’- https://www.jwnenergy.com/article/2019/5/chinese-demand-gas-lng-almost-infinite/.”
[9] “American LNG Exports threatened as China turns to Russian sources”- https://asia.nikkei.com/Economy/Trade-war/American-LNG-exports-threatened-as-China-turns-to-Russian-sources.”
[10] “China may regulate energy imports from US amid trade row- https://sputniknews.com/analysis/201905161075044370-china-regulate-usa-energy/.”
[11] “Trade LNG more, end US-China Trade War- https://www.eastasiaforum.org/2019/05/23/trade-lng-more-end-the-us-china-trade-war/.”
[12] “China is going easy on American Oil for now- https://edition.cnn.com/2019/05/14/investing/oil-china-trade-war-lng/index.html.”
[13] “How is China’s Energy Foot Print Changing- https://chinapower.csis.org/energy-footprint/”.
[14] “The Next Big threat for Oil comes from China- https://oilprice.com/Energy/Oil-Prices/The-Next-Big-Threat-For-Oil-Comes-From-China.html.”
