中國重新開放：對能源市場和政策的影響 China re-opens Implications for energy markets and policies

February2023

Chinare-opens:

Implicationsforenergymarketsandpolicies

OIESENERGYCOMMENTMichalMeidan,AndersHove,PhilipAndrews-Speed,OIES

Thecontentsofthispaperaretheauthors’soleresponsibility.Theydonotnecessarilyrepresenttheviews

oftheOxfordInstituteforEnergyStudiesoranyofitsMembers.

1

Summary

?TheYearoftheRabbitstartedonabuoyantnoteastheChinesegovernmentliftedtheCOVIDrestrictionsinplaceforthebetterpartofthreeyears.Thegovernmentisalsowalkingbackthecrackdownontherealestateandtechsectors,suggestingthatastrongeconomicrecoveryliesahead,onceinfectionspeak.

?ButcantheChineseleadershipinstilconfidenceinitsgrowthplans?Willprivateentrepreneurs

ChinbitothnarrativeandwillforeigninvestorsflockbacktoChina?Thecritical

questionfor2023remainsoneofsentiment.

?PolicyzigzagshavemeantthatoilproductstockshavedrawndownwhilegasshortageshaveemergedinnorthernChina.Withoildemandlikelytogrowby0.7mb/dthisyear,andgasdemandbycloseto30bcmy/y,therewillbemorevolatilityinthedomesticmarket.

?AclassificationchangefordieselcouldmeanlessproductexportsthaninitiallyexpectedwhilecrackdownsonShandongraisequestionsaboutthegovernment’spriorities:crackingthewhiporspurringgrowth?

?Inthepowersector,Chinacontinuestoaddcoalcapacityduetothefearofrepeatpoweroutages,eventhoughsolarandwindhadastrongyearin2022andareexpectedtogrowevenmorein2023.The2021and2022poweroutagesweredrivenbyuniquefactorsthatareunlikelytoberepeatedthisyear,butsupplysecuritywilldependonindustrialdemandgrowththisyear.

?China’sdraftsolartechnologyexportbanwouldpreventexportoftechnologiesusedtomakesiliconwafers.TherulecouldhitChinesefirmssettingupcapacityoutsideChinaaswellasnon-ChinesecompaniesseekingtoscaleupproductioninafieldnowtotallydominatedbyChinesemanufacturers.

?Themove,ifimplemented,couldpushothercountriestofurtheraccelerateeffortstolocalizeproductioninsolar,batteries,andEVs.

AsharpU-turnonzero-COVID

Aseeminglymundaneannouncementon7December20221signalledtheendofChina’sstrictzero-COVIDpolicyandpavedthewayforaradicallydifferentChinaintheYearoftheRabbitcomparedtothatseenduringtheYearoftheTiger.

TheabruptU-turncameshortlyafterprotestsgrippedShanghaiandanumberofotherChinesecitiesontheweekendof26-27November20222,andcameagainstthebackdropofaweakeningeconomy.China’sleaderslikelyfearedthathangingontothezero-COVIDpolicy—whenfacingawaveoftheOmicronvariantthatwouldrequirestrictandlengthylockdowns—wouldgenerateadditionalsocialtensionswhentheeconomyisseeingitsslowestgrowthindecades.

Andso,withonefellswoop,Beijingshiftedfromthreeyearsoftightcontroltoaliftingofmosttestingandisolationrequirements.Thepolicyreversalhascomeasasurprisetomanyandhasledtoadramaticriseininfectionsacrossthecountry.China’stopepidemiologiston21January2023suggested80%ofthecountryhadalreadybeeninfected.

Whileinfectionsinlargecitieshavegainedthemostattention,thesituationinruralareasmattersasmanymigrantworkersrelyonelderlyparentsinthecountrysidetolookaftertheirchildren.Asinfectionratesriseinruralareas,migrantworkerswillstruggletogobacktocities.ThespreadofCOVIDcouldremainanissueforseveralweeks,ifnotmonthssuggestingabumpyanduncertainrecoverytrajectory.

1NationalHealthCommission,“NoticeonFurtherOptimisingandImplementingthePreventionandControlMeasuresofCOVID-19”,7December2022,/xcs/gzzcwj/202212/8278e7a7aee34e5bb378f0e0fc94e0f0.shtml

2KathyHuang,MengyuHan,“DidChina’sStreetProtestsEndHarshCOVIDPolicies?”,CouncilonForeignRelations,14December2022,/blog/did-chinas-street-protests-end-harsh-covid-policies

Thecontentsofthispaperaretheauthors’soleresponsibility.Theydonotnecessarilyrepresenttheviews

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oftheOxfordInstituteforEnergyStudiesoranyofitsMembers.

Butthezero-COVIDpolicyisnottheonlythingBeijingiswalkingback.Governmentpolicystatementssuggesttheleadershipislookingtofireuptheeconomyatfullspeed.FrompledgesduringtheCentralEconomicWorkConference—themostimportantParty-ledannualeconomicmeeting3—toVicePremierLiuHe’sspeechattheWorldEconomicForuminDavos4,themessageisclear:Chinaisopenforbusiness.Decisionmakersaresignallinganendtothecrackdownthatsqueezedtherealestatesectorandprivateentrepreneurs,asofterapproachtoforeignpolicyandanopendoortoforeignbusiness.

Ayearoftwosentiments

ButcanChinaengineerastrongrecoveryin2023?2022GDPgrowthcameinat3%,comparedtoastaggering8.4%in2021andBeijing’stargetof5.5%.Thatsaid,Q422GDPandmacrodatasurprisedtotheupside,pointingtoaquickrecoveryinlargecities.DomestictravelduringtheLunarNewYearreportedlyreached226milliontrips(byallmeansoftransport)upby74%comparedto2022,althoughthiswasstillbelowpre-pandemiclevelswhen421milliontripsweremade5.

Figure1:ChinaquarterlyGDPgrowthrates,y/y

Source:NBS

TheChinesegovernmentdidnotsetaGDPgrowthtargetfor2023attheCEWC(itmightstillissueoneduringtheParliamentarysessionsinMarch).TheIMFnowexpectsChina’sGDPtogrowby5.2%y/yin2023(revisingitupfrom4.4%inDecember2022)6.Yetthereareconcernsthatstructuralmacroeconomicfactorscouldimpedeareturntotheheydayofrapidgrowth,suchashighlevelsoflocaldebtandalong-termslowdowninhousingdemandwhichwillholdbackgrowthininfrastructurethathadservedasamaingrowthleverforoveradecade.ArecessioninEuropeandforeigninvestorconcernsaboutthepolicyenvironmentinChina,combinedwiththefactthatChina’spopulationisshrinkingandlabourproductivityshowsfewsignsofimprovement,alladdtothelong-termconcernsabouttheeconomy7.

Butwithlotsofgovernmentsupportandsomepent-updemand,2023couldstillbeaverystrongyear,eveniftherebounddoesnotlastlongafter2024,andmoreimportantly,eventhoughitmayhavenegativeimplicationsforChina’slonger-termgrowthanddevelopmentprospects.AsthehousingsectorstabilisesandasChina’ssupplychainsreturntonormal,businesssentimentwithinChinaaswellasinternationalconfidenceinChinaasamanufacturingbasecouldimprove,leadingnotonlyinacatch-upinproduction,butpotentiallyafurtherboostindemandformanufacturing.Sothelowgrowthforecastsmayproveoverlypessimistic,butequally,therearestillheadwindstoaverystrongandalastingeconomicexpansion.

3EIU,“ThreetakeawaysfromChina’spolicy-settingconference”,22December2022,/n/three-takeaways-from-china-policy-setting-conference/

4Anne-SylvaineChassanyStephenMorris,“Beijing’stopeconomicadvisertellsDavosCEOs‘Chinaisback’”,FinancialTimes,

19January2023,/content/48586b89-bf99-42dc-8e81-c8cf5646760c

5NectarGan,“LunarNewYearholidaytripssurgeinChinaafterliftingofCovidrestrictions”,CNN,29January2023,

/2023/01/29/china/china-lunar-new-year-travel-intl-hnk/index.html

6“IMFlifts2023growthforecastonChinareopening,strengthinU.S.,Europe”,Reuters,31January2023,

/markets/imf-lifts-2023-growth-forecast-china-reopening-strength-us-europe-2023-01-31/

7JasonDouglas,StellaYifanXie,“Don’tCountonChinatoSavetheWorldEconomy”,WallStreetJournal,13February2023,

/articles/china-economy-consumer-spending-11675980834

Thecontentsofthispaperaretheauthors’soleresponsibility.Theydonotnecessarilyrepresenttheviews

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oftheOxfordInstituteforEnergyStudiesoranyofitsMembers.

Attheendoftheday,muchhingesalsoonsentimentandconfidenceinChina’spoliciesbothwithinChinaandoutsideofit.AreforeignbusinessesconfidentenoughinChina’strajectoryandtheirbusinessprospects?Willtheprivatesectorbuyintogovernmentmessaging?

2023isthereforeshapinguptobeayearoftwohalvesandofpolicyvolatility89,butperhapsalsoayearoftwosentiments:bullishexuberancethatChinaandsupplychainsareback,andbearishdismayaboutthevulnerabilitiesinChina’seconomicandsocio-politicalsystem,whichdoseemtobeattheirdeepestinatleastadecade.Energymarketswillswingbetweenthetwo.

Caughtoffguard?

ThesharpchangeinpolicyhascaughtChina’senergycompaniesoffguardwithlocalisedtightnessinbothoilandgasemerging.WhileChineserefinershadbeenlookingtoQ223forgrowth,asurgeintransportdemandmayleadthemtofocusonre-supplyingthedomesticmarketsoonerthananticipated.CrudebuyingactivitysuggestsarushtosourcebarrelsforApril-Maydelivery.Gasolinedemandhasgrownstrongly10,withtravelduringtheLunarNewYearsurprisingrefinersandleadingtostockdraws.GasolinemarginssuggestmoleculeswillstayinChinafornow,withexportsresumingonlyoncestoragehasbeenrefilled.Dieselexports,meanwhile,haverisentomeetatightEuropeanmarketaheadoftheRussianproductban,buteventhoughdomesticdieseluseisunlikelytopickupbeforeMarch,exportersmaybelookingtoensuredomesticsuppliesfirst.

Figure2:Chinaoildemandbyselectproduction,y/ychange,mb/d

Source:NBS,ChinaCustoms,OIES

Whatismore,aninspectionofindependentrefinerscoulddisruptdieselsupplies(astheShandongindependents’yieldsaredieselheavy)andleadtoslightlyreducedrunrates11,likelypromptingthemajorstoslowtheirexportprogrammesfornow.Inadditiontotaxinspections,thedieselmarketistighteningfollowingthereclassificationofdieselasa“hazardousmaterial”asof1January202312.Thenewstandardsmeanthatalldieselisnowtreatedasahazardousmaterialwhereaspreviouslyonlydieselwithaflashpointbelow60°Cwasconsideredhazardous.

Companiesinvolvedinproduction,storageandtradingwillneedtoobtainnewpermitstohandlediesel,buttheaddedcostsandmorestringentoperatingrequirementscouldforcesomeoutofthemarket.

8OIES,“KeyThemesfortheGlobalEnergyEconomyin2023”,January2023,

/publications/key-

themes-for-the-global-energy-economy-in-2023/

9ChinaEnergyOutlook2023-/publications/oies-podcast-china-energy-outlook-2023/

10TrixieSherLiYap,MuyuXu,“Chinagasolineexportsmayhit8-yearlowinFebondomesticdemandrecovery”,10February2023,/markets/commodities/china-gasoline-exports-may-hit-8-year-low-feb-domestic-demand-recovery-2023-02-10/

11“Chinatoconductnationwideinspectionsonoilsector”,Argus,1February2023,

/newsandanalysis/article/2415081

12TrixieSherLiYap,“China'sdieselexportsmayfallonnew2023transportmandate–traders”,Reuters,14November2022,

/article/asia-diesel-idUSL4N3270Q6

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oftheOxfordInstituteforEnergyStudiesoranyofitsMembers.

Blenderscouldalsobesqueezedoutofthemarketwhilebuyersintheminingandinfrastructuresectorsthatusedtobuyoffspecdiesel,willstruggletodosoorneedtopayapremiumforit.Overtime,dieselproductionwilllikelybeconcentratedwithinlargerrefiners,furthersqueezingsmallerShandongindependentsandblendersandimprovingdieseloutputdata,buttobeginwith,therewilllikelybeafallindieselproductionalthoughsomemoleculescouldbereclassified.

Overall,thetaxchangesandthisroundofinspectionswillallowthestate-ownedmajorstoraiserunsandregainmarketshare,stockingupaheadoftheirplannedmaintenance.

Eventhoughtheoiloutlookiscloselylinkedtomacroeconomicpolicies,italsodependsonthedynamicsbetweentheindependentsandstate-ownedrefiners,whichinturn,isinformedbylicences,quotasandinspections.Andthemixedsignalsarealreadyimpactingthesector.InearlyJanuary,thegovernmentissued109Milliontons(Mt)ofcrudeimportlicencesand19Mtofproductexports(almosthalfthetotal2022allowance),likelyinanefforttospurgrowth.Thisfliesinthefaceofmanyofthe14thFiveYearPlangoalsthatseektolimitrefiningcapacitygrowth,shifttochemicalsandlimitproductexportswhileshutteringolderandinefficientcapacity.In2023,ifthegovernmentstickstopro-growthpolicies,newrefinerieswillbebuiltwithoutbeingoffsetbyshutdowns,mainlyinShandong.ThenewlymintedofficialsinShandongseemtohaveambitiousprojectsfortheoilsector,andhopetoseetheYulongmega-refinerystartupthisyear.

WhiletheYulongstartupwouldintheoryrequireotherindependentsintheprovincetoshutdown,thelargebatchofcrudeimportlicencestotheShandongindependentspointtoanefforttogenerateeconomicactivity,ratherthanmovestoshutterthem.Eventhough—fornow—thisisapositivesignalforthenon-statesector,itisalsoacomplicationforthe14thFYPemissionspeakingefforts.TheextenttowhichimportandexportquotasareatacticalsupportmeasureorafundamentalshiftinChina’spoliciesremainstobeseen.Additionalallowancesthroughouttheyearthatallowproductexportstorisesignificantlywillbeanimportantsigntowatch,butthisroundofinspectionssuggestthattherearestillpartsofthecentralandlocalgovernmentsthatarepursuingeffortstocleanupthesector.AdebateseemstobeunderwaybetweentheMinistryofCommerce,thatisfavouringhigherexportquotastobolstergrowth,andtheNationalDevelopmentandReformCommission(NDRC)whichisoverseeingthecarbonpeakingplans.

Mixedsignalscontinuetocatchthesectoroffguardandseemsettobeahallmarkof2023.Thisrequiresfrequentadjustmentsfromthemajorsintermsofcrudebuyingandproductexportstrategies,butalsosuggeststhatthemarketcouldgofromfeasttofamineinveryshortsuccession.

Footoffthegas

Asomewhatsimilarsituationisunfoldinginthegasmarket.DemandintheNorthfromresidentialusersandthetransportsectorhasrecoveredstronglywithsuppliersstrugglingtocatchup.Partialprivatizationalongsidepricecontrolsareonceagainlimitingsupplies.Localdistributioncompanies,someofwhichhavebeenprivatized,failedtosecurecompetitively-pricedgasfromupstreamsuppliers(inpartbecausetheyhadnotanticipatedstrongdemandgrowthbutpartlybecausesmallerdistributorshavelittlebargainingpowerwithlargestate-ownedsuppliers).Withwholesalepricesrisingamidacoldsnap,distributorssoughttolimitsuppliestoresidentialusersastheirsalespricesarecapped.Insteadofmakinglossesonsalestoresidentialconsumers,distributorsareprioritizingindustrialandcommercialbuyersforwhichpricesaretiered.LocalgovernmentshavealsobeencashstrappedgiventhecostofCOVIDtestingandarethereforealsostrugglingtosupporttohouseholds13.

LocalizedshortagescouldpersistandworsenintheSouthaheadofthesummermonths,especiallyastheeconomicrecoverywillleadtostrongergasdemandgrowth.Withindustryshakingoffits2022doldrums,gasuseissettorise.Gasinpowerfellin2022,accordingtodatafromtheChinaElectricityCouncilbutstrongelectricitydemandthisyearcouldoffersomesupportforgas.TheCECexpectspowerdemandin2023toriseby6%from2022levels,comparedtoa3.6%y/yincreasein2022pointingtosomeupsideforgasuse.

13河北為何難以告別氣荒,6February2023,/a/637745781_120814277

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oftheOxfordInstituteforEnergyStudiesoranyofitsMembers.

Figure3:Chinagassupplies,y/ychange,bcm

Source:NBS,ChinaCustoms,OIES

Thatsaid,withnewcoalandrenewablepoweradditionsplannedfortheyear,mostoftheincreaseingasconsumptionissettocomefromtheindustrialsector,andweexpectgrowthtoreachcloseto30bcmin2023.Butevenwithstrongergasuse,LNGdemandislikelytorisemoremodestly,by6-8bcmbecauseincrementalsuppliesfromdomesticproductionandthroughPowerofSiberiawillmeetmostofthedemand.Tier-twobuyerswillalsobelookingforareturntothemarket,asactivitypicksup.

Poweringup

Partoftheconcernamongenergypolicymakersisthatanotheryearofrobustgrowthwillleadtopoweroutagesagain.Butthememoryofthe2021-2022outageshasreverberatedstronglythroughtheChinesesysteminthelastfewmonths,andledtoasustainedincreaseincoalsupplies,eventhoughtheshareofcoal-firedpowerinthenationalenergymixfell1.7%y/yto58.4%,replacedentirelybyrenewablesandnuclear14.Thecontinuedemphasisonenergysecurityhasboostedthesupplyandconsumptionofcoal.In2022,coalmineoutputrose11.4%to4.48billiontonneswhichinturnreducedtheneedforimportedcoalby9.2%.300Mtofnewcoalminecapacitywasaddedin2022andupto250Mtoffurtherincreaseistoutedfor2023.Thisnewminecapacityisneededtofuelcoal-firedpowerstations,thecapacityofwhichincreasedby40GWin2022.Thermalpowercapacity(coalandgas)maygrowbyanadditional70GWin2023.Moreover,theuseofcoaltoproducegasandchemicalshasbeenincreasing.So,whilsttheshareofcoalintheprimaryenergymixandpowergenerationisdeclining,theabsolutequantityofcoalconsumptioncontinuestorise.

Atthesametime,in2022,accordingtotheNationalEnergyAdministration(NEA),Chinaadded87GWofnewsolarcapacity,exceedingits55GWrecordin2021,and38GWofwindinstallations,asharpdropfrom2021and2020levels.Combined,Chinaadded125GWofnewwindandsolarcapacity,whichaccountedfor55%ofnewpowergenerationin202215.

Together,the125GWofnewwindandsolarcapacityaccountedfor78%ofallnewlyaddedpowergenerationcapacity–andevenmoreimportantly,55%ofnewpoweroutputin2022.TheNEAaimstoadd160GWofwindandsolarin202316butmoreofeverythingislikelyinthecards.Onpowermarkets,thegovernmentcontinuestoemphasizemarketreformsinprinciple,whileinpracticelimitingthepotentialforanyvolatilitybysettinganewstandardoflockingin90%ofindustrialpowerdemandviamonthlyandannualcontracts,limitingtheroleofanyspotmarkets17.

14CEC,/detail/index.html?3-317477&mc_cid=b4822883e5&mc_eid=1f5ebaac4b

15NEA,/2023-01/18/c_1310691509.htm?mc_cid=b4822883e5&mc_eid=1f5ebaac4b

16風(fēng)光新增裝機(jī)規(guī)模將達(dá)1.6億千瓦！明年能源工作劃重點(diǎn),/news,bwkx-202212-5000072.htm

17NDRC,國家發(fā)展改革委國家能源局關(guān)于做好2023年電力中長期合同簽訂履約工作的通知,

/xxgk/zcfb/tz/202212/t20221222_1343756.html

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oftheOxfordInstituteforEnergyStudiesoranyofitsMembers.

210

184

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131

97

100

Figure4:Totalinstalledwindcapacity(GW)

GW

400365

329

300

282

0

201420152016201720182019202020212022

Source:NEA

Figure5:TotalinstalledPVcapacity(GW)

400

300

200

100

0

307

253

204

175

130

77

43

28

GW

393

201420152016201720182019202020212022

Volatilityanduncertaintynowlookincreasinglylikelybeyondthepowersectortoo,eventhoughthegovernmentisemphasisingsuppliesandlookingtomitigateagainstanyshortfalls.XiJinpinghighlightedenergysecurityduringavisittoCNPC'sTarimoilfieldinJanuary18,asubtlenodthatwaspickedupbyCNOOCthatpledgedhigherCapexspendingonthedomesticupstream.CNPCandSinopecwilllikelyfollowsuitasCNPC’sthinktank,ETRI(Economics,TechnologyandResearchInstitute),nowexpectsoilproductioninChinatostabiliseand4mb/dandremainattheselevelsthrough2040.Whetherornotthatisachievablewhilealsomaintaininggasoutputgrowthisanopenquestion.ButthemessageisclearandwasdeliveredalsobyoutgoingpremierLiKeqiangatavisittoStateGridon17January19.

Sunking

Chinacontinuestodominateworldwidebatteryandsolarproduction,andiscloselyfollowingeffortsinNorthAmericaandEuropetojointhecleanenergyrace,whilealsoseekingtoensureChinacanbecomeself-sufficientinitsownsupplychain.Regardingincreasingdomesticself-sufficiency,China’sNonferrousMetalsIndustryAssociationannouncedthatin2022thecountry’slithiumcarbonateproductionroseby32.5%y/y20.What’smore,productionoflithiumhydroxide–theothermostimportantlithiumproduct–rose29.5%y/y.Increasinglocallithiumsupplieswillhelpsatethecountry’sboomingdemandforEVbatteries:thecountrymanufacturednearly7millionEVsin2022,up97%fromtheprioryear,andChineseEVexportshavestartedtomakeadentinmarketsoutsideofChina.

Meanwhile,toprotectthecountry’sleadingpositioninso