China’s reopening: What does it mean for the world’s economy and environment?

 If the energy crisis was bad this year, China’s recent relaxation of COVID-19 protocols could lead to a catastrophic global crisis in 2023.

Since Russia’s invasion of Ukraine in February, many countries around the world have been struggling with rising energy bills and sharp cuts in Russian oil and natural gas supplies abroad. Countries have introduced energy regulation and storage before winter, when energy demand is highest.

So far, they have been mostly successful in their efforts. Fatih Birol, director general of the International Energy Agency, stated on Monday that Europe, which was at high risk of an energy crisis prior to the war due to its reliance on Russian oil and gas, had benefited from a mild winter far away.
However, if Europe manages to avoid a major energy crisis this winter, it will also be due to China’s weak energy needs and this year’s sluggish economy due to the country’s zero-carbon policy. China’s commitment to eradicating the COVID virus was a safety net for European governments in 2022, but as the country looks to open up in 2023, that safety net may soon disappear.

China’s total energy demand is forecast to grow by 3.3 million barrels of oil per day next year, after almost no growth in 2022, According to the latest energy outlook released by S&P Global on Monday. This would account for 47 percent of the total increase in global energy demand next year.
“Weak demand from the 2022 outages was a key safety valve for oil, gas, and coal markets as Europe sought to replace Russian energy,” Dan Klein, head of energy pathways at S&P Global Commodity Insights, said in a statement.
“With another vaccination year and growing frustration with China’s domestic blockades, restrictions are likely to ease somewhat in 2023, and fossil fuel imports can be expected to pick up,” he added.

In 2022, China will flatten out.After years of steady growth, China’s electricity consumption fell for the first time in years in 2022, as many factories idled due to shutdowns and a general slowdown in economic activity.

Cumulative LNG imports into China fell 20.2% year-on-year in the first nine months of 2022, according to customs data, and Europe has fully used up existing supplies. During the summer, China even sold excess LPG to Europe due to weak domestic demand.
“If it were not for this demand weakness, all commodity prices would undoubtedly be higher, as energy supplies not taken from China would move to other regions, accentuated by the shift of LNG supplies to Europe,” the S&P report said.
But as winter approaches and the economy appears to be waking up from its slumber, Europe may not have to rely on China’s weak energy demand for much longer.

china economy


China’s renewable energy demand for electricity

In October, China suspended the resale of liquefied natural gas abroad to secure its energy supply before winter. But the real turnaround in the outlook for China’s energy demand in 2023 may have come earlier this month, as the Chinese government slowly began to roll back the COVID-19 protocols that have slowed the country’s economy since the start of the pandemic.
This month, some Chinese cities took steps to ease requirements for COVID testing and quarantine rules in response to nationwide protests criticizing the restrictions and stalling expectations of economic growth. Practices now abolished include, e.g., massive city-wide testing for high cases, hospitalization and quarantine requirements for those with mild or no symptoms, and widespread lockdowns restricting movement and business outside a defined risk zone.
Despite the increase in new cases of COVID-19 in China, the country may continue to relax its zero-COVID policy in 2023, when energy use is expected to return to growth, with significant global implications, according to S&P. Energy, a market that has benefited from weak Chinese demand this year.
At the same time, the prospects for 2023 in Europe are getting weaker and weaker. Although the continent managed to slip through the worst part of the energy crisis this year, all international organizations, including the IMF and the OECD, J.P. The CEO of Morgan Stanley, Jamie Dimon, warned that the real battle will not be this year but in the fall and winter of 2023, when Russian natural gas supplies are even more limited and competition from China intensifies.
S&P warned in its report that natural gas, coal, and oil energy supplies will remain tight in 2023 and urged vulnerable countries to prepare.
“European gas and electricity markets could be even tighter in 2023” due to shrinking Russian supplies, S&P warned. The report also warned European buyers not to expect a repeat of weak Asian LNG demand but reiterated that China’s reopening plan will continue to push global energy demand next year.
“China’s COVID policies will be a major driver of global demand for commodities and energy in 2023,” Klein said.



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