China is a country of superlatives, of enormous capacities and gargantuan appetites. With an estimated population approaching 1.4 billion and a mid-ranking GDP per capita of $8,582 in 2017, it cannot be anything but.
Nowhere do the superlatives flow faster than in the commodities sphere. Last year, the country became the world’s largest importer of crude oil, overtaking the United States. It is already by far the world’s largest producer and consumer of coal, and its natural gas consumption and imports are rising fast. China’s hydrocarbon dependencies embed it increasingly at the center of world commodity trade, to such an extent that changes in its domestic policies reverberate around global markets.
And more so than ever, China is looking outward.
It has chosen to use “soft power” — encapsulated in the ambitious multidecade Belt and Road Initiative — to consolidate its international supply chains and spread more widely its cultural and economic influence, investing in production capacity and major infrastructure projects abroad from ports to railways and power plants.
This creates demand for its companies, as earlier super-heated rates of growth cool within its domestic economy, and earns development plaudits, as China ties the economic success of its foreign partners to its own, albeit with Beijing the center around which this universe revolves.
China has notably not sought to export ideology, but has maintained its commitment to a state-led economy, pragmatically adopting market structures where they provide more efficient economic outcomes. But there can be no question that China’s economic development has reached an inflexion point.
It has built vast “pillar” industries in coal, steel and refining and become the manufacturing center of the world. It is now rationalizing these pillars, weeding out inefficiencies, improving industrial structures and environmental performance.
It is looking beyond the smokestack industries of the past to emerging technologies, such as cloud computing, renewables, artificial intelligence and robotics, focusing on its growing capacity to innovate and lead. It hopes to take advantage of technological disruption to leapfrog into the future.
Recognizing the vulnerabilities of hydrocarbon dependence, China has become a leader in renewables and electric vehicle manufacture. For each superlative in the fossil fuel arena, another can be found within the new energy economy.
Driven by both local and global concerns, environmental policy is increasingly at the heart of China’s industrial strategy and for a simple reason: it stands to benefit most from the “green dividend.”
Nonetheless, China’s environmental ambitions are, for now, a rapidly-growing but thin slice of a giant fossil fuel economy. As a result, the country will increasingly occupy two spaces; one the gravitational center of trade in hydrocarbons and metals; and second an emergent center of technology based on new, more secure supply chains and manufacturing.
However Beijing chooses to manage these complex and often seemingly contradictory positions, China is entering a new epoch in its development, one that extends far beyond the visions of its inception as the People’s Republic of China in 1949.