Middle East conflict unlikely to derail China’s energy supply

BEIJING

Escalating military conflict in the Middle East and the resulting global oil supply disruptions will not threaten China’s energy security, a prominent Chinese economic official told Anadolu.

Yao Jingyuan, former chief economist at China’s National Bureau of Statistics (NBS) and a special researcher for the State Council’s Counselor’s Office, said China's domestic coal production helps insulate the world’s second-largest economy amid ongoing geopolitical turbulence over joint US and Israeli strikes on Iran and Tehran’s retaliations.

Yao said China consumes around 700 million tons of oil per year, of which roughly 210 million tons is produced domestically, while 557 million tons is imported -- meaning the country relies on imports for about 70% of its oil. He said this dependence means China will feel the impact of oil supply disruptions and price fluctuations but not to the extent that would threaten its energy security.

Yao noted that Chinese industrial production and household consumption continue to rely primarily on the country’s coal reserves rather than imported petroleum, and that technological advancements over the years have boosted the efficiency of coal-based power generation, allowing for the production of the energy equivalent of one ton of oil to be produced from two tons of coal.

He said China prioritizes a green transition in energy to reduce carbon emissions, with hydropower, wind, and solar energy leading energy sources in the country’s west, while investments in renewable energy continue.

He mentioned that conflicts like those in Venezuela and Iran will inevitably have an impact but these effects will be limited in China in the short and medium term, and he expects the geopolitical situation will not significantly impact China’s energy supply over the next five years.

However, rising global fuel costs are expected to increase domestic transportation costs and production costs for everyday consumer goods reliant on petroleum-derived raw materials, such as fertilizers, pesticides, tires, ready-to-wear clothing, and household appliances.

Every 10% increase in global oil prices triggers a half-percent rise in China’s Producer Price Index, Yao said, citing National Bureau of Statistics data gathered during the Second Gulf War.

Beijing has built up strategic oil reserves over the years to prevent sudden global price hikes from immediately affecting the domestic market, but imported inflation from the current Middle East crisis could push China’s recently stagnant Consumer Price Index up to 1% by the end of March, he said.

Yao stated that complex geopolitical issues create many uncertainties and that it is unrealistic to think these would not affect China, but that with instability being unavoidable, Beijing spent years focusing on domestic development to ensure internal economic peace even in the face of such turbulent times.

He recalled visiting Kuwait with a Chinese delegation in 1991, during the First Gulf War, and meeting businesspeople from various countries -- except for China.

Yao urged Chinese businesspeople to learn to adapt their commercial operations even in conflict zones, adding that international business and armed conflict often proceed in parallel.