Liu Qiang says as demand increases, China’s ‘One Belt, One Road’ project can help offset the challenges and provide better connectivity and greater economic opportunities
China’s fast economic growth in the past 30 years has dramatically transformed the global landscape. This transformation will only continue under the “One Belt, One Road” initiative set out by President Xi Jinping.
This proposed initiative will propel China and the region towards a more dynamic economic system. At home, “One Belt, One Road” will connect the inland areas, furthering their development to the levels seen in cities such as Beijing, Shanghai, Shenzhen and Guangzhou. Beyond China, the initiative will create stronger links of energy, transport and information along the historical Silk Road that connects Europe to the Middle East to Asia, and the Maritime Silk Road that encompasses Southeast Asia, Oceania and East Africa.
These connections will integrate markets into a dynamic economic system and offer the chance to improve the regional security situation. They will also transform the regional energy landscape.
Currently, Asia faces several energy needs. Its growing countries are demanding more energy as well as energy-intensive products such as iron, steel, cement, electric appliances and cars. They are also increasingly looking to adopt clean energy. This fast-growing energy consumption requires more reliable and efficient infrastructure and markets.
To meet the rapidly rising demand that comes with the region’s economic development and is fuelling it, Asia’s investment in the oil, gas and power sectors could be as high as US$10 trillion over the next 20 years, according to the International Energy Agency.
Through the “One Belt, One Road” initiative, China will help to offset some of these major challenges. It will invest in energy projects ranging from upstream projects, oil and gas pipelines, and liquefied natural gas terminals to high-voltage power lines, nuclear power and renewable energy. It will create a more efficient and better integrated energy network.
In terms of energy project investment, the natural gas sector is already feeling the impact of the “One Belt, One Road” initiative. As demand increases across Asia for natural gas as a cleaner substitute for coal and oil, it is driving Qatar, Iran, Indonesia and Australia to raise their output. China and Russia have already signed a long-term natural gas contract and there is the possibility that North America will sell natural gas to East Asia in the future.
As such, a hub and proper pricing system is necessary to facilitate the fast-growing market for natural gas in the region. Some of China’s harbour cities such as Shanghai and Tangshan, in Hebei , have put forward the idea of developing a natural gas hub. Given the rising demand, participation by other East Asian economies can turn this vision into reality.
In terms of a more integrated energy network, the design of the “One Belt, One Road” initiative offers all Asian countries better energy connectivity, more economic opportunities for local communities and stronger communication among different nations and peoples. The initiative will also help mitigate the risks currently inherent in the transport of fuel and other goods through unstable, insecure or unfriendly channels. The result will be strengthened energy and geopolitical security, as well as a more stable regional energy market.
The “One Belt, One Road” initiative will engender a win-win outcome for China and the nations along the inland and maritime links. China has the ability to invest in these countries and offer an enormous market for their products. Critics may say the initiative is just an attempt by China to sell its surplus industrial output and improve its own energy supplies. The truth is that the benefits of stronger ties among economies and a bigger, more integrated Euro-Asia market will be there for all to enjoy.
Dr Liu Qiang is secretary-general of the Global Forum for Energy Security and director of the Energy Economics Division at the Chinese Academy of Social Sciences (CASS). He will be sharing more about the energy opportunities and implications of One Belt, One Road at Singapore International Energy Week (SIEW) 2015 from 26-30 October.
This article first appeared in the print edition of the South China Morning Post on 13 June 2015.