Thu. Sep 29th, 2022

ST HSIEH

June 17, 2022

US-China relation is at all time low, there are many reasons. It is an accumulative effect over the time, it does not get this low overnight. Fortunately, there are signs that both US and China are determined to avoid any major confrontation under President Biden. It is imperative that Biden-Xi meet at a Summit soon, China will elect a new leadership team in the fall and US midterm election is on November 8, 2022. If US and China do not manage a re-set, it will be very difficult 2023 and beyond.

  1. US-China energy trade was very good and beneficial to both nations. Even after President Trump initiated the tariff war against China, the Trump-Xi Phase-One Trade Agreement included energy trade in significant dollar amount.

The Phase-One Trade Agreement expired on December 31, 2021, without much accomplishment as expected. Because the trade agreement did not follow the principle of “free-trade,” instead it was a government-managed trade deal without any consideration of global price, which is largely determined by supply and demand.

  1. It is also generally recognized that tariff war interrupted the global supply chain. Along with the COVID-19 global pandemic as well as the latest Ukraine war, a global recession is almost inevitable within the next two years. US and China should at least focus on resolving the Trump tariff war, it would reduce the pressure of high inflation rate that is the major reason Biden’s approval rating is so low that the Democratic party is almost certain to lose the mid-term election. Biden risks to be a lame duck president in 2023.
  2. After Ukraine war flared up on February 24, 2022, US led West executed round after round extreme severe sanctions against Russia with the stated objective of breaking Russian economy by excluding Russian energy export to Europe. Russia responded by weaponizing energy even reducing gas supply to certain NATO nations now. It turns out that Russia grosses about one billion US dollars per month after West initiated sanctions. Even Ukraine still collects natural gas transit fee every day. As the sanction and embargo game goes on, EU economy, especially German, is in very bad shape because high energy prices. So, it seems that someone has to start the cease-fire process soon.
  3. In terms of national energy security, it is always wise for any nation to maintain a diversified supply base. A key factor is the cost and long-term contract. US natural gas export to Europe and Asia must depend on LNG. While Russia natural gas export to Europe and China are mostly pipeline based. The infrastructure investment, including time, and operational cost for LNG and pipelines are very different.
  4. The concern of sanction is not normal, Ukraine war is a special case: all the contracts mean nothing during the war. In peace time, commercial contracts are honored. Disputes should be settled by negotiation rather than sanctions. Further, sanction does not solve any major issue. It is an excuse to start a war.
  5. We recommend that Ambassador Burns actively supports US-China energy trades and take actions. This is the common ground that Ambassador Burns has not recognized. As of controlling the spread of COVID-19, US does not have any record for bragging: we suffered more than one million casualties in the US and counting. US is number one in the world. If China followed “US model” by proportion of population size, China would suffer more than three million casualties and even more. Can any government in the world survive such a casualty in such a short time? The best idea is for the US and China to lead the battle to “finish” COVID-19 pandemic and global economic recovery. May be US should focus on ending the Ukraine war now and China may play a constructive role.

China, US gas trade increase could help lift relations from ‘worst in history’, ex-official says

SCMP Fri, June 17, 2022, 2:30 AM

China could consider increasing its natural gas trade with the United States despite worsening relations between Beijing and Washington, a former Chinese official said, while also “cautiously” increasing energy commerce with Russia.

Relations between China and the US remain tense despite a flurry of diplomatic activities over the past year, adding to concerns among businesses over the risk of a decoupling between the world’s two largest economies.

“Right now, China and US relations are at their worst in history,” said Zou Ji, a former deputy director general of China’s National Centre for Climate Change Strategy and International Cooperation under the economic planner National Development and Reform Commission.

“I believe the status quo won’t be changing much in the next five, 15 and even 20 years.

“[More gas trade with the US] could strengthen the degree of ties.”

Zou, who is now the head of Energy Foundation China, a non-government research group, said while there are “some concerns” in China about buying more liquefied natural gas (LNG) from the US due to the current geopolitical tensions, growing energy trade between the two countries could form a “community of shared interests”.

He added that stronger commercial interests will help prevent any unilateral actions that could destabilise trade.

And even as Western countries back away from Russia’s oil and gas trade following its invasion of Ukraine, Zou said when it comes to diversification, China should continue to “cautiously” maintain or even increase energy trade with Russia.

He said, however, that there are growth “limits” as energy imports make up a relatively insignificant amount of China’s overall demand.

With oil, there aren’t that many regions that offer exports,” Zou told an online seminar on the energy market arranged by Renmin University of China on Wednesday.

“So there are always going to be risks and there are opportunities.”

China is the world’s top energy importer and Russia has been an important trading partner by supplying oil, gas and coal.

But Chen Zhanming, a professor with Renmin University of China, also believes China should be cautious with its oil and gas trade with Russia.

“Western countries are imposing energy embargoes and financial sanctions on Russia. China needs to respond with caution,” Chen told the seminar on Wednesday.

“On the one hand, it needs to protect the energy security of its imports, and on the other hand, it has to avoid being sanctioned.

“The experience in Europe reminds us that over-reliance on a certain country, transportation and the type of energy will bring in huge risks to energy security.”

China’s LNG imports averaged 10.5 billion cubic feet per day last year, a 19 per cent rise compared with 2020, according to the US Energy Information Administration.

LNG imports made up for more than half of China’s overall natural gas imports and 30 per cent of China’s total natural gas supply in 2021.

Last year, China imported LNG from 25 countries, with Australia, the United States, Qatar, Malaysia, Indonesia and Russia among the largest suppliers, the US Energy Information Administration said.

Over the last 12 months, pipeline crude oil deliveries to Europe and China accounted for 16.9 per cent and 18.4 per cent of Russia’s total pipeline crude oil shipments, respectively, according to a report by the International Institute of Finance earlier this month.

China’s stated objective is to limit its reliance on individual crude oil supplies from any one country to around 15 per cent.

In 2020, Saudi Arabia and Russia both reached the threshold, according to the International Institute of Finance.

China defends ‘zero-COVID’ after US envoy warns of costs

Fri, June 17, 2022, 4:24 AM

BEIJING (AP) — China on Friday defended its tough “zero-COVID” policy after the U.S. ambassador said it was causing serious damage to the global economy and foreign business sentiment.

Foreign Ministry spokesperson Wang Wenbin said the Chinese economy is recovering from the effects of the pandemic and “facts prove” the policy mandating lockdowns, quarantines and mass testing is “suitable for China’s national conditions and has stood the test of history.”

“We have full confidence that (we can) contain the epidemic, steady the economy and achieve the goal of safe economic development,” Wang said at a daily briefing.

China has sought to completely eliminate outbreaks of COVID-19 with tough restrictions, while most other countries are relaxing their anti-coronavirus measures to “live with” the disease.

Ambassador Nicholas Burns said on Thursday that the “zero-COVID” policy has “had a major impact” on business sentiment, singling out as especially damaging a two-month lockdown in Shanghai, China’s largest city and key financial hub.

Most of Shanghai’s 25 million people were confined to their homes or immediate neighborhoods, and hundreds of thousands continue to remain under restrictions. Rolling lockdowns have also continued to Beijing and other cities.

Critics say the policy is disrupting global supply chains and hurting employment and consumption in China. The U.N.’s World Health Organization has called it unsustainable. China denounced the remarks as irresponsible.

Burns said in a virtual address to the Brookings Institution think tank that there were 40,000 American citizens in the Shanghai area before the pandemic, but that “lots and lots of those people have gone home.” Diplomats from Europe, Japan and other countries report similar declines, he said.

“We’re quite cognizant of the need, I think the Chinese government is quite cognizant of the need, to try to get back to a situation of normalcy,” Burns said.

He said few American companies are leaving China completely because of its continuing importance, “but from the results that I’ve read, and the conversations I’ve had with lots of business leaders here, I think there is a hesitancy to invest in future obligations until they can see the end of this.”

The U.S. and China recorded $650 billion in trade last year, and around 1,100 American companies are operating in China.

Chinese restrictions have all but ended visits by U.S. government officials and business leaders, while the number of American students has dropped sharply since China suspended issuing student visas.

“It’s difficult to convince any of my colleagues in Washington to come here if I tell them that when they do it, they’ve to quarantine for 14 days before they can have a single meeting,” Burns said. “And I understand their unwillingness to do that.”

Burns said the Chinese government is signaling that the “zero-COVID” policy will probably be extended at least into the beginning months of 2023.

Burns, who has declared that relations between Washington and Beijing are at their lowest point since former President Richard Nixon visited in 1972, said China’s aggressive foreign policy has intensified competition between the countries. But he said they still have multiple areas in which they can engage constructively, including on climate change, anti-narcotics measures and agricultural trade.

Burns said much of his job is focused on outreach to the Chinese public, a task made more difficult by COVID-19 restrictions and the government’s strict censorship.

A recent speech on China by U.S. Secretary of State Antony Blinken that the embassy posted on China’s Twitter-like Weibo social media platform was taken down within about 2 1/2 hours, but drew large numbers of views while it was up, he said.

A second attempt to post it three days later resulted in it being censored within 20 minutes, Burns said.

“So that’s the game that they play,” he said.

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