The Chinese economy is changing, and the aftershocks of its tectonic shift will be felt around the world. After decades of growth and massive infrastructural buildout, the capacity for further additions is diminishing. As a result, China’s economy is slowing down, the nationwide property bubble is bursting, and unemployment rates are punishing. A record high of 11.79 million students are expected to graduate from university this year in China, at which point they will join legions of jobseekers, many of whom have been unemployed since the onset of the Covid-19 pandemic four years ago.
As a result of all of this economic turmoil, the country’s production and consumption patterns are going to change considerably, with ramifications for the entire global economy and the worldwide energy trade, as well as for international climate pledges and the environment writ large. As the International Energy Agency reported in their 2023 flagship World Energy Outlook, “China has changed the energy world, but now China is changing.”
China’s domestic market just can’t absorb too much more manufacturing and construction. “The country already has a world-class high-speed rail network; and residential floorspace per capita is now equal to that of Japan, even though GDP per capita is much lower,” the IEA’s most recent World Energy Outlook states. “This saturation points to lower future demand in many energy-intensive sectors like cement and steel.”
On the other hand, Chinese manufacturers don’t behave in the same way as manufacturers in free-market countries. Just because there is less demand for a given product doesn’t mean that China will necessarily stop producing it. There is a growing concern in international circles that China is overproducing a laundry list of items and will soon be burdened with gross overcapacity of a great number of products in tandem with shrinking domestic consumption patterns. “China Is Making Too Much Stuff—and Other Countries Are Worried,” read a recent Wall Street Journal headline. The primary concern is that China will try to push a glut of solar panels, electric cars, and other products onto the global market at steep discounts, flooding the market and employing predatory pricing.
But at the same time that China is doubling down on its manufacturing capacity in the face of this economic sea change, the country is also trying to shift its economic output away from anachronistic manufacturing trends and toward more green and digital sectors. While the rest of the nation’s job market is feeling the squeeze, recruitment levels in automation and new energy stand in stark contrast to the economy at large as they continue to grow at a healthy clip.
According to figures from Zhilian Zhaopin, an online recruitment platform in China, posted positions in industrial automation in the first half of 2023 grew by 7% year-over-year, while new-energy industry job postings grew by a whopping 36% over the same period. The number of recruitment positions for wind power engineers and engineering supervision positions increased by 738% and 322%, respectively. “Under the policy guidance, the demand for clean energy – especially the number of windpower projects – is growing rapidly, requiring more windpower engineers to participate in research and development, design, construction and maintenance,” the Zhilian Zhaopin report stated.
China already dominates the global clean energy sector, and these numbers suggest continued rapid growth in the near term. This spells trouble for global competition, as other major energy-producing nations, and especially the United States, have begun to invest too little, too late in building up their green energy capacities. China has been outspending the competition for years now – last year they quadrupled the United States’ level of spending on clean energy – and has well-established clean energy supply chains around the world. Being also has near-monopolies on a number of key supply chain nodes. China produces approximately 80% of the world’s solar panels, 60% of electric vehicles, and over 80% of EV batteries. It also produces 60 percent and processes nearly 90 percent of the world’s rare earth minerals, essential ingredients for clean energy infrastructure including electric vehicle batteries and photovoltaic solar panels.
And clearly, according to the country’s job postings, China is just getting started. While the scale of their dominance in the sector has serious and frightening geopolitical drawbacks, it also is extremely hopeful for global climate trends. While China’s control of clean energy supply chains isn’t popular in the West, and for good reason, it is associated with affordable clean energy components at a time when they are sorely needed. Furthermore, the saturation point of the domestic market suggests a downward trend in the nation’s famously insatiable energy demand, and especially for hard-to-decarbonize industries like steelmaking. As a result, China’s fossil fuel consumption will plateau and begin to taper off while its clean power capacity continues to grow.
By Haley Zaremba for Oilprice.com
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