China’s Global Leadership Lies in Providing Integrated Solutions

来源：北京国际能源专家俱乐部

Mesdames et Messieurs,

Je suis très ravi d’avoir cette opportunité d’échanges avec vous, et je remercie Marc-Antoine Ely-Mazzega et Olivier Appert pour l’avoir organisée.

Nous vivons une époque de grande mutation. Avant la pandémie, on a déjà constaté les fractures apparentes des relations internationales. Post pandémie, ces fractures ont une forte chance de devenir des forces destructrices de l’ordre international, qui menacent d’efffrondrement la gouvernance globale.

C’est dans ce contexte que j’applaudis les efforts de l’IFRI pour éviter le déraillement de cet ordre qui nous a été très cher à établir et à maintenir, car beaucoup de nos prédécesseurs comme le Général de Gaule y ont consacré beaucoup d’efforts.

Dans les vingt minutes qui viennent, je voudrais exposer quelques grandes lignes concernant l’économie chinoise et le développement de son secteur énergétique, surtout la direction post pandémie, avant d’aborder la position de la Chine dans le nouveau monde.

Je voudrais souligner que je n’ai pas de position officielle au sein du gouvernement chinois et que tout avis émis durant cet exchange est strictement personnel.

Pour mieux me faire comprendre, et en accord avec Marc Antoine, je vais parler Anglais, car cela fait long temps que je n’ai pas pratiqué le français, et beaucoup de termes techniques sont difficile à traduire simultanément.

I will cover two subjects: Chinese development post Covid-19 and Chinese leadership in the new post pandemic world.

1. Chinese development post COVID-19

First of all, on the pandemic. The whole country has been seeing single digit new cases, mainly imported cases with overseas students and business people coming back to homeland. Wuhan is also under control, with the city re-opened transportation connection with the rest of China on 8th April, two emergency hospitals which were built at a record speed, were both closed, all the national supporting teams have returned to their respective cities/provinces. China will have one week holiday for the international labour day. Chinese government has also announced that the annual sessions of the two congresses will be held respectively on 21st May and 22nd May.

According to official statistics, Chinese GDP 1Q2020 fell 6.8%, lowest since quarterly reporting system was introduced in 1992. This may appear not to be very low compared to global situation, but compared against last year 1Q growth of 6.4%, the fall was 13.2%. Energy demand fell 2.8%, electricity demand fell 6.8%. There is no official statistics on oil demand, but I guess the fall should be at least 5%.

Despite being severely hit, the impact as currently estimated will not change the fundamentals of the Chinese economy. China has the world’s largest market and very complete industrial manufacturing capabilities. Of the total 666 industrial categories classified by the UN, China is the only country in the world that has all of them.

As the pandemic is still progressing worldwide, and import-export still account about 1/3 of the Chinese economy, it is too early to say that the bad situation is over for China. We do not know whether there will be other rounds of virus hit-backs, as it was the case for the Spanish flu of 1918-1920, and the US Influenza H1N1 in 2009-2010.

It’s very likely that the virus will not disappear. We will have to find ways of living safely with it. In 2015, the Chinese government used a term “New Normal” to describe the fact that the Chinese economy will change from a period of high speed growth to a new period where growth will be lower and where the focus will be more on quality rather than quantity. To borrow this term, I believe that due to COVID-19, we are entering into a “New Normal” world, where work and life have to be modified in order to avoid contamination. Teleworking, virtual meetings, social distancing etc will become new norm.

There is another ancient Chinese wisdom which I know you are all familiar with: that the word crisis in Chinese is composed of two characters: one is danger and the other is opportunity.

As you may know, after the 1998 Asian financial crisis and the 2008 global financial crisis, China launched very large stimulus plans with focus on infrastructure development, such as roads, railways, airports, etc.

Now this crisis is much bigger than the 1998 and 2008 ones. Clearly it is a big danger, but are there also big opportunities? The answer is yes. The opportunities rest with the hope that China will use the recovery stimulus to overcome the shortcomings of the Chinese economy and society and to accelerate the modernization process.

The keyword is “new infrastructure”. According to the NDRC, it includes 3 parts:

Digital Infrastructure: including 1) communication infrastructure, such as 5G, IOT, industrial digital net, satellite-based internet; 2) new digital technology infrastructure such as artificial intelligence, cloud computing, blockchain; 3) computational infrastructure, such as data centre, smart computing centres.

Digital integrated infrastructure: deeply applying new digital technologies to upgrade the traditional infrastructure to form new and integrated infrastructure such as smart transportation infrastructure and smart energy infrastructure.

Innovation infrastructure: those facilities that would support R&D, technology development and product innovation.

Together with other projects in the healthcare, disease control, smart cities and pollution abatement, these “new infrastructure” projects aim to bring the Chinese economy to new heights, with a new degree of modernization through digitalization and advanced digital applications.

China is also in the process of elaborating the 14th Five-Year-Program for 2021-2025. The keyword before the pandemic was “high quality” development. The pandemic further highlighted the urgent need for quality, rather than quantity, in the country’s development.

For the energy sector, 4 years ago, I already pointed out that the Chinese energy development is shifting away from the 1.0 era where energy supply security must be ensured regardless of environmental protection, and entering into a new 2.0 era, where the focus is more on quality and environmental protection.

In this new era, energy development program is no more simply setting a supply target and organizing all the resources to meet it, but to optimize the use of the existing infrastructure, to start with the customers’ needs, and to meet those needs with the minimum amount of energy at lowest cost. The aim is to improve the overall efficiency of any energy value chain, as well as the synergy between different energy industries, to improve the service quality and reduce the environmental footprint.

You may ask, the post pandemic recovery, will China take benefits of the low energy prices to encourage the consumption of coal and oil, regardless of global environment and climate concerns? On this question, I think we should all be concerned about countries going back to fossil fuels regardless of Paris Agreement, particularly when the US has withdrawn from it.

In many occasions, I have been appealing that China should keep the cap in climate and energy transition, and do not vanish all the previous years’ efforts under the excuses of economic stimulus. I believe China should have sufficient foresights to include energy saving, renewables, energy storage, and digitally enabled smart energy solutions as part of “new infrastructure”, and apply them widely in smart city and new urbanization projects. This will not only reduce local air pollution and greenhouse gas emissions, but also improve the country’s energy security.

You may also ask, isn’t current level of very low oil prices good for China as the world’s largest oil importer? Yes, I believe low oil prices can help the recovery of the Chinese economy, but it also sow the seeds for future price hikes and deteriorate the country’s energy security woes.

One significant trend before the pandemic was on one side, you have the US energy independence, thanks to shale revolution, and on the other side, we see the Chinese oil import dependency rising continuously, overpassing 70% now, with heavy reliance on Saudi Arabia and Russia.

Oil import dependency would not be an issue in a globalized world. But in a not-so-globalized world, it could be a big issue. How can China overcome this Achilles’ Heel ?

I believe China can find solutions to its energy security problems in the electricity sector, by leveraging its strengths to overcome the weaknesses. As you know, China is very strong in power generation technologies, be them traditional thermal power plants, or new and renewables such as solar, wind and nuclear. In the energy storage field, we are about the same as other leading countries. This is our strength.

China can deploy this strength to promote the substitution of oil by electricity in transportation, which is already ongoing via electrification of vehicles. China can also use electricity as medium, to capture and utilize all forms of low density and dispersed energies above the Chinese soil, with digitally integrated energy solutions combining energy saving, heat pump, solar, wind, geothermal, energy storage, to meet the customers’ heating, cooling and electricity requirements. This will accelerate the energy transition process, and cut the energy security problem by its root.

I hope to see what will happen in China will not only help the country recover, but also show the world how to turn crisis into opportunity.

2. Chinese Leadership in the Post Covid-19 World

Let me now turn to the 2nd part of my intervention today: Chinese leadership in the post Covid-19 world.

Post pandemic, the world will be no more the same as before. In this “New Normal” world, not only we will have to work, live and conduct our social lives differently, the global supply chain, international trade, country to country relations, international organisations, all will change. We are entering into a totally new world, with much bigger uncertainties.

Many assimilate the current global fight against the pandemic as the first world war in the 21st century, not nation against nation, but whole humanity against this deadly virus. We do not know how long the war will last, but one day it will be over.

At the end of WWII, the US launched a massive Marshall plan of US$15 billion to rebuild the post-war European economy. We need a new Marshall Plan post pandemic.

But in a fragmented “new normal” world where trust is missing among major powers, who will be the architecture and fund provider of the new Marshall Plan? I hope IFRI can study this question.

The global governance system that was built after the WWII was already under threat, led by the US withdrawal from many of the international organisations: Unesco, Human Rights Council, Paris Agreement, Middle-Range Missile Treaty, Iran Nuclear Agreement. The pandemic will further deteriorate the tendency. Without those international organisations that provide public goods for the well-functioning of the world, how can nations across the planet work together, to resolve conflicts and join forces? This is the second question I hope IFRI can study.

The 3rd question involves the energy sector. The global oil and gas industry suffers a life and death crisis with a double blow from the demand destruction and very low oil price shock. Things such as -37 dollar per barrel were beyond anyone’s imagination happened in reality. And the power industry also suffers from the negative electricity prices.

If the pandemic is a resilience test of the global energy industry, it is also a test of the global energy governance system:

Is OPEC still relevant in the context of OPEC+?

Can we leave the oil market management to Saudi Arabia, Russia and the USA, without the participation of Europe and China ?

Is WTI still a valid crude benchmark, given the limitations of Cushing as its delivery point? In 2008 when oil market was very tight, it was the WTI that sent oil prices to $145 per barrel. Now the same WTI pushed the price to the hell level of $-37/bbl. With such a strong volatility, can the WTI still be a good global crude benchmark?

So the third question I hope IFRI can study is how to reform the global energy governance system to effectively avoid strong market volatilities.

One major challenge post pandemic is to manage the conflicts along the origin of the virus, and the causes of the global spread. If not properly managed, this will push further the US and China apart, and hinder the formation of a new global governance structure. This is not desirable for humanity’s common future.

In an era where global leadership is seriously missing, I hope France can stand up with her universal values of “liberty, equality and fraternity”, to not only address the 3 questions I posed, but also to work together with China and other countries to defend, renew and modernize the world order.

Having both studied and worked in France and China for so many years, I highly value both cultures. France is the country where scientific advances in microbiology during the 19th century led the discovery of vaccination principles by Louis Pasteur and the consequent invention of vaccines and pasteurization methods which saved millions of lives. China is the country where traditional medicine focuses on reinforcing the body’s immunity by treating any illness with an integrated solution. During China’s fight against the deadly virus, the Chinese medicine proved to be quite effective.

In the building of a post pandemic world, we need tools such as biochemical means for vaccination and disease control, we also need good practices to improve the immunity and resilience of the global governance system. The strength of China lies probably in providing integrated solutions that improve its overall resilience.

The same applies to the energy world. In addition to be a big oil and gas importer, China’s traditional role has been the provider of components such as solar PV, wind turbine, batteries, etc. As the country enters into 2.0 development phase, when domestic market turns more to integrated solutions around the end-customers, the role of Chinese companies in the global market will also turn from component suppliers to integrated solution providers.

Thank you for your kind attention.