China's Economy and the Importance of Oil
Secure Energy Supply Needed to Fuel Chinese Growth
Dec 19, 2008
Things are changing in the Middle East. Old alliances, once thought rock solid, are under strain, and new players have arrived on the scene, all looking to try their luck in the volatile world of energy supply. There is one new player of particular note – China.
Diplomatic Relations Between China and the Middle East
As if to emphasize China’s increasing importance in the region, when King Abdullah of Saudi Arabia embarked on his first foreign visit in January 2006 since becoming king the previous year, his first stop was Beijing. The event was a clear indicator of the close economic and diplomatic ties between China, the world’s fastest growing source of oil demand, and Saudi Arabia, the world’s largest oil producer.
Abdallah Jum’ah, chief executive of the world’s biggest state oil company, Saudi Aramco, put it clearly when he described the relationship between China and Saudi Arabia as “among the most important energy relationships on the planet.” (“China Makes Friends in the Gulf” by Julian Madsen, Asia Sentinel, 30 October 2006).
Since the foundation of the People’s Republic in 1949, China traditionally regarded the Middle East as distant from its immediate concerns. With the 1959 discovery of the Daqing oil-field, some 600 miles north-east of Beijing, energy supply was not an issue. China’s prime concern regarding the countries of the Middle East was to persuade them to establish diplomatic ties with Beijing rather than Taiwan. Egypt was the first to do so in 1956, and Saudi Arabia the last, in 1990.
China’s Economic Development
China’s economic boom has changed the situation drastically. The economic reforms of the late 1970s have lead to an annual growth rate of nearly 10 percent on average, a rate that has only slowed with the onset of the global financial crisis. Chinese oil demand is increasing by around one billion barrels per day annually. The International Energy Agency (IEA) predicts that by 2030 Chinese oil imports will equal those of the US.
China became a net importer of oil in 1993, surpassing Japan in 2003 to become the second largest international oil consumer after the US. The new economic realities have pushed the search for a stable supply of energy to the top of the Chinese agenda, as continued economic growth is central to the Chinese Communist Party’s legitimacy. In a speech celebrating 30 years of reform in December 2008, Chinese President Hu Jintao emphasized the importance of maintaining stable and relatively rapid growth.
Such growth looks set to continue, if at a reduced rate, and China’s search for secure energy supplies will also continue, along with its wooing of the oil-rich Middle East. To quote the movie Casablanca, this could be the start of a beautiful friendship.
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