Chindia Alert: You’ll be Living in their World Very Soon
aims to alert you to the threats and opportunities that China and India present. China and India require serious attention; case of ‘hidden dragon and crouching tiger’.
Without this attention, governments, businesses and, indeed, individuals may find themselves at a great disadvantage sooner rather than later.
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India’s CO2 emissions have fallen for the first time in four decades – and not just as a result of the country’s coronavirus lockdown.
Falling electricity use and competition from renewables had weakened the demand for fossil fuels even before the coronavirus hit, according to analysis by the environmental website, Carbon Brief. However, it was the sudden nationwide lockdown in March that finally tipped the country’s 37-year emissions growth trend into reverse.
The study finds that Indian carbon dioxide emissions fell 15% in March, and are likely to have fallen by 30% in April.
Virtually all of the drop-off in power demand has been borne by coal-fired generators, which explains why the emissions reductions have been so dramatic.
Coal-fired power generation was down 15% in March and 31% in the first three weeks of April, according to daily data from the Indian national grid.
But even before India’s sudden coronavirus lockdown, the demand for coal was weakening.
The study finds that in the fiscal year ending March 2020, coal deliveries were down by around 2%, a small but significant reduction when set against the trend – an increase in thermal power generation of 7.5% a year set over the previous decade.
Indian oil consumption shows a similar reduction in demand growth.
Image copyright GETTY IMAGESImage caption The nationwide lockdown finally tipped a 37-year emissions growth trend into reverse
It has been slowing since early 2019.
And, once again, the trend has been compounded by the impact of the Covid-19 lockdown measures on the transport industry.
Oil consumption was down 18% year-on-year in March 2020.
Meanwhile, the supply of energy from renewables has increased over the year and has held up since the pandemic struck.
This resilience the renewables energy sector shows in the face of the sudden reduction in demand caused by coronavirus is not confined to India.
Media caption Delhi smog disappears during India’s lockdown
According to figures published by the International Energy Agency (IEA) at the end of April, the world’s use of coal was down 8% in the first quarter of the year.
By contrast, wind and solar power saw a slight uptick in demand internationally.
A key reason that coal has taken the brunt of the fall in electricity demand is that it cost more to run on a day-to-day basis.
Once you have installed a solar panel or a wind turbine, operating costs are very low and, therefore, tend to get priority on electricity grids.
Image copyright GETTY IMAGESImage caption India’s use of coal has plummeted, in line with that of other countries
Thermal power stations – those powered by coal, gas or oil – by contrast, require you to buy fuel in order to generate power.
But analysts warn that the decline in fossil fuel use may not last.
They say when the pandemic subsides, there is a risk that emissions will soar again as countries attempt to kick-start their economies.
The US has already started to relax environmental regulations and the fear is other nations could follow suit.
However, the analysis from Carbon Brief suggests there are reasons to think India could buck this trend.
The coronavirus crisis has brought the long-brewing financial troubles in the Indian coal sector to a head, and the Indian government is finalising a relief package which could top 900bn rupees ($12bn; £9.6bn).
But, at the same time, the government is talking about supporting renewable energy as part of the recovery.
Image copyright GETTY IMAGESImage caption Renewables have the economic edge in India, offering far cheaper electricity than coal
Renewables have the economic edge in India, offering far cheaper electricity than coal.
The report claims that new solar capacity can cost as little 2.55 rupees per kilowatt hour, while the average cost for electricity generated from coal is 3.38 rupees per hour.
Investing in renewables is also consistent with the country’s National Clean Air Programme, launched in 2019.
Environmentalists hope the clean air and clear skies Indians have enjoyed since lockdown will increase public pressure on the government to clean up the power sector and improve air quality.
But trade with partner countries might not be as badly affected as with countries elsewhere in the world, observers say
China’s trade with belt and road countries rose by 3.2 per cent in the January-March period, but second-quarter results will depend on how well they manage to contain the pathogen, academic says
China’s investment in foreign infrastructure as part of its Belt and Road Initiative has been curtailed because of the coronavirus pandemic. Photo: Xinhua
The coronavirus pandemic is set to cause a slump in Chinese investment in its signature
and a dip in trade with partner countries that could take a year to overcome, analysts say.
But the impact of the health crisis on China’s economic relations with nations involved in the ambitious infrastructure development programme might not be as great as on those that are not.
China’s total foreign trade in the first quarter of 2020 fell by 6.4 per cent year on year, according to official figures from Beijing.
Trade with the United States, Europe and Japan all dropped in the period, by 18.3, 10.4 and 8.1 per cent, respectively, the commerce ministry said.
By comparison, China’s trade with belt and road countries increased by 3.2 per cent in the first quarter, although the growth figure was lower than the 10.8 per cent reported for the whole of 2019.
China’s trade with 56 belt and road countries – located across Africa, Asia, Europe and South America – accounts for about 30 per cent of its total annual volume, according to the commerce ministry.
Despite the first-quarter growth, Tong Jiadong, a professor of international trade at Nankai University in Tianjin, said he expected China’s trade with belt and road countries to fall by between 2 and 5 per cent this year.
His predictions are less gloomy than the 13 to 32 per cent contraction in global trade forecast for this year by the World Trade Organisation.
“A drop in [China’s total] first-quarter trade was inevitable but it slowly started to recover as it resumed production, especially with Southeast Asian, Eastern European and Arab countries,” Tong said.
“The second quarter will really depend on how the epidemic is contained in belt and road countries.”
Nick Marro, Hong Kong-based head of global trade at the Economist Intelligence Unit, said he expected China’s total overseas direct investment to fall by about 30 per cent this year, which would be bad news for the belt and road plan.
“This will derive from a combination of growing domestic stress in China, enhanced regulatory scrutiny over Chinese investment in major international markets, and weakened global economic prospects that will naturally depress investment demand,” he said.
The development of the Chinese built and operated special economic zone in the Cambodian town of Sihanoukville is reported to have slowed, while infrastructure projects in Bangladesh, including the Payra coal-fired power plant, have been put on hold.
The development of the Chinese built and operated special economic zone in the Cambodian town of Sihanoukville is reported to have slowed. Photo: AFP
Marro said the reduction of capital and labour from China might complicate other projects for key belt and road partner, like Pakistan, which is home to infrastructure projects worth tens of billions of US dollars, and funded and built in large part by China.
“Pakistan looks concerning, particularly in terms of how we’ve assessed its sovereign and currency risk,” Marro said.
“Public debt is high compared to other emerging markets, while the coronavirus will push the budget deficit to expand to 10 per cent of GDP [gross domestic product] this year.”
Last week, Pakistan asked China for a 10-year extension to the repayment period on US$30 billion worth of loans used to fund the development of infrastructure projects, according to a report by local newspaper Dawn.
China’s overseas investment has been falling steadily from its peak in 2016, mostly as a result of Beijing’s curbs on capital outflows.
Last year, the direct investment by Chinese companies and organisations other than banks in belt and road countries fell 3.8 per cent from 2018 to US$15 billion, with most of the money going to South and Southeast Asian countries, including Singapore, Vietnam, Indonesia and Pakistan.
Tong said the pandemic had made Chinese investors nervous about putting their money in countries where disease control measures were becoming increasingly stringent, but added that the pause in activity would give all parties time to regroup.
“Investment in the second quarter will decline and allow time for the questions to be answered,” he said.
“Past experience along the belt and road has taught many lessons to both China and its partners, and forced them to think calmly about their own interests. The epidemic provides both parties with a good time for this.”
Dr Frans-Paul van der Putten, a senior research fellow at Clingendael Institute in the Netherlands, said China’s post-pandemic strategy for the belt and road in Europe
might include a shift away from investing in high-profile infrastructure projects like ports and airports.
Investors might instead cooperate with transport and logistics providers rather than invest directly, he said.
“Even though in the coming years the amount of money China loans and invests abroad may be lower than in the peak years around 2015-16, I expect it to maintain the belt and road plan as its overall strategic framework for its foreign economic relations,” he said.
Image copyright GETTY IMAGES
Image copyright GETTY IMAGES
Image copyright GETTY IMAGES
Image copyright GETTY IMAGES
CHINDIA ALERT: You'll be living in their world, very soon 