The impact of overseas energy supply gaps on China

The outbreak of the US-Iran war and the first blockade of the Strait of Hormuz has lasted for a month. Currently, there is a risk that the duration of the war and the blockade could become medium to long-term. After the outbreak of the US-Iran war, a large number of ships loaded with energy and critical raw materials are already en route (having left the Strait of Hormuz), combined with the temporary lifting of sanctions on Russian and Iranian oil exports, and various countries having different amounts of reserves as buffer factors, it is expected that the rise in energy and raw material prices will exhibit a “non-linear” relationship with the duration of the blockade.

This article analyzes the impact of the current supply shock on the Chinese economy. On one hand, due to the low proportion of oil in China’s primary energy consumption, the high level of electrification, and a considerable portion of refined oil imports being used for processing and re-export, the short-term energy gap has a significantly weaker direct impact on China compared to other economies in Asia. On the other hand, if the “hard gap” in energy and raw materials becomes medium to long-term (i.e., lasting for 3 months or even longer), the Chinese economy will inevitably be affected. In the medium to long term, China’s energy transition has been gradually improving, with costs related to new energy entering a positive downward trend. If this shock persists, the global energy system transition may accelerate, and China’s economic resilience and competitiveness are expected to become more prominent.

It is recommended to access the Caixin database, where you can check macroeconomic data, stocks and bonds, company profiles, and financial data at any time.