 We're live, it's three o'clock, I'm Jay Fidel, Stink Tech, it's Energy in America. Okay, very important discussion today about the economy, energy economy of China. Okay, from a researcher from EPRNC, Energy Policy Research Organization in Washington that we deal with and that reports to us. It's president, it's Lu Puli Ricci, not available today, but a researcher by the name of Batulia O'Garrell, Odgarrell, yeah, is here with us. We'll call him Bat. Can we call you Bat, Bat? Yeah, thank you. Thanks for coming on the show. So tell us what's going on in China these days about its economy and about energy in China, despite the fact that the United States is having arguments with China like every day. What do you find? There are a lot of things happening in China right now from US-China trade deal review to a lot of companies transfer and agreements and to floods in the Yantai River region in China. So the Chinese government is under a lot of pressure at this point, and the economy is projected to grow by around one to 2% this year, which will make China probably the only country only major economy to have a positive economic growth this year. Why is that, Bat? I mean, China had a terrible time at the beginning of the year, they had to do really hard things in order to get back to ship shape with COVID. They clamped down. There were all kinds of issues about reopening the economy. I think they forced the point and they did to some extent reopen, but now for them to find, now for us to find that in the course of this whole year where they had such trouble at the beginning of the year, they're still gonna have a positive GDP growth. That's quite remarkable. What do you attribute that to? Can we pull up the first graph? So China, if you look at this graph by Johns Hopkins University, the US, Hawaii, and the world, they are all having daily cases not really getting better or going back to normalcy. But if you look at China, almost everything happened in February and March. So how it started was back in January, on January 23rd, there was a complete lockdown in Wuhan city and then China had a very heavy-handed lockdown across the country. That helped the authoritarian approach, if I may, helped China to enforce social distancing and all the other norms and rules to fight against the pandemic, against the virus. And thanks to that, starting in early March, things got better, people started going back to work and school and now schools are in session. So, yeah, so. Right now, the lockdown is over. Is that what you're saying? That people back in school, they're back at work, the economy has returned to, I don't wanna say normal, but what it was before COVID, am I right? Yeah, so it is, I would say it's pretty much thanks to the strict lockdown that was placed in earlier this year. And that helped a lot. And then since then, China has been exporting a lot and then the government has introduced a lot of stimulus, packages, policies and subsidies to boost the economy. And then for those reasons, now China is loosening its restrictions and just recently, China loved people, travelers from 30 plus European countries and some South and Southeast Asian countries to travel to China. And then there were strict provincial travel restrictions in China and then those are also, they are also losing those restrictions. Oh, it's a success story, isn't it? I mean, I guess the teachers is something, if you have a serious lockdown and you would force a lockdown, maybe they over-enforced it in some ways, but then you'll actually recover. Now, they must still have the infection to some extent. It doesn't go away completely and they don't have any identifiable vaccine right now yet. But it sounds like whatever infections they have in whatever parts of the country, that doesn't materially affect the improvement, the restarting of its economy, am I right? So yeah, you know, China is having daily, still having daily cases. And then there's an app by Alipay and some others Chinese social media companies to rate provinces based on their risks. And then Chinese people are using even provincial authorities are using those apps to determine how the situation is in each of the regions. And then until they have a vaccine and guarantee that it will not bring another spread of the virus, there will still be a certain degree of lockdown or restrictions. You know, it's interesting, I was just watching TV an hour ago and we have this gathering, the motorcycle gathering in Sturges, what was it, Michigan? And a few weeks ago and somebody wanted a track to see how the infection would spread out of this big motorcycle gathering. And they were able to give you a national chart of how it spread on the basis of cell phones. So somebody was able to take a picture, must have been a cell phone carriers of who was in Sturges at the time of their gathering. And then they took a picture a few weeks later of those exact same cell phones returning to the homes of those individuals in various places around the country. And you can see it on a chart. I didn't know we had this kind of collaborative technology. I'm trying to must be doing much better than that, but fact is you could see it spreading with this chart of cell phone movements all over the country. I'm sure it was anonymous, nobody's privacy was violated, but on a macro level, you could see this happening. And I'm sure that in China, they are much more sophisticated with testing and tracing. Are you familiar with what they are doing? My understanding is that LAP, ZTE, some other major companies, social media companies have come up with an app to give a color coded system, which was agreed upon by provinces, provincial local authorities. And then if you are from, I think my understanding is that you give, you enter your personal information, where you're from, and then where you've been traveling. And based on those information, they give you one of the three colors, red, green, yellow. And then if you have a green color, you can pretty much travel to any part of the country. If you are red, it's gonna be problematic. But if there are also certain indicators, and then if you are from a region where there were over 50 cases in the past 14 days, that your color will be red. But in the past few weeks, there hasn't been much of a spike in China. I don't think there will be, yeah, many regions where people will be assigned red. It's very interesting. By the way, I should add that on the Sturgis gathering, those charts also showed that there have been infections as a result all over the country. Hundreds of infections have spread out of Sturgis because they were there without distancing, without masks. They didn't follow any of the rules. And gee, it's really tragic, but it could have been avoided. Anyway, you also mentioned that China is letting various travelers in now. Does that include the United States, Pat? Unfortunately, it doesn't include the United States. I'm gonna look that up. It didn't seem like the US is included on the list. And various other countries were not included on the list. I think, but China will start adding more countries, but we will see. Yeah, well, it's smart. I mean, they've done a good job, although you could quibble with some of the techniques they've used. And I suppose they're prepared to use those techniques again, if there's a resurgence of the infection. I don't think there's any question they would because they're not gonna tolerate increases and spikes in infection. So you say the economy is doing well, much better than expected. So let's connect that up with energy, okay? How is their energy doing? Where are they getting their energy from? How are they using? What are the numbers on their importation and use of energy? What kinds of energy? Yeah, but before that, I'd like to talk a little bit about the economy as a whole. Yes, please. Yeah, so in the first quarter, the economy plunged by 6.8% and they started in quarter two. They showed over 3% growth and then manufacturing is now recovering although at a much slower pace. And the services industry, compares to manufacturing is growing at a much better pace. And because of manufacturing being slow, dragging growth a little bit, energy was affected by that early in the year. And then I'd like to, I can talk about other things that are happening in China, including the floods in the Yanjie River and then unemployment rates and the agricultural situation deteriorated by the floods and then how much pressure foreign divesture is putting pressure on the leadership of CCP. But with regards to the energy sector, let's go to the, pull up the second graph. So here you can see what industries have been affected most in the first six, seven months of the year. And the first, the biggest loser was extraction of oil and gas, although the graph shows the revenue of the industry, but the total volume of oil and gas production during the period actually increased. And then the other losers, if I may, in terms of total revenue include textiles and then other energy and other industries. And in terms of winners, there are the biggest one is computer communications equipment followed by a special purpose machinery and cigarettes and tobacco, interestingly. And then out of all these 35 or so large industries, petroleum and natural gas extraction experienced the biggest loss during the first seven months. And if he can go to the third... Just one point on that, it sounds parallel to the US. I mean, our stock market, which is at heights we cannot explain has done well on the basis of tech stocks and the tech stocks that have done well, the ones in communications like Zoom. And so I would imagine, check me on this, I would imagine that the reason these Chinese communication stocks and, I guess, and software stocks that deal in communication like Zoom are doing well because the Chinese people are using programs like Zoom just the way we are in the COVID pandemic. Am I right? Yeah, I agree, I totally agree. In the pandemic, industries like, that would allow people to work from home or put people to maintain good social distancing and also medical supplies and things like that. They are showing the growth and in a positive return to investment, whereas, you know, other industries that require more personal interactions have been suffering. But analysts and, you know, China experts expect more positive growth in the second half, but, you know, I'm not being extremely optimistic about the second half as well because, you know, in the short run, China might rebound, you know, continue this rebounds and then end the year with the positive growth, but there need to be a lot of structural changes and a lot of reforms, you know, in the post-pandemic world. And so, yeah, there is a lot of parallel, but also there are a lot of differences between the United States and China. But one thing is clear that our supply line has needed and still does need supply, manufactured goods and other things from China. And since our economy is in the tank and is likely to continue in the tank for some time because of the pandemic, we're not buying as much from China, I imagine, I'm guessing about this, than we were. And therefore, to the extent that China's economy is dependent, at least in substantial part, on purchasing from by the US, that's ultimately gonna constrain China's economy, isn't it true? Yeah, so the economy, US, China, you know, yeah. It brings us to the US-China trade deal and the first phase one trade deal was signed early this year. And both sides, you know, especially the US was expecting a lot from it. But, you know, nothing much has happened since then. And, you know, both sides are reviewing their phase one deal results. And if you look at the energy numbers, only 5% of the Chinese commitment, the energy goods that China committed to buy from the US, you know, was made during the time. And the other 95% didn't come to, you know, fusion. So, yeah, so there needs to be a follow-ups and then enforcement to, you know, and also other initiatives from both sides to promote that. So here, in terms of energy production, you know, we talked about, you know, you talked about revenue by industry and the natural gas and crude oil extraction suffered the most loss. But if you look at this graph, year on year increase in domestic energy output shows that natural gas actually grew by 9.5% whereas, you know, other energy sectors like hydro, coke decreased during the first seven months compared to the same period last year. And crude oil, crude processing, nuclear solar wind, they all grew during the period. And if you can go to the next slide, please. So where are they getting the LNG back? China gets its LNG from a variety of sources. So, you know, before LNG, let's talk about the natural gas of China. So China is a massive consumer of natural gas with the biggest importer of natural gas in the world and second biggest LNG, liquefied natural gas importer in the world. And it gets, it produces over half of its natural gas domestically, 55% of its 300 billion cubic meters of gas. But that doesn't, you know, that is not enough for the huge market China has for natural gas, which is driven by policies to fight air pollution and then to displace coal in favor of more, you know, in the cleaner energy resources. And in terms of sources, China gets a majority of its LNG from Australia and Qatar followed by many other countries in the Southeast Asia and also in the Middle East. And Australia, Qatar are the biggest exporters to China and then China also imports liquefied natural gas from the United States. And, you know, during the trade tension between the United States and China, things didn't look very good for the LNG liquefied natural gas industry. So, you know, from 2018 to early this year, there was almost no cargo exported from the United States to China, but thanks to the phase one deal I mentioned, China put some effort into that. And then also the economics were favorable. And several cargoes were sent to China, LNG cargoes were delivered to China starting in April this year. And then that trend continued in the following months. You know, one thing is that we had expected, we in the United States had expected to sell a lot of LNG to China through a hub in Japan, as I recall, from discussions with Luke Pulirisi. And I wonder, is that being curtailed now? Are we realizing our expectations in terms of marketing LNG to China? So, LNG is, LNG trade, you know, consists not just of, you know, agreements, bilateral government level agreements, but also the economics of the industry, you know, and in Asia, you know, to sell natural gas from the United States to Asia, you know, there are a lot of costs added to the natural gas itself, natural gas price itself. You have to pay for transportation, liquefaction and other fees and costs. So at the moment, in the Asian spot markets have very low liquefied natural gas prices, which is not extremely favorable for US LNG at this point, but running, you know, run up to the winter heating season in Asia, there will be more demand from Asian buyers, which will increase the price back to about $6 per million at ETU or beyond that. And that'll make it more profitable for American suppliers. Yeah, that will, you know, those circumstances will allow American and other natural gas producers to export gas to China. You know, Bat, I wanted to pick up on something else you said, and that is China is very mindful of, you know, the effect that COVID has had on its economy and it's trying to rebuild the economy, but in the process, the economy is changing. And when China comes out of COVID, so to speak, as other countries, its economy will be different. The importation of natural resources, the exportation of manufactured goods, you know, the momentum, the belt and road initiative all across Asia and then to Europe and Africa, that will probably change. And certainly its relationship, this trading relationship with the US, depending on who's elected president in November, that will change. But I wanted to get your thoughts on how, what will the economy of China look like when things settle down? What will the economy of China look like post COVID? So post COVID, we don't know yet when this will end. Next year, later this year, next year or 2022, but they have very important, you know, meetings and they have important meetings coming up later this year in October. They have a, the Communist Party has a plenary session and then in March next year, the state council or the government of China has to provide issue their 14th five year plan, which is a very important document. And from that, I think we will be able to see a lot of changes they expect to see in their economy and then their policy in the next five years. But as of now, based on what a lot of Chinese experts and government officials are publicly saying, you know, due to the trade tension, they are more concerned about their dependency on technologies, you know, foreign technologies because for example, you know, companies like Huawei and other AI based telecommunications companies, their operations are kind of stalling because of, you know, of the supply constraint situation. You know, for chips they have to, they don't have enough capacity to produce, you know, the much needed chips for their equipment. So they have to buy it from elsewhere. And in the current circumstances, it's becoming extremely hard for them to do that. So they are trying to become more, you know, independent in those technologies and they had announced the policy to promote, you know, their research and development capabilities by year, by the year 2025, which is called Meet in 2025, you know, due to some concerns expressed by other countries, they have become, you know, rather mute about that policy. But I think that will still be a play and important role in their future, you know, economy and the future policy planning. One last thing that comes to mind about is this, United States has been, you know, the number one economy for a long time. China has, you know, improved its economy. Arguably, it's a second economy behind the United States where it has been. And now what we have is the American economy is suffering and there doesn't seem to be an end in sight for that, except if the, there's a successful vaccine and COVID is subdued. But the Chinese seem to have handled this. Of course, their question is about credibility, about statements that come from China may not be entirely credible, you know, in the self-serving propaganda, maybe, but it seems like from all the sources, it seems like China is making great progress and it's coming back. It's coming back even though it had a hard time. So my question to you is, how is this going to change, do you think, the relative position of China and the United States in the world economy? Will the United States come to second? Will China come to first? What do you think will happen in the years to come to change the relative positions of these two countries? So, you know, I, as a researcher, tried to see things from a long-term perspective, not just, you know, short-term, you know, because I don't want, things change in the long-term events. You know, things change and the world changes due to a lot of factors and even a lot in the short-term current events. But, you know, thinking of it just in terms of the COVID is, in my opinion, not a good way to look at how the world works. And then China was able to, you know, rebounce and then, you know, its economy is compared to other economies doing well, but it is still suffering from a lot of, you know, missed, you know, a lot of losses and a variety of other reasons. But at the same time, there are other geopolitical factors that will potentially play out later in the year or maybe once everything is settled. For example, you know, I'm not a geopolitical expert or I'm not a political expert scientist, but countries, you know, such as Australia, started expressing their disappointment with China's handling of the virus early on. So, you know, they are not having, I think there will be more countries demanding compensation or punishment for the virus. So, I think in addition to all those economic factors, these, you know, those will also need to be taken into consideration. Yeah. Well, very interesting that. About O'Garrell of EPRINC, a research analyst at EPRINC talking about the economics of China here in the time of what appears to be recovery from COVID. Thank you so much, Pat. Really appreciate you coming on. Really appreciate your knowledge and expertise in these areas. Thanks so much. Thank you so much for having me. Thank you. Aloha.