BEIJING: Chinese leaders will launch a pivotal five-year plan this week that’ll help shape global commodities markets through the end of the decade.
Their fixes targeting supply will be as important as the impact of their decisions on demand.
As the world’s biggest buyer of raw materials, China’s annual gross domestic product (GDP) goal, plans to stimulate the economy, and any steps to support favoured sectors, from clean energy to artificial intelligence, should give relatively straightforward clues on where consumption is likely to expand.
But the supply-side is more complicated. Beijing wants to strengthen resilience in some areas and ease cutthroat competition in others. At the same time, industry is being retooled for a green transition that calls for peak emissions by 2030.
Last year’s fightback against the Trump administration’s trade offensive rested on wielding critical minerals as a mighty geopolitical weapon.
China will aim to maintain that dominance, even as Western rivals hurry to develop their own resources.
The government has staked out a role ensuring that its high-tech industries have the materials needed to thrive.
The dancing robots that drew gasps at the televised annual Spring Festival Gala are only possible because of the tiny but powerful rare earth magnets that emerge from a state-coordinated supply chain.
Reinforcing that model is likely to be a focus for policymakers. Bolstering domestic supply channels might involve stronger export controls, or pursuing greater consolidation among producers.
Any talk of a bigger role for strategic mineral reserves could be especially bullish for prices, as the United States also embarks on a major stockpiling initiative.
The surge in renewable energy is allowing China to meet growing power demand without increasing emissions, but their intermittency is straining the grid.
That’s focusing attention on what steps might be taken to sustain the wind and solar boom.
Beijing could set goals for building long-distance power lines to connect remote clean energy hubs with users, or for battery storage, which is already on track to eclipse 180 gigawatts by 2027.
Green hydrogen may also get a boost after the government touted it as a key technology and floated the idea of minimum targets for industrial use of renewable fuels, which could help shore up demand for a wave of planned facilities.
The energy sector will also be watching for details of the recently announced plan to accelerate the construction of a nationwide power market, which would reshape how electricity from all sources is priced and traded.
The reform could align China’s market with the needs of a renewables-heavy grid, according to BloombergNEF.
Carbon emissions per unit of GDP is a key measurement of Beijing’s climate ambitions. The last plan covering 2021 to 2025 delivered a rare miss, after the government failed to meet its target of cutting carbon intensity by 18%.
Instead, the country was forced to double-down on coal usage to ensure sufficient power. — Bloomberg
