20 February 2014

China SignPost™ (洞察中国) #80—“King Coal Reigns: North America’s Shale Gas Boom Will Force China to Continue Relying on Coal”

Gabriel B. Collins and Andrew S. Erickson, “King Coal Reigns: North America’s Shale Gas Boom Will Force China to Continue Relying on Coal,” China SignPost™ (洞察中国) 80 (21 February 2014).

China SignPost™ (洞察中国)–“Clear, high-impact China analysis.”©

Key Points: Unless Chinese industrial consumers use low-cost coal, they will likely not be competitive in the export market with their global peers in North America and elsewhere who benefit from the shale gas boom and more favorable demographics. Energy costs matter more now for Chinese industry because Mexican manufacturing wages have become roughly equivalent to those in many parts of China. By 2015, manufacturing wages in Mexico could be as much as 30% lower than those in China on a productivity-adjusted basis. Nuclear, wind, and hydro power will not displace coal significantly for at least 10 years. Even with the current aggressive reactor buildout, China will likely only add 32 GW of nuclear power in the next five years—roughly half of the coal-fired capacity it has added annually in…