The recent global financial crisis has caused China’s GDP to slow from highs of 13 percent in 2007, to 6.1 percent in the first quarter of 2009 (measured against Q1 2008), the lowest quarterly rate in 10 years. Most analysts predict growth of less than the government’s target of 8 percent for 2009 as a whole.
However, the second quarter 2009 rebounded somewhat and grew at 7.9 percent year over year according to the Chinese government. China’s recent 4-trillion yuan ($586 billion) economic stimulus package, launched in November 2008, is focused on boosting China’s domestic consumption (currently about a third of real GDP) and fixed asset investment, as well as improving industry value chains and energy conservation in order to decrease dependence on an export-driven economy.
Using various measures such as tax reductions, rebates, fiscal subsidies, greater access to credit, and direct government expenditures, China is targeting almost all sectors of the economy: real estate/construction, transportation and power infrastructure, agriculture, social services, heavy and light industry, Sichuan earthquake reconstruction, technology advancement, and rural development.
In light of the government’s goals for energy security and energy efficiency, China is using its stimulus package through vehicles such as tax breaks, advantageous lending rates, and a foreign exchange fund to encourage state-owned oil companies to expand upstream investments abroad, increase downstream refining capacity, and augment crude and oil product stockpiles. Analysts anticipate the fiscal stimulus will translate into economic development in the second half of 2009 and 2010 and generate at least a moderate increase of domestic consumption including demand for energy commodities.
Despite the economic slowdown in exports and domestic demand in the past year, China’s demand for energy remains high. China has emerged from being a net oil exporter in the early 1990s to become the world’s third-largest net importer of oil in 2006. Natural gas usage in China has also increased rapidly in recent years, and China has looked to raise natural gas imports via pipeline and liquefied natural gas (LNG). China is also the world’s largest producer and consumer of coal, an important factor in world energy markets.