China plans new commodity superhighway, altering energy trade flow – by Ilan Solomons (MiningWeekly.com – April 24, 2015)

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JOHANNESBURG (miningweekly.com) – China’s Go West strategy of encouraging coastal to inland flow of capital and people will result in the formation of a new commodity superhighway, says advisory firm Wood Mackenzie (Woodmac).

This new superhighway will impact the energy trade flows within China and externally, through the new Silk Road routes, and will link the country from east to west, onwards to Central Asia and beyond.

“This represents a significant business and investment opportunity for China’s western region,” states Woodmac. Woodmac principal Asia economist Cynthia Lim explains China’s Go West policy is already under way and is often touted as the country’s “silver bullet” to ensure long-term gross domestic product (GDP) growth, as China’s economically dominant coastal regions approach maturity.

“The coastal provinces will have to upgrade their industries to higher value-add sectors, such as services, while industries will relocate inland, westwards. This is shifting the regional distribution of demand centres and power generation; and the impact will become more apparent over the next two decades.

This will form an impressive commodity superhighway,” she states. The commodity superhighway will have three main implications.

“The first implication is that power generation in the central and western regions will almost triple from about 3 200 terrawatt hours (TWh) in 2015 to about 9 600 TWh in 2035,” says senior Asia power consultant Frank Yu. He highlights this significantly outpaces the coastal regions’ generation growth in the same period, which is only set to increase from under 3 000 TWh to about 6 000 TWh.”

Yu says that the second implication will be the emergence of new energy trade flows within China, from the inland west to the coastal regions of China. “Coastal regions will become further reliant on China’s west to meet its energy demand. The west has an abundant supply of energy, accounting for more than 65% of China’s marketable coal and gas reserves.

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