- The latest IEA data show China's energy consumption outpaced the US by 4% last year.
- This shouldn't be much of a surprise—China's energy requirements have been fast increasing for several years.
- Emerging Markets growth will likely continue to be a global growth catalyst for a while—especially as world markets become increasingly intertwined.
Many argue China doesn't generate much of anything but cheap goods and carbon dioxide—and they're right! On the carbon dioxide front anyway. A recent report from the International Energy Agency (IEA) shows China's 2009 energy consumption outpaced the US by 4%, as measured by oil equivalents, which includes crude oil, nuclear power, coal, natural gas, hydroelectricity, and wind and solar power (i.e., pretty much everything but hamster wheels). That China is now an energy consuming powerhouse (along with being an economic powerhouse) shouldn't really surprise—its energy needs have been fast increasing for several years now. Just 10 years ago, Chinese energy use was just half that of the US in absolute terms.
Why care about energy consumption? It's evidence of the strong growth emanating from China, but similarly from other Emerging Markets—and the fact this region is likely to continue to be a key global growth driver. However, there's widespread fear China may soon slow down and that EM growth overall is unsustainable. Indeed, China has even taken steps to temper its growth a bit to counter concerns of an inflating real estate bubble.
And yes, China appears to have slowed some from its previously blistering pace—but it's still growing at rates tripling the US. Plus, EMs as a whole—and China particularly—have vast populations and relatively small "middle" classes, which means huge growth opportunities. But that doesn't mean their non-stop, perpetual growth is guaranteed. EMs can be politically unstable—a risk much more pronounced than in most developed nations. But EMs as a group are broad and diverse, and their governments don't move in lockstep. Further, China has increasingly shown lasting economic prosperity and—dare we say it—greater economic "freedom" (at least relatively) is increasingly Chinese policy. Here's hoping they stay on that path.
Meanwhile, as China and other energy-hungry, fast-growing EMs continue to chug along, their appetite for oil, coal, natural gas, etc., shouldn't let up. Their strong demand should prove a positive for those industries, but their growth is also a key reason the world should see strong overall fine growth this year.
For more information on the energy sector, visit the Fisher Investments on Energy website.