[LINK] "China's Gas-Demand Growth Rate Below GDP Hinders Russian Deals"

[rfmcdonald]

Bloomberg's Haixing Jin notes that falling rates of economic growth in China, coupled perhaps with increasing Chinese efficiency, bodes ill for Russian exports to China. This, in turn, bodes ill for Russian plans to replace the sanctions-separated west with China.

China’s demand for natural gas is on pace to grow at a slower rate than the economy for a second straight year, a fact that bodes poorly for any energy agreements that President Xi Jinping and Russian counterpart Vladimir Putin may sign during a meeting in Beijing today.

China’s natural-gas consumption through July rose just 2.3 percent from the same period in 2014, according to data released by the National Development and Reform Commission. Apparent demand actually fell by more than 5 percent in April and May, the first year-on-year declines since at least 2011.

That data reflects the shifting nature of China’s economy and the forces underpinning the two countries’ relationship. An economic slowdown and lagging industrial production has affected China’s appetite for everything from iron ore to fossil fuels, while Russia’s recession amid a plunge in oil prices and western sanctions only increases the urgency for it to sign new deals.

[. . .]

Russia’s economy relies more on China than the other way around. Bilateral trade last year was $92 billion, making the mainland Russia’s largest partner. From China’s perspective, Russia ranked just eighth, with the U.S., Japan and Germany the top partners. China’s $50.9 billion of exports to Russia weren’t enough to put that market in its top 10.

Russia’s nominal gross domestic product was $1.86 trillion last year in current dollar terms, only 12 percent more than in 2008. China’s GDP expanded 127 percent in the same period to $10.36 trillion. Russia’s reliance on energy for economic growth helps explain the divergence of the two economies.