WEBVTT 1 00:00:04.839 --> 00:00:08.400 With Laurent's segal end from London and Gerard Reed from Berlin. 2 00:00:08.919 --> 00:00:10.679 This is redefining energy. 3 00:00:11.400 --> 00:00:14.199 Today. On redefining energy, we're going to talk about that 4 00:00:14.400 --> 00:00:17.160 elephant in the room China. 5 00:00:18.000 --> 00:00:21.000 Yeah, the panda, Yeah, the panda. 6 00:00:21.000 --> 00:00:23.239 Sorry, you're dead right, panda in the room. 7 00:00:23.679 --> 00:00:25.519 But first of all, from my partner. 8 00:00:25.719 --> 00:00:28.679 A bl Loco Energy is Europe's premier leaser of ten 9 00:00:28.800 --> 00:00:33.079 foot container mobile batteries built in Europe with COTL best 10 00:00:33.240 --> 00:00:39.039 LFP cells. A Bloco Energy serves fourteen European countries, including France, 11 00:00:39.560 --> 00:00:43.200 Germany and the UK. Our Bloco's batteries can be leased 12 00:00:43.240 --> 00:00:46.359 for any duration between six weeks and six years, and 13 00:00:46.399 --> 00:00:49.759 they are monitored by the Dutch award winning platform school 14 00:00:50.359 --> 00:00:53.840 a Bloco Energy Make your life easier, make your business 15 00:00:53.840 --> 00:00:54.520 more flexible. 16 00:00:54.759 --> 00:00:59.039 Back to the show, and whatever China does in terms 17 00:00:59.079 --> 00:01:03.880 of energy technology investment has so much impact on the 18 00:01:03.920 --> 00:01:08.200 rest of the world. But also we have, I believe, 19 00:01:08.239 --> 00:01:11.519 a very distorted view of what China does and what 20 00:01:11.640 --> 00:01:15.519 China brings. So we thought it was a good idea 21 00:01:15.680 --> 00:01:22.480 to bring someone who can talk about that interaction between policy, investment, 22 00:01:22.920 --> 00:01:28.200 entrepreneurships and especially with what's happening in the Gulf right now? 23 00:01:28.719 --> 00:01:32.359 Is China going to be a winner or loser? What's happening? 24 00:01:32.400 --> 00:01:37.799 So jobbed, very very fast field of conversation. Okay, we 25 00:01:37.879 --> 00:01:42.680 have decided to bring doctor Michael Maidan. She is the 26 00:01:42.719 --> 00:01:46.840 head of the China Energy research at the Oxford Institute 27 00:01:46.879 --> 00:01:52.480 for Energy Studies and she knows the China system inside out. 28 00:01:53.359 --> 00:01:54.480 So let's bring around the show. 29 00:01:55.799 --> 00:01:57.640 Michele. Welcome to the show. 30 00:01:57.879 --> 00:02:01.439 Thank you so much, and the excited to talk about 31 00:02:01.480 --> 00:02:04.719 the topic today, which is China and really what's going 32 00:02:04.760 --> 00:02:06.599 on and energy and maybe it let me just kick 33 00:02:06.599 --> 00:02:08.879 off the same one. If I look from the outside, 34 00:02:09.120 --> 00:02:12.240 the most astounding thing for me is how China has 35 00:02:12.280 --> 00:02:15.639 electrified its society and brought so many people out of 36 00:02:15.719 --> 00:02:19.199 poverty over the last twenty years. But maybe talk about 37 00:02:19.319 --> 00:02:20.719 that as a starting point. 38 00:02:21.319 --> 00:02:24.199 You're right, the sort of transformation of China's energy system 39 00:02:24.240 --> 00:02:27.800 in the past twenty years has been phenomenal just in 40 00:02:27.879 --> 00:02:32.919 terms of access to energy growth affordability. Though the last 41 00:02:32.960 --> 00:02:35.319 five years have been really striking. If you look at 42 00:02:35.319 --> 00:02:38.560 some of the charts of penetration rates, of renewable production 43 00:02:38.719 --> 00:02:42.599 rates of all the clean technologies they have the sort 44 00:02:42.599 --> 00:02:45.199 of es curve Israel, and that has happened really in 45 00:02:45.199 --> 00:02:47.800 the space of five years. It's been building up in 46 00:02:47.840 --> 00:02:51.039 the system for much longer through industrial policies and innovation, 47 00:02:51.759 --> 00:02:57.280 but the impact of that big electrification push with it decarbonization, 48 00:02:57.400 --> 00:03:01.159 has really happened over the past five years. That said, right, 49 00:03:01.240 --> 00:03:03.360 China has. And it's really fun to talk about the 50 00:03:03.400 --> 00:03:06.199 China numbers because it is the biggest of everything. It's 51 00:03:06.199 --> 00:03:09.240 got the biggest power system and we've just demand as 52 00:03:09.280 --> 00:03:13.000 exceeded ten thousand tarawa hours last year. It's got the 53 00:03:13.039 --> 00:03:16.039 biggest renewable deployment in the world, and last year alone 54 00:03:16.080 --> 00:03:18.919 it added four hundred and thirty gigawatts of wind and solar. 55 00:03:19.120 --> 00:03:22.039 But at the same time it added more coal capacity 56 00:03:22.080 --> 00:03:25.080 than India did over the past decade. It's the biggest 57 00:03:25.199 --> 00:03:28.319 importer of crude oil, it's the biggest consumer and producer 58 00:03:28.319 --> 00:03:31.360 of coal globally. So I think the story beyond that 59 00:03:31.719 --> 00:03:37.159 recent electrification is also an optionality and flexibility story, where 60 00:03:37.240 --> 00:03:39.879 China has all of the above, and now we're coming 61 00:03:39.879 --> 00:03:42.159 to a point of how do you mix and match 62 00:03:42.280 --> 00:03:43.520 those energy sources. 63 00:03:44.159 --> 00:03:47.599 Looking back at those China mus volume and it's always 64 00:03:47.639 --> 00:03:50.400 a bit difficult to know looking back, but you know 65 00:03:50.479 --> 00:03:54.400 you've got those plans every five years. Now we are 66 00:03:54.560 --> 00:03:58.000 entering in the fifteenth one. How much would you say 67 00:03:58.520 --> 00:04:02.439 is stuck down coming to sparty this side and everybody follows, 68 00:04:02.919 --> 00:04:06.360 and how much is market led, how much is province led? 69 00:04:06.680 --> 00:04:08.919 Or is it very difficult to assess? What are the 70 00:04:09.000 --> 00:04:11.159 drivers of that electrification? 71 00:04:11.840 --> 00:04:14.960 I think it's electrification and system change more broadly, that 72 00:04:15.520 --> 00:04:20.199 comes from clearly a top down vision. There's a guiding principle. 73 00:04:20.399 --> 00:04:24.360 There is a very strong central power. Certainly in the 74 00:04:24.399 --> 00:04:26.600 past decade, you sort of you can look back and 75 00:04:26.639 --> 00:04:30.879 see not as strong centralized power, but an ability to 76 00:04:30.920 --> 00:04:34.959 give a sense of direction, to put resources behind that 77 00:04:35.040 --> 00:04:38.480 sense of direction. Some of it is subsidies and active support, 78 00:04:39.040 --> 00:04:41.560 and some of it then filters down to local governments 79 00:04:41.600 --> 00:04:44.720 that give tax cuts or tax brakes and cheaper land. 80 00:04:45.240 --> 00:04:49.240 So you do have an enabling policy environment that can 81 00:04:49.279 --> 00:04:54.920 trickle down. But within that, once that's created, it's hugely competitive, 82 00:04:55.439 --> 00:04:58.680 and you've got the EV's companies and the battery companies 83 00:04:59.040 --> 00:05:02.000 that are now making very small margins because they're competing 84 00:05:02.040 --> 00:05:04.959 with each other for the market share. So you haven't 85 00:05:04.959 --> 00:05:08.959 actually a really interesting dynamic of central government directives that 86 00:05:09.439 --> 00:05:12.360 then spurs a lot of competition, and it's not always 87 00:05:12.439 --> 00:05:15.240 been efficient and perfect. We've got this image of the 88 00:05:15.279 --> 00:05:18.519 monolith in Beijing that is able to direct everything in everyone. 89 00:05:18.959 --> 00:05:22.120 The reality is way more complicated and fragmented. You look 90 00:05:22.199 --> 00:05:24.879 back at evs, there was so much subsidy fraud and 91 00:05:24.920 --> 00:05:27.519 there is so much adjustment and consolidation in a number 92 00:05:27.519 --> 00:05:30.560 of sectors. You know, that premise of the central government 93 00:05:30.639 --> 00:05:35.480 being able to guide the sector has also led to overcapacity. 94 00:05:35.519 --> 00:05:37.879 We've seen it repeatedly in a number of industry and 95 00:05:38.079 --> 00:05:40.000 you know, now it's called involution in China and it 96 00:05:40.040 --> 00:05:42.800 will lead to a round of consolidation. But it's a 97 00:05:42.879 --> 00:05:46.800 really confusing from the outside combination of top down directives 98 00:05:46.839 --> 00:05:51.480 and yet a lot of bottom up innovation, competition, creativity, 99 00:05:52.040 --> 00:05:54.879 and local government sort of stepping in to protect their 100 00:05:54.920 --> 00:05:57.959 needs and their interests, which makes it really confusing. 101 00:05:58.759 --> 00:06:00.800 You know, I did a lot of financing in the 102 00:06:00.920 --> 00:06:04.800 Chinese solar market like fifteen twenty years ago, and the 103 00:06:04.920 --> 00:06:08.040 thing that I was struck by then was was the 104 00:06:08.079 --> 00:06:12.319 animal spirits, which is they basically just went out there 105 00:06:12.319 --> 00:06:15.839 and said's complete and there was like, I don't know, 106 00:06:15.879 --> 00:06:17.720 the probably was one hundred companies at the time, and 107 00:06:17.720 --> 00:06:19.720 then if you look at the way the market's consolidated 108 00:06:19.800 --> 00:06:22.560 now there really is only a handful of them left. 109 00:06:22.920 --> 00:06:24.839 And the other thing that then happened in all of 110 00:06:24.879 --> 00:06:27.920 that is these companies became the technology leaders as well. 111 00:06:27.959 --> 00:06:31.439 It wasn't that they were just low cost producers. They 112 00:06:31.480 --> 00:06:34.759 did everything better quicker than we did in the West. 113 00:06:35.639 --> 00:06:37.759 And I suppose when I look at the EV space, 114 00:06:38.120 --> 00:06:39.879 I would assume the same is going to happen, or 115 00:06:39.920 --> 00:06:40.800 do you see it differently. 116 00:06:41.920 --> 00:06:44.439 I mean, there's absolutely a consolidation happening in the EV 117 00:06:44.600 --> 00:06:46.759 space and in the battery space. We're going to cut 118 00:06:46.759 --> 00:06:51.040 down from over one hundred companies to a handful of leaders. 119 00:06:51.600 --> 00:06:54.680 What's also been interesting, sort of in addition to these 120 00:06:54.680 --> 00:06:57.480 animal spirits in the clean tech space, which is very 121 00:06:57.560 --> 00:07:01.800 very different to traditional oil gas power, these are new companies. 122 00:07:01.839 --> 00:07:04.639 These are private entrepreneurs that have come into the space, 123 00:07:05.120 --> 00:07:10.279 often from adjacent industries, from batteries or electronics. They've shaken 124 00:07:10.319 --> 00:07:12.560 things up in China as well. They have the EV 125 00:07:12.720 --> 00:07:15.639 companies or a massive challenge for the incumbents that have 126 00:07:15.720 --> 00:07:21.199 been competing with ice makers and Western automakers. So what's 127 00:07:21.199 --> 00:07:23.720 really been interesting there is how they've come in from 128 00:07:23.800 --> 00:07:28.439 a very different sector. They've innovated, they've shaken up practices. 129 00:07:28.800 --> 00:07:32.839 They've also been gradually able to vertically integrate, some more 130 00:07:32.879 --> 00:07:36.800 than others. But they've gone from the batteries gradually into 131 00:07:36.800 --> 00:07:39.199 the mining as well. Like BID has its own fleet 132 00:07:39.240 --> 00:07:41.279 of ships now in order to be able to move 133 00:07:41.639 --> 00:07:45.519 the cars around, so there's also sort of ability to 134 00:07:46.000 --> 00:07:49.399 weather different storms. I guess on the entire supply chain 135 00:07:49.639 --> 00:07:52.240 to your critical mineral costs are taking a hit, then 136 00:07:52.279 --> 00:07:54.399 you've got a different segment of the supply chain in 137 00:07:54.399 --> 00:07:57.360 which you're making money, and that's really helped them. The 138 00:07:57.480 --> 00:08:00.160 bigger and the most powerful ones are the ones that 139 00:08:00.199 --> 00:08:03.000 are more vertically integrated, which I think is very different 140 00:08:03.000 --> 00:08:04.920 to what we're seeing in the West. Tends to still 141 00:08:04.920 --> 00:08:07.240 be quite siloed and quite specialized. 142 00:08:07.920 --> 00:08:09.800 I was going to add one. I think it's amazing 143 00:08:09.839 --> 00:08:11.680 really is when I look at say something like BID, 144 00:08:12.079 --> 00:08:14.160 which is you've gone from sort of a million car 145 00:08:14.279 --> 00:08:17.519 production to five million car production, and at the same 146 00:08:17.519 --> 00:08:20.600 time you suddenly have eight hundred and fifty thousand employees. 147 00:08:21.040 --> 00:08:25.800 It's for me it's the speed at which these companies scale, 148 00:08:26.040 --> 00:08:28.759 which is for me astounding because we've never seen anything 149 00:08:28.800 --> 00:08:30.319 like this in the West in terms of what they did. 150 00:08:30.360 --> 00:08:33.840 And as you said, they're vertically integrated. So BID makes 151 00:08:33.840 --> 00:08:35.960 its own batteries, it makes its cars, it makes its 152 00:08:35.960 --> 00:08:38.440 power electronics, and it has its own shipping fleet. 153 00:08:38.559 --> 00:08:38.759 Right. 154 00:08:39.440 --> 00:08:42.080 But obviously, you know, human capital is something that China 155 00:08:42.120 --> 00:08:45.440 has lots of. It is BYD that has one hundred 156 00:08:45.440 --> 00:08:48.799 and twenty thousand R and D employees. That's kind of 157 00:08:48.840 --> 00:08:51.600 scale that we can't really get in the West. And 158 00:08:51.600 --> 00:08:54.799 that's again it's an interesting combination of corporate strategies but 159 00:08:54.840 --> 00:08:59.120 also government enabling policies. We've written about this quite a bit, 160 00:08:59.320 --> 00:09:02.879 where you know, in the West we're focused on its subsidies, 161 00:09:03.159 --> 00:09:07.120 it's technology transfers or technology theft, and that's the only 162 00:09:07.159 --> 00:09:09.440 thing that the Chinese are good at. If you look 163 00:09:09.480 --> 00:09:12.440 at some of the policy framework or sort of what's 164 00:09:12.440 --> 00:09:17.960 happening more broadly in industrial policy, there's industrial clusters and manufacturing hubs. 165 00:09:18.000 --> 00:09:21.600 That means that you have a huge ecosystem that enables 166 00:09:21.639 --> 00:09:25.159 this innovation and enables gill and talent and R and D, 167 00:09:25.279 --> 00:09:27.919 and it makes that whole feedback loop between your production 168 00:09:28.000 --> 00:09:31.279 and your consumption much faster. If it takes two to 169 00:09:31.360 --> 00:09:33.840 three years to come up with a new auto with 170 00:09:33.919 --> 00:09:35.879 a new car model in the West, I think it 171 00:09:35.919 --> 00:09:38.679 takes nine months in China. And just the fact that 172 00:09:38.720 --> 00:09:43.279 you have these ecosystems is really significant, and that's a 173 00:09:43.320 --> 00:09:47.200 feedback loop between government and corporate that has really helped 174 00:09:47.639 --> 00:09:50.879 some of these innovations and the low carbon technology development. 175 00:09:51.759 --> 00:09:55.720 Now, Michael, let's look about the eight hundred pound gorilla. 176 00:09:56.559 --> 00:10:02.200 Energy security. It's a fundamental of the China energy pretty see. 177 00:10:02.559 --> 00:10:04.919 Can you talk about energy security when it comes to 178 00:10:05.519 --> 00:10:09.919 the power sector, and then with address oil and gas, 179 00:10:10.279 --> 00:10:13.120 especially considering what's happening in the Gulf right now. 180 00:10:13.799 --> 00:10:16.480 If you look at China's power sector, if you look 181 00:10:16.480 --> 00:10:21.159 at power supplies in China, they're overwhelmingly domestic. It's mostly coal. 182 00:10:21.720 --> 00:10:26.440 Ten percent of Chinese coal is imported, and then it's nuclear, renewables, hydro, 183 00:10:27.279 --> 00:10:30.879 a fraction of gas. So really the power system is 184 00:10:30.919 --> 00:10:35.200 predominantly self sufficient. Oil and gas. China has four million 185 00:10:35.240 --> 00:10:37.440 barrels a day of oil. That's roughly the size of 186 00:10:37.440 --> 00:10:40.879 Iraqi production. So it's got massive oil reserves. It's got 187 00:10:41.320 --> 00:10:44.080 I think the fourth or fifth largest gas reserves globally, 188 00:10:44.120 --> 00:10:47.960 But obviously demand is outstripped that massively, So yes, you 189 00:10:47.960 --> 00:10:51.879 can argue an electrification is denting oil demand growth. Gasoline 190 00:10:51.919 --> 00:10:55.240 diesel demand in China have already peaked and that's trending downwards. 191 00:10:55.879 --> 00:10:58.840 And yet oil imports are not declining. And if you 192 00:10:58.919 --> 00:11:02.639 look at future four cots, even in a world where 193 00:11:02.639 --> 00:11:07.360 it's energy transition electrification advances rapidly, it's still the biggest 194 00:11:07.399 --> 00:11:10.600 crude importer globally. Just because of the size of the system. 195 00:11:10.639 --> 00:11:13.120 You're still going to have petrochemical demand and jet fuel 196 00:11:13.159 --> 00:11:15.759 demand which sort of offset some of the decline, and 197 00:11:15.799 --> 00:11:19.200 transport fuels. But the point is that that vulnerability doesn't 198 00:11:19.200 --> 00:11:21.720 go away. What they have again done is giving themselves 199 00:11:21.799 --> 00:11:25.440 optionality and a hedge and flexibility in their stockpiling crude. 200 00:11:25.679 --> 00:11:29.000 But what we can see is that China's energy security 201 00:11:29.039 --> 00:11:33.799 policy seems to be vindicated from these first few weeks 202 00:11:33.840 --> 00:11:37.440 of the crisis in the Gulf in terms of oil supplies, 203 00:11:38.000 --> 00:11:41.720 the fact that China has diversified its import sources, So yes, 204 00:11:41.759 --> 00:11:44.240 it relies on the Golf for fifty percent of its crude. 205 00:11:44.240 --> 00:11:46.000 But you can flip it and say it relies on 206 00:11:46.120 --> 00:11:49.399 other sources for fifty percent of its crude. It has 207 00:11:49.519 --> 00:11:52.840 stocks that it's not releasing just yet, but it does 208 00:11:52.879 --> 00:11:56.559 have that as a cushion. And the big electrification program, 209 00:11:56.679 --> 00:12:01.159 so moving away from gasoline and diesel to electrification of 210 00:12:01.159 --> 00:12:04.279 passenger vehicles and trucks, which have really been gaining momentum 211 00:12:04.399 --> 00:12:07.639 over the past year. That serves as a shock absorber. 212 00:12:07.879 --> 00:12:10.679 Now that doesn't mean that China is completely insulated from 213 00:12:10.720 --> 00:12:14.519 the shocks in the Middle East. Higher prices are impacting 214 00:12:15.000 --> 00:12:18.799 Chinese end users and Chinese refiners. There is a physical 215 00:12:18.799 --> 00:12:23.039 shortage that is gradually appearing, and there are various indications 216 00:12:23.039 --> 00:12:26.279 about exactly how many Chinese tankers are moving through the 217 00:12:26.320 --> 00:12:30.080 Strait of Hormuz. But also that as Saudi is finding 218 00:12:30.120 --> 00:12:34.200 other export routes, mainly through Yamboo, then the Chinese refiners 219 00:12:34.200 --> 00:12:37.159 are able to load some crude. There is still going 220 00:12:37.200 --> 00:12:39.840 to be a shortfall, and I think the compounding impact 221 00:12:40.000 --> 00:12:44.639 of the lack of availability of oil of products, the 222 00:12:44.679 --> 00:12:48.879 precursors to petrochemicals are really important, and the shortages and 223 00:12:48.919 --> 00:12:51.840 price increases in gas are going to impact chemicals, for 224 00:12:51.840 --> 00:12:55.519 instance in China, But overall, if you compare China to 225 00:12:55.840 --> 00:12:59.399 other Asian countries, it is really I don't know if 226 00:12:59.399 --> 00:13:02.399 the least ex posed, but it has the most significant 227 00:13:02.559 --> 00:13:05.360 buffers and shock absorbers in the system right now. And 228 00:13:05.399 --> 00:13:09.080 what about metals, I think metals is something that's going 229 00:13:09.159 --> 00:13:13.039 to play out over time with a variety of sort 230 00:13:13.039 --> 00:13:15.440 of second and third order impacts from what we're seeing 231 00:13:15.519 --> 00:13:17.519 right now. And the other thing we forget when we 232 00:13:17.559 --> 00:13:20.720 talk about China's dominance in clean tech, they still need 233 00:13:20.759 --> 00:13:26.919 the minerals lithium, cobalt, rare, they have plenty, but manganese, nickel, 234 00:13:27.120 --> 00:13:29.600 that's all still important in order to process and to 235 00:13:29.679 --> 00:13:33.679 produce clean tech. So it's not like they're completely independent. 236 00:13:34.240 --> 00:13:36.679 I hear very clearly what you're saying there. What's for 237 00:13:36.759 --> 00:13:39.840 me interesting about China is the fact that what they 238 00:13:39.879 --> 00:13:44.320 did is they did see this dependence and said, adism, 239 00:13:44.399 --> 00:13:46.720 we need to at least lessen it. And they made 240 00:13:46.720 --> 00:13:50.360 this decision maybe fifteen years ago that one we would electrify. 241 00:13:51.159 --> 00:13:53.759 But the other thing that they did was they also 242 00:13:54.039 --> 00:13:57.440 did it as part of their industrial strategy and geopolitical strategy. 243 00:13:57.519 --> 00:14:01.799 Industrial strategy is, hey, let's produce all these components and 244 00:14:01.840 --> 00:14:04.720 then geopolitical strategy is you be into export all of 245 00:14:04.759 --> 00:14:07.279 these And I think that they've done an amazing job 246 00:14:07.320 --> 00:14:10.799 of taking this strategic view of the future. Like again 247 00:14:10.960 --> 00:14:13.399 correctness of our own, we might say they were just lucky, 248 00:14:13.440 --> 00:14:14.759 but I don't think. I think it was a real 249 00:14:14.879 --> 00:14:16.519 plan behind what they've done. 250 00:14:16.840 --> 00:14:22.080 Absolutely, there was absolutely an industrial policy and an industrial vision. 251 00:14:22.480 --> 00:14:25.200 And if you remember ten fifteen years ago, there was 252 00:14:25.279 --> 00:14:29.720 talking China about moving away from industrial capacity, relying more 253 00:14:29.759 --> 00:14:33.559 on consumption and services. And they've sort of realized that 254 00:14:33.679 --> 00:14:38.039 if you lose your industrial capabilities, you also lose economic 255 00:14:38.159 --> 00:14:41.679 competitiveness and a defense industrial base, and they've sort of 256 00:14:41.720 --> 00:14:45.200 slowed down that move towards a service oriented industry and 257 00:14:45.240 --> 00:14:48.840 sort of a post industrial economy. So they absolutely recognized 258 00:14:48.879 --> 00:14:53.480 the importance of industry and industrial capabilities. I think a 259 00:14:53.480 --> 00:14:56.919 lot of the clean tech there were different policy strands. 260 00:14:56.960 --> 00:15:00.120 So for evs, it was about a combination of of 261 00:15:00.240 --> 00:15:02.480 leap frogging ice technologies that they weren't going to be 262 00:15:02.519 --> 00:15:06.679 able to compete with energy security that led them to 263 00:15:06.759 --> 00:15:10.759 develop the EV sector. Solar started as an export industry, right, 264 00:15:10.799 --> 00:15:12.600 it was a few entrepreneurs, as you know, well that 265 00:15:12.679 --> 00:15:14.759 came back to China and said, look, they're feeding tariffs 266 00:15:14.799 --> 00:15:17.960 in Europe, let's capitalize on that. And it only gradually 267 00:15:18.080 --> 00:15:21.879 became a domestic industry. So they started from different perspectives, 268 00:15:22.679 --> 00:15:27.000 but again there was that consistent industrial policy and that 269 00:15:27.080 --> 00:15:29.759 move throughout the value chain. Because China also has so 270 00:15:29.799 --> 00:15:32.639 many resources and natural resources that today it is in 271 00:15:32.639 --> 00:15:36.480 an extremely strong position in those supply chains. I'm not 272 00:15:36.519 --> 00:15:39.759 sure it's set out to dominate them, but it clearly 273 00:15:39.799 --> 00:15:41.960 had a vision that these were things that China could 274 00:15:41.960 --> 00:15:44.960 and should develop, with lots of mistakes along the way, 275 00:15:45.039 --> 00:15:49.480 but today are pretty successful, a pretty significant position globally. 276 00:15:49.559 --> 00:15:52.039 That gives China a huge amount of leverage. 277 00:15:52.480 --> 00:15:55.240 Now let's talk a bit about the narrative from the 278 00:15:55.320 --> 00:16:00.639 West looking in China, what is real and what is balloons? 279 00:16:00.799 --> 00:16:04.720 We need to pop? Because there were very successful books 280 00:16:04.759 --> 00:16:09.960 recently saying okay, without Apple transferring so much expertise, they 281 00:16:09.960 --> 00:16:14.120 would never been able to produce a smartphone. There is 282 00:16:14.159 --> 00:16:17.320 the view which I share that the arrival of Testla 283 00:16:17.320 --> 00:16:22.279 and Shanghai somehow has boosted the development of evs. And 284 00:16:22.360 --> 00:16:27.759 of course, what is US brilliance versus China execution? Because 285 00:16:28.159 --> 00:16:31.639 you go from a football field to a functioning plant 286 00:16:31.679 --> 00:16:35.000 in less than a year. I mean, nowhere else in 287 00:16:35.039 --> 00:16:39.240 the world is that possible. So my question is what's 288 00:16:39.320 --> 00:16:41.360 real and what is fantasized. 289 00:16:42.360 --> 00:16:45.519 Everything is real, The question is how do you contextualize 290 00:16:45.519 --> 00:16:47.720 it and what do you make of it. Every data 291 00:16:47.759 --> 00:16:51.399 point probably that you'll read about China is true, the 292 00:16:51.519 --> 00:16:54.279 huge increases in power capacity, but also the fact that 293 00:16:54.360 --> 00:16:57.519 coal is still hugely significant, and it's such a vast 294 00:16:57.519 --> 00:17:00.360 and big country that you will have innovation that is 295 00:17:00.399 --> 00:17:04.519 based on probably pure technology theft, and equally a lot 296 00:17:04.519 --> 00:17:07.440 of technology that's based on a lot of hard work, 297 00:17:07.480 --> 00:17:10.880 home grown industry and innovation. So all of the above, 298 00:17:11.119 --> 00:17:14.319 what's important is the context and the nuance, which we 299 00:17:14.440 --> 00:17:18.319 lose very very quickly because the conversation about China, and 300 00:17:18.359 --> 00:17:21.519 I would say the energy transition becomes breathless and siloed 301 00:17:21.640 --> 00:17:25.200 very very quickly. China's good, China's bad. China can innovate, 302 00:17:25.279 --> 00:17:28.599 China can only steal. That's one of our biggest problems. 303 00:17:29.279 --> 00:17:32.759 If you look back historically, China's clean tech development has 304 00:17:32.880 --> 00:17:36.680 been based around a lot of technology transfers. Initially, there 305 00:17:36.759 --> 00:17:38.680 was a lot of innovation that came from the West. 306 00:17:39.079 --> 00:17:42.759 Where China has been very very good is at process innovation, 307 00:17:43.119 --> 00:17:46.480 at scaling up and again using that massive industrial base 308 00:17:46.559 --> 00:17:49.839 and skill base to scale up. I wouldn't say, though, 309 00:17:49.880 --> 00:17:53.640 that China cannot innovate today. First of all, that process 310 00:17:53.680 --> 00:17:57.759 innovation has been hugely additive and significant when you look 311 00:17:57.799 --> 00:18:00.599 at it again, to date, China has been better at 312 00:18:00.680 --> 00:18:06.160 sort of that process innovation rather than design intensive technological innovation. 313 00:18:06.279 --> 00:18:10.119 So you have less of those disruptive technologies coming from China. 314 00:18:10.200 --> 00:18:11.960 It doesn't mean that it's not going to happen. I 315 00:18:12.000 --> 00:18:16.200 do think that today in the system where clean tech 316 00:18:16.279 --> 00:18:20.440 or low carbon technologies are so developed, that ability for 317 00:18:20.480 --> 00:18:25.039 incremental innovation is just huge. We talk about sodium mine batteries, 318 00:18:25.079 --> 00:18:27.200 of all, the Chinese are doing that already. Part of 319 00:18:27.240 --> 00:18:29.400 it is to reduce dependence on lithium, and part of 320 00:18:29.400 --> 00:18:32.680 it is just because there's an ecosystem there. So there 321 00:18:32.799 --> 00:18:35.359 was that notion that China can't innovate, and then it's 322 00:18:35.400 --> 00:18:38.000 all the innovation and the growth in clean tech is 323 00:18:38.039 --> 00:18:42.039 because of subsidies and technology theft. I think that's wrong. 324 00:18:42.960 --> 00:18:45.720 It doesn't mean also that China is completely independent and 325 00:18:45.799 --> 00:18:49.640 is now going to dominate everything. There are areas where 326 00:18:49.759 --> 00:18:52.400 China does need the West and does rely on the West, 327 00:18:52.759 --> 00:18:55.000 and obviously synergies and collaboration would be great. 328 00:18:56.000 --> 00:18:58.319 What I was going to say, the other advantage that China, 329 00:18:58.319 --> 00:19:01.079 I think has is just a fact that it has 330 00:19:01.119 --> 00:19:03.839 a big market and the government doesn't just sort of say, 331 00:19:03.880 --> 00:19:05.720 go out there and build stories. They go, well, let's 332 00:19:05.759 --> 00:19:07.640 create a market for let's create a mark for evs. 333 00:19:08.279 --> 00:19:10.240 And so what there is is massive amount of learning. 334 00:19:10.279 --> 00:19:13.279 So if I take the case of say electric vehicles, well, 335 00:19:13.279 --> 00:19:16.960 actually they started with electric scooters, and they started years ago, 336 00:19:17.480 --> 00:19:20.799 and so people were sort of normalized in the around 337 00:19:20.799 --> 00:19:23.160 oh yeah electric, yeah, okay, so power cable, so what 338 00:19:23.599 --> 00:19:25.720 while we the West have not been normalized in and 339 00:19:25.799 --> 00:19:28.200 around it. That's the other big advantage that they have 340 00:19:28.319 --> 00:19:30.400 is that they're just more joined up in the way 341 00:19:30.400 --> 00:19:32.319 they go and approach these things. 342 00:19:32.799 --> 00:19:37.640 The electric scooters and small evs is not an example 343 00:19:37.640 --> 00:19:40.279 of a joined up strategy or of Beijing sort of 344 00:19:40.319 --> 00:19:45.599 say having this vision. Electric scooters originally and electric motorcycles 345 00:19:46.079 --> 00:19:49.160 were not allowed, and this was something that developed because 346 00:19:49.200 --> 00:19:51.920 there were batteries and because they were low cost, and 347 00:19:51.960 --> 00:19:54.319 innovation just happened because this was such a huge market. 348 00:19:54.359 --> 00:19:57.640 It emerged and it wasn't regulated to begin with, and 349 00:19:57.680 --> 00:20:00.079 the government actually tried to crack down on it. But 350 00:20:00.119 --> 00:20:02.039 then it became such a lucrative market that it's part 351 00:20:02.079 --> 00:20:04.480 of the market. That's the other thing that we miss 352 00:20:04.559 --> 00:20:08.200 a little bit with this vision that central government has 353 00:20:08.200 --> 00:20:11.480 it all planned and designed, and we don't appreciate just 354 00:20:11.599 --> 00:20:15.599 how much organic growth and room for innovation there is 355 00:20:16.200 --> 00:20:18.440 in I guess at the margins of the market, but 356 00:20:18.599 --> 00:20:21.839 the margins of a market like China that just becomes 357 00:20:21.920 --> 00:20:24.319 very quickly transformative because of the numbers. 358 00:20:24.839 --> 00:20:28.599 And to follow on your point, I add the privilege 359 00:20:28.680 --> 00:20:32.400 to see Stella l the number two of BIDE at conference. 360 00:20:33.200 --> 00:20:36.880 My god, what a rock star. She started a carry 361 00:20:36.920 --> 00:20:40.920 on parking lots waiting that the clowns is open. It 362 00:20:40.960 --> 00:20:43.160 is to supply boots and she would come with her 363 00:20:43.440 --> 00:20:48.160 samples of imitated the Sangyo batteries. And I mean, look 364 00:20:48.200 --> 00:20:51.559 what Biada has become. You can have all the plans. 365 00:20:51.720 --> 00:20:54.559 I mean every country make plans. Two ordered countries in 366 00:20:54.559 --> 00:20:57.519 the world to ordered plans, but some deliver because you 367 00:20:57.559 --> 00:21:02.039 have a generation of entrepreneurs. Zanget c ATN and so on, 368 00:21:02.400 --> 00:21:05.279 which I mean those people are absolutely remarkable, and it's 369 00:21:05.319 --> 00:21:10.079 always very puzzling that the Chinese system looks very monolithic 370 00:21:10.119 --> 00:21:13.240 and top down, as you say, But some heroes, some 371 00:21:13.480 --> 00:21:17.319 crazy entrepreneur has managed to put their energ and reinvest 372 00:21:17.480 --> 00:21:20.880 like crazy and developed. Now okay, we talk about Bady, 373 00:21:20.920 --> 00:21:25.079 but it's the size now they're reaching is absolutely insane. 374 00:21:25.319 --> 00:21:28.160 They mean more car Lastion, th and Ford really for 375 00:21:28.400 --> 00:21:30.519 being there fo one hundred plus yours. 376 00:21:30.960 --> 00:21:33.599 And I think the demand certainty is something that's really 377 00:21:33.640 --> 00:21:38.119 really important, where again for low carbon technologies, there has 378 00:21:38.200 --> 00:21:43.119 been consistency in the demands actually throughout, but in the 379 00:21:43.480 --> 00:21:47.359 policy again where we focus on subsidies, there's been subsidies 380 00:21:47.359 --> 00:21:50.839 and government support for production of all of this kit 381 00:21:51.440 --> 00:21:54.440 but also for demand and then for the infrastructure to 382 00:21:54.480 --> 00:21:57.920 go with it. So you've had that consistency of commitment 383 00:21:58.440 --> 00:22:00.720 that has been really really significant, and you have had 384 00:22:00.759 --> 00:22:03.559 these entrepreneurs that have been able to come in. But equally, 385 00:22:03.599 --> 00:22:07.160 that's one side of the energy system, the coal, oil, 386 00:22:07.319 --> 00:22:11.440 gas power. These are not private mavericks. These are state 387 00:22:11.480 --> 00:22:15.480 owned companies with a massive legacy of a bureaucracy and 388 00:22:15.519 --> 00:22:20.160 a responsibility for energy security and you know, operating in 389 00:22:20.279 --> 00:22:24.000 a pricing system that is set by the government and 390 00:22:24.119 --> 00:22:26.720 is quite hard to navigate and juggle through. So we've 391 00:22:26.759 --> 00:22:30.680 got the two sort of images of China that coexist, 392 00:22:30.759 --> 00:22:32.240 which again to your question, which I think is a 393 00:22:32.240 --> 00:22:35.599 brilliant question. Everything is true and sort of nothing is 394 00:22:35.640 --> 00:22:37.319 true unless you can textualize it. 395 00:22:38.039 --> 00:22:41.240 One thing that I'm really interested in is the environmental 396 00:22:41.319 --> 00:22:43.079 side of things, because it's very tear you go to 397 00:22:43.160 --> 00:22:46.599 China to day and you compare Shanghai to ten years ago, 398 00:22:46.640 --> 00:22:49.240 that just the air quality is just in a different league. 399 00:22:49.240 --> 00:22:51.759 In fact, it's probably better than most Western cities. Is 400 00:22:51.759 --> 00:22:54.880 that by accident or was that part of their strategy? 401 00:22:55.559 --> 00:22:58.720