China is serious about its decarbonisation programme, but independent economist and commentator George Magnus is still sceptical of the country’s plans.
Speaking at ETF Stream’s ETF Ecosystem Unwrapped event, Magnus, who is a research associate at Oxford University’s China Centre, said he did not doubt the serious of President Xi Jinping’s recently set 2060 as a target for the country to become carbon neutral, however, added he was sceptical.
“First I am sceptical about the motivation, but that is not specific to China,” Magnus explained. “They want to play a big global role in climate change leadership and they kind of hijacked leadership when the Trump administration was taking the US in the opposite direction. But I am also sceptical about their dependency on coal.”
Here, Magnus says scrutiny is required when assessing the data being released out of China. Like the frequently conflated economic data it publishes, the author of ‘Red Flags: why Xi’s China is in jeopardy’, explained that the reality of China’s consumption of fossil fuels was most likely to be different than reported.
“It is much more intense than they would have us believe,” he said, “China account for about half of global coal consumption and are still adding coal capacity. The investments they have made in solar, and wind are growing, but from a low base. And the intermittent supply they give makes them reluctant to let go of the coal anchor.
“Their targets are also more than ambitious, I would be very surprised if they were met.”
Magnus also discussed how geopolitical tensions should be considered by investors in China. Growing animosity with Taiwan and the US has become an area of concern for investors.
“The danger of conflict between China and Taiwan, and by implication with the US, has never been higher,” said Magnus who caveated he was not an expert on international hostilities. However, he does not see it likely that Taiwan will openly antagonise China into war. This could reassure investors, especially when ties with the West – within the financial services industry at least – seem to be strengthening.
“It is anomalous that, when talking about cyber and trade wars, that China is actually welcoming foreign asset managers and finance firms to attract both capital and skills,” Magnus said. “However, the companies that go there have to be wary of the risks that weren’t there five years ago.”