The World's Greatest Coal Arbitrage: China's Coal Import Behavior and Implications for the Global Coal Market
In 2009 the global coal market witnessed one of the most dramatic realignments it has ever seen - China, long a net exporter of coal, suddenly imported a record-smashing 126 Mt tons (103 Mt net). This inversion of China's role in global coal markets meant that Chinese imports accounted for nearly 15% of all globally traded coal, and China became the focal point of global demand as traditional import markets like Europe and Japan stagnated in the wake of the financial crisis. The middle kingdom's appetite for imported coal seems insatiable, and the "China Factor" appears to have ushered in a new paradigm for the global coal market.
But China doesn't "need" the coal. The world's largest coal producer cranked out 2.96 Bt of production in 2009, backed up by 114.5 Bt of reserves. While the world's other fastest growing importer, India, is plagued by a growing gap between coal supply and power demand that it is unable to fill domestically, this is not the case in China. The spike in Chinese demand for imported coal is therefore a more complex (and less easily predictable) phenomenon that requires careful examination if the world is to understand what impact China might have on global energy markets in the coming decade.
In this paper Richard Morse and Gang He devise a model that explains Chinese coal import patterns and that can allow the coal market to understand, and to some degree predict, China's coal import behavior. They argue that the unique structure of the Chinese coal market creates a series of key arbitrage relationships between Chinese domestic coal markets and international coal markets that determine Chinese import patterns.
The implications of this argument are significant for the development of the global coal trade in the coming decade. The arbitrage relationships that Morse and He describe directly link the domestic price of coal in China to the global price of coal. Developments in China's domestic coal market will be a dominant factor determining global coal prices and trade flows (and by implication power prices in many regions). This makes understanding the domestic Chinese coal market, which operates according to a unique economic and political logic, crucial for any participant in the global markets.
Global Education Network on Food Policy, Food Security, and the Environment
Providing food security for a world that will be warmer, more populous, and continually developing requires the implementation of sound policies that enhance food and agricultural consumption, production, incomes, and trade. FSE is in the midst of hosting a two-year, 12-lecture symposium series on Global Food Policy and Food Security.
Executive Summary from the Fourth Korea-U.S. West Coast Strategic Forum Released
The fourth Korea-U.S. West Coast Strategic Forum was held on June 18th at Stanford to discuss current developments in North Korea and North Korea policy, the future of the U.S.-South Korean alliance, and a strategic vision for Northeast Asia. Former senior government officials and other leading experts from the United States and South Korea participated. The forum agenda and the executive summary available.
Participants from the United States included:
- Michael H. Armacost, Shorenstein Distinguished Fellow, Shorenstein Asia-Pacific Research Center (APARC), Stanford University
- Michael Chinoy, Senior Fellow, University of Southern California, U.S.-China Institute; former CNN foreign correspondent
- Siegfried S. Hecker, Co-Director of Center for International Security and Cooperation (CISAC), Stanford University; and Professor (Research), Department of Management Science and Engineering; FSI Senior Fellow
- David C. Kang, Professor of International Relations and Business, University of Southern California; Director, USC Korean Studies Institute
- Stephen D. Krasner, Professor of International Relations and Business, Deputy Director of Freeman Spogli Institute, Stanford University
- John W. Lewis, William Haas Professor of Chinese Politics, Emeritus, Stanford University; CISAC Faculty Member; FSI Senior Fellow, by courtesy
- Kyung-Ae Park, Associate Professor, Korea Foundation Chair, Institute of Asian Research, University of British Columbia
- William J. Perry, Michael and Barbara Berberian Professor (at FSI and Engineering) and Co-director of the Preventive Defense Project at CISAC; FSI Senior Fellow
- Gi-Wook Shin, Director, Shorenstein APARC; Director, Korean Studies Program and Tong Yang, Korea Foundation, and Korea Stanford Alumni Chair of Korean Studies; Professor of Sociology; FSI Senior Fellow
- David Straub, Associate Director, Korean Studies Program, Shorenstein APARC; former Director, Office of Korean Affairs, U.S. State Department
- Philip W. Yun, Vice President for Resource Development, The Asia Foundation
Participants from South Korea - Yun Young Cho, Associate Professor, Chung-Ang University
- Ro Myung Gong, Chairman, The Sejong Foundation; former Foreign Minister
- Young Sun Ha, Professor, Seoul National University
- Yong Ho Kim, Professor, Inha University; former President of Korea Political Science Association
- Sangho Lee, Research Fellow, The Sejong Institute (Program Coordinator)
- Yong Ok Park, Governor, South Pyongan Province; former Vice Minister of Defense
- Sang Woo Rhee, Head, Presidential Commission for National Security Review; former President, Hallym University
- Gi Woong Son, Senior Research Fellow, Korea Institute for National Unification
- Dae Sung Song, President, The Sejong Institute
The China Factor: Short and Long-term Drivers of Chinese Coal Imports
In 2009 China, the world's largest coal producer, in seemingly a counterintuitive shift, became the world's largest coal importer at the same time. The resulting realignment of the global coal trade has altered global prices for coal and power, and may be the harbinger of an "Asian coal decade" to come.
Drawing on their recent presentation at Coaltrans Asia 2010, PESD researchers Gang He and Richard Morse examine the recent trend of soaring Chinese coal imports, and offer a theory of what will drive this long term coal import/export balance between China and the world in the next 10 years. He and Morse argue that China's voracious appetite for imported coal is largely profit driven and takes advantage of key arbitrage relationships in the global market. But those relationships are in turn largely a function of key political economy issues in China's domestic energy markets.
Major coal and power sector reforms, such as coal sector consolidation and coal-power integration, will impact domestic coal prices and therefore will largely drive China's import trends going forward. Thus China's shift to imports is not a paradigm shift in global markets, but rather a harbinger of greater trade volatility in the future.
Gang He
616 Serra St.
E420 Encina Hall
Stanford, CA 94305
Gang He's work focuses on China's energy and climate change policy, carbon capture and sequestration, domestic coal and power sectors and their key role in both the global coal market and in international climate policy framework. He also studies other issues related to energy economics and modeling, global climate change and the development of lower-carbon energy sources.
Prior to joining PESD, he was with the World Resources Institute as a Cynthia Helms Fellow. He has also worked for the Global Roundtable on Climate Change of the Earth Institute at Columbia University. With his experiences both in US and China, he has been actively involved in the US-China collaboration on energy and climate change.
Mr. He received an M.A. from Columbia University on Climate and Society, B.S. from Peking University on Geography, and he is currently doing a PhD in the Energy and Resources Group at UC Berkeley.
Rising international stars: 2010 Draper Hills Summer Fellows on Democracy and Development
Rising leaders from a diverse group of nations in transition, including China, Russia, Ukraine, Syria, Iran, Iraq, Pakistan, Egypt, Kenya, Zimbabwe, Mozambique, and Nigeria arrived on campus on July 25 for a three-week seminar as Draper Hills Summer Fellows on Democracy and Development. Initiated by FSI's Center on Democracy, Development, and the Rule of Law (CDDRL) six years ago, the program has created a network of some 139 leaders from 62 transitioning countries. This year's exceptional class of 23 fellows includes a deputy minister of Ukraine, current and former members of parliament (including a deputy speaker), leading attorneys and rule of law experts, civic activists, journalists, international development practitioners, and founders of non-governmental organizations (NGOs). (One fellow needed to withdraw because he was named to the Cabinet of the new Philippine president, Noynoy Aquino).
Draper Hills Summer Fellows are innovative, courageous, and
committed leaders, who strive to improve governance, enhance civic
participation, and invigorate development under very challenging
circumstances"
- Larry Diamond"Draper Hills Summer Fellows are innovative, courageous, and
committed leaders, who strive to improve governance, enhance civic
participation, and invigorate development under very challenging
circumstances," says CDDRL Director Larry Diamond. "This year's fellows are
an inspiring group. They have come here to learn from us, but even more so from one another. And we will learn much from them, about
the progress they are making and the obstacles they confront as they work to build democracy, improve government
accountability, strengthen the rule of law, energize civil society, and enhance
the institutional environment for broadly shared economic growth."
The three-week seminar is taught by an interdisciplinary team of leading Stanford faculty. In addition to Diamond, faculty include FSI Senior Fellow and CDDRL Deputy Director Kathryn Stoner; Stanford President Emeritus Gerhard Casper; FSI Deputy Director and political science Professor Stephen D. Krasner; Olivier Nomellini Senior Fellow Francis Fukuyama; professor of political science, philosophy, and law Joshua Cohen; professor of pediatrics and Stanford Health Policy core faculty Paul H. Wise; visiting associate professor Beth van Schaack; FSI Senior Fellow Helen Stacy; Walter P. Falcon, deputy director, Program on Food Security and the Environment; Erik Jensen, co-director of the Stanford Law School's Rule of Law Program; Avner Greif, professor of economics; Rick Aubry, lecturer in management, Stanford Graduate School of Business; and Nicholas Hope, director, Stanford Center on International Development.
Other leading experts who will engage the fellows include President of the National Endowment for Democracy Carl Gershman, United States Court of Appeals Judge Pamela Rymer, International Center on Nonviolent Conflict founding chair Peter Ackerman, Omidyar Network partner Matt Halprin, Conservation International's Olivier Langrand, executives of leading Silicon Valley companies, such as Google and Facebook, and media and nonprofit organizations in the Bay Area. Michael McFaul, a Stanford political science professor and former CDDRL director, who now serves on the National Security Council as President Obama's chief advisor on Russia, will come to campus to teach a session on U.S. foreign policy in the Obama administration.
The demanding, but compelling curriculum will devote the first week of the seminar to defining the fundamentals of democracy, good governance, economic development, and the rule of law. In the second week, faculty will turn to democratic and economic transitions and the feedback mechanisms between democracy, development, and a predictable rule of law. This week will include offerings on liberation technology, social entrepreneurship, and issues raised by development and the environment. The third week will turn to the critical - and often controversial - role of international assistance to foster and support democracy, judicial reform, and economic development, including the proper role of foreign aid.
Our program helps to create a broader community of
global activists and practitioners, intent on sharing experiences to bring
positive change to some of the world's most troubled countries and regions"
- Kathryn Stoner-Weiss The fellows themselves also lead discussions, focused on the
concrete challenges they face in their ongoing work in political and economic
development. "Fellows come to realize that they are often engaged in solving
similar problems - such as endemic corruption in different country contexts,"
says Kathryn Stoner-Weiss. "Our program helps to create a broader community of
global activists and practitioners, intent on sharing experiences to bring
positive change to some of the world's most troubled countries and regions."
The program has received generous gifts from donors William Draper III and Ingrid Hills. Bill Draper made his gift in honor of his father, Maj. Gen. William H. Draper, Jr., a chief advisor to Gen. George Marshall and chief diplomatic administrator of the Marshall Plan in Germany, who confronted challenges comparable to those faced by Draper Hills Summer Fellows in building democracy, a market economy, and a rule of law, often in post-conflict conditions. Ingrid von Mangoldt Hills, made her gift in honor of her husband, Reuben Hills, president and chairman of Hills Bros. Coffee and a leading philanthropist. The Hills project they ran for 12 years improved the lives of inner city children and Ingrid saw in the Summer Fellows Program a promising opportunity to improve the lives of so many people in developing countries.
Thanking the program's benefactors, Larry Diamond says, "The benefit to CDDRL faculty and researchers is incalculable, and we are deeply grateful for the vision and generosity of Bill Draper and Ingrid Hills." As he and Kathryn Stoner-Weiss state, "The Draper Hills Summer Fellows Program allows us to interact with a highly, talented group of emerging leaders in political and economic development from diverse countries and regions. They benefit from exposure to the faculty's cutting edge work, while we benefit from a cycle of feedback on whether these ideas work in the field." Like CDDRL, which bridges academic theory and policy, the Draper Hills Summer Fellows Program, they note, "is an ideal marriage between democratic and development theory and practice."
For additional details on the program or to request permission to attend a session, please contact program coordinator Audrey McGowan, audrey.mcgowan@stanford.edu.
Research Experience in Carbon Sequestration 2010
Student Union Building
Acoma A&B Rooms
University of New Mexico
Albuquerque, NM 87131
Gang He
616 Serra St.
E420 Encina Hall
Stanford, CA 94305
Gang He's work focuses on China's energy and climate change policy, carbon capture and sequestration, domestic coal and power sectors and their key role in both the global coal market and in international climate policy framework. He also studies other issues related to energy economics and modeling, global climate change and the development of lower-carbon energy sources.
Prior to joining PESD, he was with the World Resources Institute as a Cynthia Helms Fellow. He has also worked for the Global Roundtable on Climate Change of the Earth Institute at Columbia University. With his experiences both in US and China, he has been actively involved in the US-China collaboration on energy and climate change.
Mr. He received an M.A. from Columbia University on Climate and Society, B.S. from Peking University on Geography, and he is currently doing a PhD in the Energy and Resources Group at UC Berkeley.
Liberation Technology
(excerpt) In March 2003, police in Guangzhou (Canton), China, stopped 27-year- old Sun Zhigang and demanded to see his temporary living permit and identification. When he could not produce these, he was sent to a detention center. Three days later, he died in its infirmary. The cause of death was recorded as a heart attack, but the autopsy authorized by his parents showed that he had been subjected to a brutal beating.
Sun’s parents took his story to the liberal newspaper Nanfang Dushi Bao (Southern Metropolis Daily), and its investigation confirmed that Sun had been beaten to death in custody. As soon as its report appeared on April 25, “newspapers and Web sites throughout China republished the account, [Internet] chat rooms and bulletin boards exploded with out- rage,” and it quickly became a national story. The central government was forced to launch its own investigation and on June 27, it found twelve people guilty of Sun’s death.
Sun’s case was seen as a watershed—the first time that a peaceful outpouring of public opinion had forced the Communist Chinese state to change a national regulation.
Optimists discern in these events a striking ability of the Internet— and other forms of “liberation technology”—to empower individuals, fa- cilitate independent communication and mobilization, and strengthen an emergent civil society. Pessimists argue that nothing in China has funda- mentally changed. The Chinese Communist Party (CCP) remains firmly in control and beyond accountability. The weiquan movement has been crushed. And the Chinese state has developed an unparalleled system of digital censorship.
China 2.0 conference investigates the rise of a digital superpower
Participants at "China 2.0: The Rise of a Digital Superpower (May 2010)" discussed China's rapid developments in online areas like e-commerce, television, music and games, how its infrastructure and financing would handle this exploding growth, as well as how global firms can thrive in this landscape.
The two-day workshop brought together executives and entrepreneurs from China and overseas to explore the ramifications of a community of 400 million online and 750 million mobile consumers, one with constantly-spawning innovative start-ups and established multi-billion dollar enterprises in social networking, games, video, music and e-commerce.
The conference was covered by KGO-TV's David Louie (Silicon Valley hoping to cash in on wireless in China) and in Chinese by the World Journal (史大论坛 探讨中国网络发展及影响).