WEBVTT - China Data Signals Clean Tech Shift: Analyst Reaction 0:00:00.560 --> 0:00:03.000 This is Kamala Shelling and you're listening to Switched on 0:00:03.120 --> 0:00:06.320 the Bloomberg NEF podcast. In the early days of the 0:00:06.360 --> 0:00:09.440 Iran War, BNF analysts from an array of teams push 0:00:09.480 --> 0:00:12.559 forth the hypothesis that rising fossil fuel prices could be 0:00:12.600 --> 0:00:15.000 a boon for the clean tech trade. When oil and 0:00:15.040 --> 0:00:19.840 gas get expensive. Our argument went, adoption rates of electric vehicles, renewables, 0:00:19.880 --> 0:00:23.279 and other energy transition tech are likely to increase the 0:00:23.360 --> 0:00:25.479 problem was that we had little data to test that 0:00:25.600 --> 0:00:29.240 hypothesis until now. A few days ago, China dropped a 0:00:29.240 --> 0:00:32.080 new set of custom statistics, and our analysts were able 0:00:32.120 --> 0:00:34.920 to see in hard numbers just how clean tech trade 0:00:34.960 --> 0:00:38.040 has changed since February. With US Today to explain is 0:00:38.080 --> 0:00:41.519 Antoine Wagner Jones, BNF's head of Trade and Supply Chains. 0:00:41.680 --> 0:00:45.080 Our conversation is based on the analyst reaction china clean 0:00:45.120 --> 0:00:48.199 tech exports trend up amid high oil prices, as well 0:00:48.240 --> 0:00:51.280 as the brand new energy transition supply Chain's outlook twenty 0:00:51.320 --> 0:00:54.440 twenty six. BNF clients can find more from Antoin's team 0:00:54.440 --> 0:00:57.760 by heading to BNF Supply Chains, go on the Bloomberg Terminal, 0:00:57.920 --> 0:01:00.319 or at BNF Dot com. If you'd like to learn 0:01:00.320 --> 0:01:03.000 more about how BNF covers the energy transition writ large 0:01:03.040 --> 0:01:05.560 from development and commodity markets to the cross cut in 0:01:05.640 --> 0:01:08.360 technologies shaping the future, you can find out more at 0:01:08.400 --> 0:01:10.600 BNF dot com. And if you'd like to speak with 0:01:10.680 --> 0:01:13.640 a member of our team about becoming a client, email 0:01:13.720 --> 0:01:17.959 US Sales dot BNF at Bloomberg dot net. But for now, 0:01:18.200 --> 0:01:30.240 let's dive into my conversation with Antoine. Welcome back, Antoine. 0:01:30.280 --> 0:01:31.920 It's so good to have you back on the podcast. 0:01:32.200 --> 0:01:34.039 It's great to be a kamana. Thanks for having me. 0:01:34.360 --> 0:01:37.040 So when we were preparing this conversation, I asked you 0:01:37.080 --> 0:01:39.640 what is the event that we're responding to, because usually 0:01:39.640 --> 0:01:42.640 our Analyst Reaction podcasts come after a very specific event 0:01:42.680 --> 0:01:44.920 has occurred. And you said, in this case, the event 0:01:45.120 --> 0:01:47.640 is this massive data drop out of China. And I 0:01:47.720 --> 0:01:49.760 was thinking about the fact that, you know, BNF, we 0:01:49.800 --> 0:01:53.320 are surrounded by data all the time everywhere, and even 0:01:53.400 --> 0:01:56.080 within this massive flood of data we're always in, there 0:01:56.080 --> 0:01:58.560 are some data that are just stand out from the rest. 0:01:58.800 --> 0:02:02.200 So why does this day account as an event and 0:02:02.240 --> 0:02:02.720 what is it? 0:02:03.000 --> 0:02:06.120 That's a great question, and basically it's all about Chinese 0:02:06.160 --> 0:02:10.360 customs statistics. On the third week around then of every month, 0:02:10.520 --> 0:02:16.520 China's Customs Agency releases it's specific data about imports and 0:02:16.560 --> 0:02:19.160 exports of all these different products that we track, and 0:02:19.680 --> 0:02:23.080 we've been looking very closely at a few specific products 0:02:23.120 --> 0:02:26.240 within that and those have namely been what we broadly 0:02:26.320 --> 0:02:31.400 call clean technologies, so solar modules, solar cells, electric vehicles 0:02:31.440 --> 0:02:35.639 of different types, and batteries so liftimine batteries. And what 0:02:35.680 --> 0:02:39.160 we're really trying to understand is whether or not we're 0:02:39.200 --> 0:02:42.560 seeing any change compared to the historic trend line. And 0:02:42.760 --> 0:02:45.799 one of the feces that we've got basically is that 0:02:45.919 --> 0:02:48.280 we've got the Iran War putting, you know, with all 0:02:48.320 --> 0:02:51.600 the dips and drops and all the whipsawing that we're 0:02:51.639 --> 0:02:54.600 seeing in oil and gas markets, we're still in a 0:02:54.639 --> 0:02:58.160 period of elevated prices and that's led to a lot 0:02:58.200 --> 0:03:00.880 of strain sort of being put on countries that are 0:03:00.919 --> 0:03:04.680 big fossil fuel impauses. So the idea is that basically 0:03:04.720 --> 0:03:06.480 a lot of these countries are going to start importing 0:03:06.520 --> 0:03:11.440 clean technology to try and counter the sudden inflationary pressure 0:03:11.480 --> 0:03:14.480 put on them by whether it's diesel, gasoline, imports, whether 0:03:14.520 --> 0:03:18.959 it's natural gas via liquefied natural gas LNG, and we 0:03:19.240 --> 0:03:21.320 were pretty certain that this would have an impact and 0:03:21.360 --> 0:03:24.200 we'd see an acceleration, but we weren't really able to 0:03:24.520 --> 0:03:28.960 say anything smart until we got the customs data coming in. 0:03:29.160 --> 0:03:30.960 And we had a first wave of data come in 0:03:31.320 --> 0:03:35.040 for the month of March, which was extremely interesting but 0:03:35.080 --> 0:03:37.400 maybe not conclusive. And then most recently we have the 0:03:37.400 --> 0:03:41.040 April data that's come in which has really backed up 0:03:41.040 --> 0:03:42.600 a lot of the views that we sort of developed 0:03:42.640 --> 0:03:43.560 over the last few weeks. 0:03:43.680 --> 0:03:47.040 So to clarify, we're talking about solar products, EV products 0:03:47.040 --> 0:03:49.200 and battery products that are coming out of China. Do 0:03:49.240 --> 0:03:51.520 we also know where those products are going? 0:03:52.000 --> 0:03:55.840 Yeah? Absolutely. Around fourteen billion dollars of all of these 0:03:55.880 --> 0:03:59.119 different things added together were exported from China last year. 0:03:59.320 --> 0:04:01.200 A lot of them are going going to Europe, a 0:04:01.280 --> 0:04:02.840 lot of them are going to US. Those are the 0:04:02.840 --> 0:04:06.120 two big centers for demand for clean technology still in 0:04:06.160 --> 0:04:08.520 the world outside of China, and naturally a lot of 0:04:08.560 --> 0:04:11.200 those goods are flowing to those countries. There's big caveats. 0:04:11.400 --> 0:04:14.520 China doesn't really export evs to the US for various reasons. 0:04:14.520 --> 0:04:18.320 There's basically rules that ban so called connected cars that 0:04:18.400 --> 0:04:21.080 are linked to China from being on American roads. There 0:04:21.080 --> 0:04:25.479 are very high tariffs. Historically, there've been limits on subsidies 0:04:25.480 --> 0:04:28.360 being given out or tax credits for passenger electric vehicles 0:04:28.680 --> 0:04:31.120 if there was Chinese involvement in the making of the 0:04:31.160 --> 0:04:33.560 battery or of the vehicle itself. So there's been all 0:04:33.600 --> 0:04:36.200 of these different hindrances and roadblocks, which means that ev 0:04:36.279 --> 0:04:38.640 exports to the US aren't really a thing, much more 0:04:38.680 --> 0:04:40.320 of a thing to the EU. And then when we 0:04:40.360 --> 0:04:42.599 look at batteries, a lot is going to the US 0:04:42.720 --> 0:04:45.480 because of this sudden boom that we're seeing in stationary storage, 0:04:45.560 --> 0:04:47.640 despite the fact that there are pretty high tariffs on 0:04:48.480 --> 0:04:51.320 batteries coming from China in the US and otherwise Europe 0:04:51.360 --> 0:04:53.600 is pretty well represented as well. But maybe what's very 0:04:53.600 --> 0:04:56.320 interesting too is that, i mean, historically over the last 0:04:56.320 --> 0:04:59.000 few years, every year we see an inching up of 0:04:59.120 --> 0:05:03.279 Chinese exports that are destined for emerging markets. These countries 0:05:03.480 --> 0:05:05.560 what you can define them in different ways, but you 0:05:05.560 --> 0:05:08.640 can use the World Banks classifications of everything sort of 0:05:08.760 --> 0:05:12.080 under a rich country or an upper income country, so 0:05:12.120 --> 0:05:14.400 you can look at all of these lower income middle 0:05:14.440 --> 0:05:16.240 income countries, and you can see the share that they 0:05:16.279 --> 0:05:18.680 make up of Chinese imports for all of these different 0:05:18.720 --> 0:05:21.880 clean technology goods is going upwards. And what's really interesting 0:05:21.960 --> 0:05:23.880 now when we look at this data is that we're 0:05:23.880 --> 0:05:27.800 seeing regions that are especially exposed to fossil fuel imports 0:05:27.880 --> 0:05:29.919 and gas products make up more than three percent of 0:05:30.000 --> 0:05:33.640 Vietnam and the Philippines GDP. That was the case last year. 0:05:33.960 --> 0:05:37.360 Thailand imports around two percent of its GDP in natural gas. 0:05:37.440 --> 0:05:40.000 So countries in Southeast Asia, but also countries in South 0:05:40.040 --> 0:05:43.040 Asia and countries in Sub Saharan Africa are very exposed 0:05:43.360 --> 0:05:45.719 to these kind of price pleasures from the kinds of 0:05:45.720 --> 0:05:47.320 shocks that we've been seeing as a result of the 0:05:47.400 --> 0:05:51.000 Iran War, and they've been quite well represented in this data. 0:05:51.040 --> 0:05:53.760 So if you look at the increase in exports of 0:05:53.800 --> 0:05:55.960 a lot of these goods, what we see is that 0:05:56.040 --> 0:05:58.760 Southeast Asia has grown quite quickly, and we've also seen 0:05:58.800 --> 0:06:01.599 a number of South Asian trees grow fast too. And 0:06:01.640 --> 0:06:03.400 we're going to be doing a lot more analysis over 0:06:03.440 --> 0:06:06.000 the coming weeks, specifically looking at which countries are growing 0:06:06.040 --> 0:06:10.080 fastest and which seem like they're primed to suddenly boom 0:06:10.160 --> 0:06:11.240 in terms of imports. 0:06:11.440 --> 0:06:13.760 So just to recap the data we have is we 0:06:13.839 --> 0:06:17.200 have the volume in monetary figures of exports coming out 0:06:17.200 --> 0:06:20.039 of China. We know where these exports are going, we 0:06:20.080 --> 0:06:22.640 know the relative wealth of the countries they are going to. 0:06:22.800 --> 0:06:25.599 We know how much fossil fuel imports each of these 0:06:25.600 --> 0:06:28.120 countries have. So now let's talk about actually what the 0:06:28.160 --> 0:06:30.960 April data shows, what has gone up, what has gone down, 0:06:31.240 --> 0:06:34.520 and relating it back to your hypothesis you mentioned at 0:06:34.560 --> 0:06:37.800 the beginning, which is oil price shocks, gas price shocks 0:06:37.880 --> 0:06:39.839 after the start of the Iran war is going to 0:06:39.839 --> 0:06:43.240 boost clean tech exports and imports. How is that playing out. 0:06:43.680 --> 0:06:45.919 So we have the data absolutely like you said, we 0:06:45.920 --> 0:06:48.359 have in value in dollar value. But what we also 0:06:48.400 --> 0:06:51.440 do at BNF is we convert it into the relevant figures. 0:06:51.520 --> 0:06:54.360 So there's things like evs are also reported in units, 0:06:54.360 --> 0:06:57.279 so number of cars for solar for batteries. We have 0:06:57.320 --> 0:06:59.800 an in house methodology that allows us to then convert 0:07:00.080 --> 0:07:02.880 those figures into something that's more useful when we're looking 0:07:02.880 --> 0:07:05.040 at it from an energy angle, So we can convert 0:07:05.080 --> 0:07:07.640 it to gig what hours for batteries, for example, gig 0:07:07.640 --> 0:07:09.560 what's for solar and those are the numbers that we're 0:07:09.560 --> 0:07:12.760 looking at. And when we think about April, what's really 0:07:12.760 --> 0:07:16.480 interesting is that March already was a huge boom year. 0:07:16.720 --> 0:07:18.560 So when we look at March twenty twenty six and 0:07:18.600 --> 0:07:21.160 we compare it to the previous months to February, exports 0:07:21.200 --> 0:07:24.679 of Chinese batteries increased by the order of around forty 0:07:24.720 --> 0:07:27.480 four percent, so just over that month. And then when 0:07:27.480 --> 0:07:29.760 we look at solar and we some sort of solar 0:07:29.760 --> 0:07:32.800 models and solar cells, they basically doubled. And that was 0:07:32.840 --> 0:07:36.480 a real that was incredibly interesting, and that was also 0:07:36.720 --> 0:07:39.760 far from really being conclusive in any kind of way. 0:07:39.920 --> 0:07:41.600 And why is that. That's because of the fact that 0:07:41.640 --> 0:07:44.480 when you're looking at this trade data, you can't just say, well, 0:07:45.200 --> 0:07:47.679 we're seeing high fossil fuel prices as a sudden jump 0:07:47.840 --> 0:07:50.240 in exports that must be linked. We actually have to 0:07:50.280 --> 0:07:52.200 go beyond that a bit and look at a number 0:07:52.200 --> 0:07:53.840 of other factors that could be relevant. And it just 0:07:53.880 --> 0:07:58.120 so happened that March was the last month where rebates 0:07:58.120 --> 0:08:00.800 would be available for solar exporters, so for exporters of 0:08:00.800 --> 0:08:04.360 solar products out from China, and the rebate that is 0:08:04.360 --> 0:08:07.680 given to exporters of lithiumind batteries was reduced, so that 0:08:07.960 --> 0:08:12.080 basically means less favorable terms for exporters of clean technology 0:08:12.080 --> 0:08:14.320 coming out from China. And that's part of why we 0:08:14.360 --> 0:08:17.600 saw this sudden rush to benefit from those terms while 0:08:17.600 --> 0:08:20.360 they remained available, because they were basically going to stop 0:08:20.680 --> 0:08:23.640 or be reduced or curtailed in April. So we saw 0:08:23.640 --> 0:08:26.280 a huge jump, as I mentioned in exports in March, 0:08:26.440 --> 0:08:29.480 but because of the policy context within China, we weren't 0:08:29.520 --> 0:08:32.400 able to say, okay, well, this is conclusive evidence that 0:08:32.440 --> 0:08:35.080 the Iran War is having an impact on global energy 0:08:35.320 --> 0:08:37.959 trade from the perspective of clean tech. So what we 0:08:37.960 --> 0:08:41.360 were waiting for is this month, so April, because April, 0:08:41.480 --> 0:08:43.679 if we look at the data, then you know, all 0:08:43.679 --> 0:08:46.960 things considered, we've got past this sudden lurch as a 0:08:46.960 --> 0:08:51.000 result of tax rebates or rebates for exporters being reduced 0:08:51.080 --> 0:08:53.559 or removed entirely in the case of solar, and then 0:08:53.559 --> 0:08:56.520 we can begin to make some observations that perhaps are 0:08:56.520 --> 0:08:59.079 a little bit more indicative of trends that we're seeing 0:08:59.080 --> 0:09:01.040 that are linked to the Iran war. And that's when 0:09:01.080 --> 0:09:04.040 things were quite interesting. That's when we saw something really 0:09:04.679 --> 0:09:09.880 pretty impressive where battery electric vehicle exports reached two hundred 0:09:09.880 --> 0:09:12.959 and eighty six thousand cars shipped in a single month, 0:09:13.160 --> 0:09:16.080 and that's a record since we started counting. Our trade 0:09:16.120 --> 0:09:18.160 data that we sort of published on our website goes 0:09:18.160 --> 0:09:21.120 back to twenty seventeen, so that's a historic record, like 0:09:21.160 --> 0:09:24.199 that's never before have we reached those heights. And I mean, 0:09:24.240 --> 0:09:27.000 with all the reports that we're seeing of ev uptake 0:09:27.120 --> 0:09:29.640 being sort of buoyed by the fact of that the 0:09:29.720 --> 0:09:31.480 Iran war is putting a lot of pressure up on 0:09:31.520 --> 0:09:34.760 pump prices, then that seems like there's a correlation that 0:09:34.880 --> 0:09:37.800 could be indicative of a link. And what we've also 0:09:37.960 --> 0:09:40.880 seen is a month on month game for solar cells, 0:09:40.920 --> 0:09:44.439 for LIFTIU modules and Lift your Mind batteries, not compared 0:09:44.480 --> 0:09:47.720 to the previous month, but compared to the twelvemonth average 0:09:48.120 --> 0:09:50.640 that we have sort of before the crisis, and there 0:09:50.679 --> 0:09:54.240 we see pretty substantial increases of at least ten percent 0:09:54.360 --> 0:09:57.040 or more based on against that average. And that's also 0:09:57.040 --> 0:09:59.559 at a time when solar module prices are being pushed 0:09:59.600 --> 0:10:01.600 up slightly because of the fact that there's this rebate 0:10:01.640 --> 0:10:03.800 that's collapsed and because of the fact that we're also 0:10:03.920 --> 0:10:07.920 seeing pretty high silver prices. Aluminium prices have also gone 0:10:08.000 --> 0:10:10.680 up as a result of the Iran War. So really 0:10:10.679 --> 0:10:13.280 interesting that we just when we look at historical averages, 0:10:13.320 --> 0:10:16.120 what we are seeing is a huge growth in battery 0:10:16.160 --> 0:10:19.320 electric vehicles that's visible month versus month or month. But 0:10:19.360 --> 0:10:23.520 we're also seeing this pretty impressive growth in solar exports 0:10:23.559 --> 0:10:27.120 and battery exports even after this huge boom that we 0:10:27.160 --> 0:10:29.280 saw in March. So what we're going to be doing 0:10:29.320 --> 0:10:31.400 is we're going to be looking over the coming months 0:10:31.400 --> 0:10:32.760 to see whether or not this was a sort of 0:10:32.760 --> 0:10:34.560 a blip or whether or not this is the beginning 0:10:34.559 --> 0:10:37.160 of what we think could be a step change or 0:10:37.200 --> 0:10:40.360 an accelvative effects over the shorter to mid term. And 0:10:40.360 --> 0:10:41.880 that's something that we're going to be looking at very 0:10:41.880 --> 0:10:43.840 closey and going to be publishing in the form of 0:10:43.880 --> 0:10:47.839 monthly analysis pieces, looking at not just where things are 0:10:47.840 --> 0:10:50.080 increasing and by how much and how that compares to 0:10:50.160 --> 0:10:53.520 historic volatility measures, but also we're going to be sort 0:10:53.559 --> 0:10:56.800 of looking at for looking for correlation with countries that 0:10:56.840 --> 0:11:00.440 are particularly dependent on fossil fuels. So where though fossil 0:11:00.440 --> 0:11:04.000 fuel imports make up a particularly high share of GDP, 0:11:04.440 --> 0:11:06.160 and we're going to be looking very closely to see 0:11:06.160 --> 0:11:08.120 whether or not there's a correlation there. And then that 0:11:08.160 --> 0:11:11.960 becomes very interesting to manufacturers, for example, whether there's South Korean, 0:11:12.000 --> 0:11:15.400 whether they're Chinese manufacturers, because they're right now in an 0:11:15.480 --> 0:11:18.600 environment that's marked by overcapacity. Is quite difficult to be 0:11:18.640 --> 0:11:21.000 a manufacturer and make money in a lot of these sectors. 0:11:21.120 --> 0:11:23.680 So they're really eager to try and suss out where 0:11:23.720 --> 0:11:25.800 the new growth markets are going to be. And they're 0:11:25.800 --> 0:11:28.360 really eager to understand the impacts of the Iran war 0:11:28.520 --> 0:11:31.040 and what kind of factors might be driving a rise 0:11:31.080 --> 0:11:32.640 in exports to this or that country. 0:11:32.920 --> 0:11:34.800 So you've given us a whole bunch again, a whole 0:11:34.800 --> 0:11:36.720 bunch of data points that you have to sort of 0:11:36.840 --> 0:11:39.160 navigate and bring together to try to pull apart what 0:11:39.280 --> 0:11:42.440 is coincidence in this data? You're looking at what is causality, 0:11:42.520 --> 0:11:45.680 the price of manufacturing various clean tech parts, the price 0:11:45.760 --> 0:11:48.000 of the metals that go into it. But it sounds 0:11:48.000 --> 0:11:49.760 like pretty much everything you've given us up to this 0:11:49.840 --> 0:11:53.800 point is largely economic space. So what's expensive, what's inexpensive? 0:11:53.840 --> 0:11:57.000 Where can we make money? I'm curious if you've also 0:11:57.080 --> 0:11:59.920 seen countries changing their policies in the last couple of 0:12:00.120 --> 0:12:02.959 months to try to improve clean tech uptakes. So you 0:12:03.040 --> 0:12:05.520 know our countries passing new laws to try to help 0:12:05.559 --> 0:12:08.400 people adopt electric vehicles. Are there new laws that are 0:12:08.400 --> 0:12:10.959 going to help people adopt solar and batteries or is 0:12:11.000 --> 0:12:13.240 it too early to see a response like that to 0:12:14.040 --> 0:12:15.520 the vicissitudes of the Iran war. 0:12:15.920 --> 0:12:19.000 So there's a number of trackers out there, and we're 0:12:19.000 --> 0:12:22.760 also tracking this stuff, looking at, for example, the impact 0:12:22.960 --> 0:12:26.320 of the Iran War on well, the link between the 0:12:26.360 --> 0:12:29.680 Iran War and policies that are specifically angling to reduce 0:12:29.840 --> 0:12:33.000 energy demand, whether that's fuel for the transport segment, whether 0:12:33.040 --> 0:12:35.720 that's electricity demand, to reduce the strain on the grid. 0:12:35.800 --> 0:12:38.600 And there there's dozens and dozens and dozens of countries 0:12:38.720 --> 0:12:43.240 that have introduced measures, oftentimes multiple interventions in parallel to 0:12:43.320 --> 0:12:45.440 try and make some kind of an impact and try 0:12:45.480 --> 0:12:47.600 and make some kind of a dent in demand and 0:12:47.640 --> 0:12:50.880 therefore ease of the pressure on the public purse, but 0:12:50.960 --> 0:12:54.560 also ease the pressure on the outflow and foreign exchange 0:12:54.559 --> 0:12:57.480 that we're seeing in lots of emerging markets that typically 0:12:57.520 --> 0:13:00.119 have to pay for these fossil fuel imports in hard currency. 0:13:00.360 --> 0:13:04.200 What's interesting is that we've also identified as subset of 0:13:04.240 --> 0:13:08.040 countries that are putting in place policies specifically designed to 0:13:08.520 --> 0:13:12.880 incentivize the deployment of, for example, electric vehicles. That's something 0:13:12.920 --> 0:13:15.040 that we've seen in certain Latin American countries. Is also 0:13:15.080 --> 0:13:17.360 something that we've seen in Me and Marth for example, 0:13:17.400 --> 0:13:20.680 has in place of temporary exemption for imported evs, so 0:13:20.840 --> 0:13:24.520 exempting them from tariffs. LAO has cut road taxes for 0:13:24.600 --> 0:13:29.000 evs while concurrently raising them for internal combustion engine vehicles, 0:13:29.160 --> 0:13:32.920 and then Cambodia also interesting is has introduced tariff exemptions 0:13:32.920 --> 0:13:36.280 for evs along with exemptions for for solar and for batteries. 0:13:36.440 --> 0:13:38.480 Now a lot of these are actually quite focused on EV's, 0:13:38.520 --> 0:13:41.600 which is sort of interesting because the car fleet takes 0:13:41.600 --> 0:13:44.640 a while to turn around to renew and the immediate 0:13:44.679 --> 0:13:47.320 impact of some of these policies on fuel demand is 0:13:47.320 --> 0:13:49.640 really not going to be noticeable in the and at 0:13:49.760 --> 0:13:52.199 least in the short term. But what this is really 0:13:52.200 --> 0:13:55.280 reflecting is the fact that these countries are starting to 0:13:55.320 --> 0:13:59.360 see their position as countries that are trying really hard 0:13:59.360 --> 0:14:02.600 to find hedging strategies for importing look financial gas, or 0:14:02.640 --> 0:14:04.920 trying to think about how to diversify away from oil. 0:14:04.960 --> 0:14:06.640 They've been thinking about this for a while, but now 0:14:06.640 --> 0:14:09.360 they're sort of realizing that this is becoming extremely important 0:14:09.360 --> 0:14:12.360 to focus on, especially given that nowadays you've got this 0:14:12.640 --> 0:14:16.920 incredible availability of low cost, high quality clean technology, much 0:14:16.920 --> 0:14:18.679 of which is produced in China, but much of which 0:14:18.760 --> 0:14:21.600 is also produced in other countries like Japan, South Korea. 0:14:21.680 --> 0:14:24.560 So really interesting intervention is happening. A lot of them 0:14:24.600 --> 0:14:27.600 focus on the transport segment, but a lot of the activity, 0:14:27.640 --> 0:14:29.400 and I think this is really important as well, is 0:14:29.480 --> 0:14:32.520 not government driven. It's consumer driven. And that's why we're 0:14:32.520 --> 0:14:35.320 seeing these sort of booms in imports of solar modules, 0:14:35.320 --> 0:14:38.200 for example, many of which are sort of distributed solar, 0:14:38.200 --> 0:14:40.280 many of which are behind the meter, many of which 0:14:40.320 --> 0:14:43.120 are for the residential segment, but also for commercial on 0:14:43.160 --> 0:14:46.440 industrial projects, and not so much part of a sudden 0:14:46.560 --> 0:14:50.560 jump towards increasing the amount of tendered utility scale solar 0:14:50.560 --> 0:14:52.520 projects in a given country. So a lot of this 0:14:52.560 --> 0:14:55.000 is consumer got driven, even though we're also seeing many 0:14:55.040 --> 0:14:59.440 government interventions, especially around electric vehicles and the consumer driven stuff. 0:14:59.480 --> 0:15:01.640 When it comes to batteries and solar and then you know, 0:15:01.680 --> 0:15:03.920 building more wind as well. That has much more of 0:15:03.960 --> 0:15:08.360 an a media impact on fuel burn than measures to 0:15:08.440 --> 0:15:12.400 try and over the coming year incentivize more evs on 0:15:12.440 --> 0:15:12.760 the road. 0:15:13.000 --> 0:15:15.440 That is really fascinating. So if that question is about 0:15:15.680 --> 0:15:18.240 trying to incentivize imports or maybe not, but you know 0:15:18.280 --> 0:15:22.160 the import question, the flip side then is potentially incentivizing exports. 0:15:22.160 --> 0:15:23.840 And it just so happens. We're talking about two and 0:15:23.880 --> 0:15:27.160 a half hours after your team's big Supply Chains outlook 0:15:27.360 --> 0:15:29.400 was published, and one of the big stories in there 0:15:29.640 --> 0:15:32.760 is the world has a way more manufacturing capacity for 0:15:32.800 --> 0:15:36.440 clean tech than probably demand, and China has so much 0:15:36.560 --> 0:15:40.160 manufacturing capacity. So even as we're seeing these exports rise 0:15:40.200 --> 0:15:42.640 out of China, is China putting in new laws to 0:15:42.680 --> 0:15:45.640 try to encourage exports trying to sell these products? You 0:15:45.680 --> 0:15:48.640 did mention which may belie this this they've cut this 0:15:48.760 --> 0:15:51.360 export rebate, but I'm curious, is China trying to do 0:15:51.400 --> 0:15:54.080 anything to get their clean technology into other countries? 0:15:54.400 --> 0:15:57.840 So China has been doing basically carrying out textbook industrial 0:15:57.880 --> 0:16:01.480 strategy around increasing the manufacturer and then the export of 0:16:01.560 --> 0:16:05.480 clean technologies over a decade plus and it's been incredibly consistent, 0:16:05.680 --> 0:16:09.600 and there's been all these different bumps and issues along 0:16:09.640 --> 0:16:12.360 the way, But what you've seen is is a pretty 0:16:12.360 --> 0:16:15.600 determined attempt at getting to a stage where export competitiveness 0:16:15.640 --> 0:16:17.600 is something that is really a given when it comes 0:16:17.640 --> 0:16:20.560 to China's ability to outcompete many of his other peers 0:16:20.640 --> 0:16:24.000 when it comes to liftumine batteries or solar products or 0:16:24.040 --> 0:16:27.120 increasingly electric vehicles. But what we've also seen, just like 0:16:27.160 --> 0:16:30.760 you said, is that really interestingly, we have way more 0:16:30.800 --> 0:16:32.760 in the way of manufacturing capacity for a lot of 0:16:32.760 --> 0:16:35.680 this stuff than the world theoretically needs, even for the 0:16:35.760 --> 0:16:39.120 years to come. And that's really odd because when we 0:16:39.160 --> 0:16:41.080 think about the energy transition, what we're really used to 0:16:41.120 --> 0:16:44.600 looking at in pieces like our Energy Transition Investment Trends Report. 0:16:44.840 --> 0:16:46.520 It's a big piece that we put out where we 0:16:46.560 --> 0:16:49.040 basically tally up all of the investments that are happening 0:16:49.200 --> 0:16:52.000 and we compare them to theosically what's needed to be 0:16:52.040 --> 0:16:54.760 on track of this or that climate scenario. And what 0:16:54.800 --> 0:16:57.920 you see is that most sectors are found wanting, most 0:16:57.920 --> 0:17:00.240 sectors fall short. And that's when you look at the 0:17:00.360 --> 0:17:03.160 upstream part of the equation, especially when you look at 0:17:03.200 --> 0:17:06.720 manufacturing as a segment and manufacturing capacity for all of 0:17:06.760 --> 0:17:11.280 these different sectors. That's when the picture is completely flipped 0:17:11.600 --> 0:17:13.640 and you have way more in the way of investment 0:17:13.680 --> 0:17:17.040 than we theoretically need. And that's really good news when 0:17:17.040 --> 0:17:19.320 it comes to the energy transition writ large. If the 0:17:19.320 --> 0:17:22.159 aim is to procure clean tech at low cost, then 0:17:22.200 --> 0:17:24.920 that's great. That's less good news if you're a manufacturer, 0:17:24.920 --> 0:17:27.800 because suddenly your margins are compressed and you're really struggling, 0:17:27.840 --> 0:17:31.440 and we're seeing that and move towards consolidation, and then 0:17:31.600 --> 0:17:35.880 here and there some bankruptcies and suddenly localization in regions 0:17:35.880 --> 0:17:37.879 that want to sort of capture part of this value 0:17:37.920 --> 0:17:40.159 add that want to capture some of this manufacturing are 0:17:40.200 --> 0:17:42.280 really struggling to make the case for that in a 0:17:42.400 --> 0:17:45.440 context of oversupply. So it's a bit of a double 0:17:45.480 --> 0:17:48.320 edged sword. But I would just stress that it's the 0:17:48.440 --> 0:17:50.720 energy transition. We're usually used to talking about the fact 0:17:50.760 --> 0:17:52.080 that we're not doing enough and now we need to 0:17:52.119 --> 0:17:54.840 accelerate things, all the while celebrating the fact that you know, 0:17:55.080 --> 0:17:57.480 SOLO has been over the last few years growing extremely 0:17:57.560 --> 0:17:59.960 fast et cetera et cetera. But generally speaking, the page 0:18:00.160 --> 0:18:01.880 is one where we need to do more. But when 0:18:01.880 --> 0:18:05.199 we talk about manufacturing, the picture is completely different. And 0:18:05.240 --> 0:18:07.520 it means that when we suddenly see these jumps in 0:18:07.600 --> 0:18:10.239 demand as a result of, for example, the crisis in 0:18:10.280 --> 0:18:13.159 the Persian Gulf, the response can be quite fast and 0:18:13.320 --> 0:18:16.879 exports can scale pretty quickly. Now the Chinese government is 0:18:17.000 --> 0:18:19.440 you know, sees these sectors are strategic, but it also 0:18:19.920 --> 0:18:22.840 it recognizes the fact that they aren't going to alone, 0:18:22.960 --> 0:18:25.360 you know, plug the hole that's left by the housing 0:18:25.400 --> 0:18:27.720 crisis that China has been still suffering from over the 0:18:27.800 --> 0:18:30.200 last few years. And what's worried about as well is 0:18:30.240 --> 0:18:32.199 the fact that this could be something of a bubble, 0:18:32.359 --> 0:18:34.800 and this could be a bit of a strategic risk 0:18:34.840 --> 0:18:37.000 as well if we suddenly see all these bankruptcies and 0:18:37.040 --> 0:18:39.240 sectors that are really struggling. So it's trying to sort 0:18:39.240 --> 0:18:41.480 of rain in a race towards the bottom when it 0:18:41.520 --> 0:18:43.720 comes to pricing across a lot of these different sectors, 0:18:43.720 --> 0:18:46.640 and it's also trying to dampen some of the incentives 0:18:46.680 --> 0:18:49.879 for exporting and trying to get companies to sort of 0:18:49.920 --> 0:18:53.480 wind down some of their older manufacturing facilities. Because it 0:18:53.520 --> 0:18:57.280 sees that as being you know, pretty important when it 0:18:57.280 --> 0:18:59.680 comes to these sector's health. And that's something that we've 0:18:59.680 --> 0:19:02.320 covered in lot of detail in the report our Energy 0:19:03.440 --> 0:19:06.680 our Energy Transition Supply Chains Outlook report that just came 0:19:06.720 --> 0:19:07.240 out today. 0:19:07.600 --> 0:19:10.320 And so as your final question, this is monthly data. 0:19:10.680 --> 0:19:12.080 Next month there's going to be a new set of 0:19:12.160 --> 0:19:14.720 data coming out from China. What is the one key 0:19:14.800 --> 0:19:16.880 figure that you are most excited to see. 0:19:17.240 --> 0:19:20.960 I'm interested in having a couple of months of data 0:19:21.200 --> 0:19:24.440 to now start to look for correlations between growth in 0:19:24.560 --> 0:19:32.199 imports let's say, of solar for example, and then reliance 0:19:32.840 --> 0:19:37.639 of a given country's power sector on imported fossil fuels. 0:19:37.640 --> 0:19:39.080 And that's something that we can chart in a number 0:19:39.119 --> 0:19:42.000 of different ways, and that would be really interesting because 0:19:42.040 --> 0:19:43.679