Dr. Michal Meidan is director at China Matters, an independent consultancy firm that advises investors and government officials on their China strategies, with particular emphasis on the politics of the Chinese energy sector. She is also an associate fellow at Chatham House in London. Previously, she has been a senior analyst at Eurasia Group and head of the Energy and Environment Program at the Asia Centre of Sciences Po in Paris. Dr. Meidan holds a Ph.D in Political Science and East Asian Studies from Sciences Po.
How did you become interested in studying China, and in particular, China’s energy sector?
I can’t say it was a thought-out plan to study China before it became a big trend. It was more of an accidental choice. I wanted to study languages and culture, and Asian languages were interesting to me. They were always appealing. It was a pick between Chinese and Japanese, and I pretty randomly picked Chinese.
The choice of energy also sort of came up during my studies. As I was doing my MA in Asian studies and political studies (in France!), I wanted to bring the Middle East, where I come from, and China together. That was how I got into the politics, and geopolitics of energy.
Can you talk a little about the lens that geopolitics brings to political analysis?
I think it’s more about what political analysis brings to geopolitics. Geopolitics comes into the discussion a lot, because with China’s growing global footprint you look at what it’s doing overseas and you immediately get this image of China, Inc., the big Chinese state firms guided by the government, going out to pursue their energy interests.
I started off looking at geopolitics and what these energy relations meant for Chinese foreign policy, but then I came to the conclusion that you actually had to look within China. It was more about the politics than the geopolitics. Because in reality, the geopolitics are the outcome of a balance of powers between corporate and government stakeholders.
The geopolitical trends are fascinating in how they shape Chinese foreign policy and how China thinks about its role in the world. What I’ve really enjoyed about working on the politics and geopolitics of energy is that it is a microcosm of distinct policy choices: It’s about, especially these days, the anticorruption agenda and political reform, and China’s political trajectory. It’s about state-owned enterprise reform, environmental policy. To a certain degree it’s also about social policy: if you look at the pricing of commodities and energy resources, there’s a social policy aspect in there. And obviously it’s about foreign policy, when you look at the international ramifications, and how China is thinking about interacting with other corporate, financial, and state players.
China Matters, the consultancy you direct, offers bespoke political and economic analysis to investors and government officials. What kinds of clients do you work with or questions do you seek to answer?
Our clients have a very clear exposure to the energy space. They’re government, corporate, financial clients and traders. China Matters helps them cut through a lot of the noise, because there is a lot of analysis out there on China, but not all the analysis is specifically useful to them. So we cut through that chatter and provide them what they need to know on the energy sector. We offer bespoke reports that brief them on the macro economic and political environment in which they operate and on political and regulatory developments in the energy sector.
We also have a weekly publication that gives a very quick overview of the macroeconomic questions and how they impact energy supply and demand. A lot of clients care about how much oil China’s going to consume or how much gas its going to require, and whether that will be liquefied natural gas (LNG) or pipeline gas. That has ramifications for energy importers, but it also has implications for people who are invested in energy trade, from Qatar to Australia. The ramifications of China’s policy choices are huge.
We look at political questions such as the anticorruption campaign, which has been an important issue, because again that has targeted the oil and gas sector; it has targeted Shanxi, China’s biggest coal-producing province; it has targeted the power sector, which is gearing up for reform. Operating in that environment in China has become much more volatile these days, just because people are disappearing, or because are officials who are changing over positions. As somebody who is invested in China or exposed to China, you need to know what that means.
We also look every week at foreign policy. It can be anything from the South China Sea to Chinese investments in the Middle East, or China and Russia, of course, that’s been a huge question mark this year: what are the implications of the gas deal? How political is it? What are the commercial implications?
And then we also look at energy—mostly fossil fuels: oil, gas, and coal—both from a policy and political perspective. We monitor new regulations and analyze what they mean for our clients.
We also have Deep Dives, which are longer pieces that bring together the political perspective, the policy perspective, and industry insight.
You’ve done a lot of work on China’s energy security and its energy imports. What are some of the most important ways you believe China will move to meet its growing energy needs and supply its reserves? Have your views on the topic evolved since you began studying it?
There’s a perception that China is very strategic about its oil imports and overseas acquisitions: That its overseas investments were aimed at securing oil supplies and that the military and naval expansion was coordinated with it, aimed at securing the supply route.
When I started off looking at energy security quite a while ago, decision-makers in China were talking about energy security in those terms. But the corporate actors, the traders, were looking at the market. They were looking at what made sense, what could be bought and stored cheaply, and whether the resources were adapted to the domestic refining systems. So there was a pretty clear disconnect between the decision-making circles and the commercial circles. And it was much closer to the West than a lot of observers thought—you had this image again of China, Inc.—but actually it was much more fragmented. You had interest groups and lobbyists, very similar to what you would see in the West.
Now under Xi Jinping, it has actually changed quite a lot. And over time a more coordinated strategy did develop, especially in the loans-for-oil: China Development Bank granted loans that are repaid with oil, and that gives Chinese oil and gas companies preferential access to upstream stakes; the China-Russia deal was a purely political deal, even though it’s still not clear that it’s fully aligned with the commercial reality. Over the past two decades, China’s overseas energy strategy has been correlated to the relationship between the corporate stakeholders and the government.
That has constantly surprised me: when I thought it was very much market-oriented, then I’d get an example of how it was political; and when I would get to thinking that it was very political and strategic, I’d see an example of how the rationale was commercial.
Can you tell us more about the misalignment of political ends and commercial means in the China-Russia deal?
It’s not clear that the prices are right, especially now that global gas prices are falling. If the Russians make huge concessions on the prices, then they won’t be able to execute the projects, especially if you consider Western sanctions that make access to financing and technology more difficult. They won’t necessarily have the money to drill for the gas. The Chinese can invest and help them do that, but the Russians over the last few years have been reluctant to give the Chinese access to their oil and gas. Now, with sanctions and Putin’s stance toward the West, they’ll have to integrate the Chinese more closely. I don’t think that the Russians are too thrilled about that. The bilateral relationship between China and Russia has certainly improved under Xi Jinping but that doesn’t mean that all the past mistrust has been patched over, or that either side is willing to bind itself to the other more deeply.
As global market prices are adjusting to new supply and demand balances, and China tries to tap its domestic shale resources, it’s still unclear what will make the most economic sense in five to seven years, and whether Russian pipeline gas with the constraints of supplying it and the rising costs to produce it will be more competitive than LNG or domestic Chinese production.
What advice can you offer aspiring China watchers interested in energy and geopolitics?
Learn Chinese—speak it and read it well, and spend time in China. Try to work in the industry, because there are too many reports that look at geopolitics without understanding the commercial dynamics. It can also be useful to look at energy questions elsewhere: in the US, the UK, and Europe, to get a comparative perspective.
Interview by Zoe Grueskin