Think that’s an overstatement?
The U.S. Energy Information Administration (EIA) just announced that China has become the world’s second largest liquefied natural gas (LNG) importer. Out of respect for the just-concluded Winter Olympics, let’s say China is the LNG silver medal winner—especially since China just edged out South Korea, which now takes the bronze.
The gold medal goes to Japan, and India, in fourth place, receives an honorable mention.
Why is China’s LNG silver medal victory so important?
First, international trade tends to make countries friends, not enemies. If two countries are heavily engaged in mutually beneficial, voluntary trade they want to find solutions to any issues that arise between them.
China has been straining some of its international relationships lately with its efforts to expand in the South China Sea; covert, if not overt, support for North Korea, etc.
The good news is that in the closing months of 2017 China became the second largest destination for U.S. LNG exports, according to the EIA. South Korea is first, but not by much.*
The more China depends on the U.S. for its growing LNG needs, the more sway the U.S. could have in diplomatic negotiations with China.
Second, when China buys U.S. LNG, that reduces the U.S. trade deficit with China. Now, most economists don’t put much stock in international trade deficits, but President Trump does. Reducing the U.S. trade deficit with China could remove some of the pressure the president feels to impose tariffs on Chinese imports.
Third, China’s increased LNG imports could replace coal for electricity generation. China is the world’s largest carbon dioxide emitter, in part because it has relied heavily on coal for electricity generation. Natural gas burns much cleaner, and thanks to innovative U.S. drilling techniques, it is both abundant and cheap.
For those concerned about CO2 emissions, China’s importing of natural gas, especially if it is replacing coal in power generation, should be welcomed.
While LNG exports began under Barack Obama, his administration slow-walked efforts to build U.S. LNG export terminals. The Trump administration has reversed that policy, helping the U.S. energy sector to become a force for peace and a cleaner environment.
*Canada and Mexico import much more natural gas from the U.S., but it travels by pipeline, not LNG.