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Energy and Finance: Global Challenges and Global „Game Changers“

German Week at Tongji University Shanghai

As part of the German Week at Tongji-University, KAS Shanghai cooperated with Global Bridges to host a public panel discussing the topic "Energy and Finance: Global Challenges and Global Game Changers".

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Energy security has increasingly evolved into a global "Game Changer". Europe, China and the USA react to these challenges with new geo-strategic concepts.

Dr. Hans ALBRECHT, chairman of Global Bridges e.V., began his speech by illustrating the energy-political developments in China. While in 2000 China only consumed about half as much energy as the USA, in 2014 China had surpassed the consumption of the world’s biggest economy by 4%. However, the per-capita consumption still amounts to just one tenth of the equivalent figures in the US and some European countries. As Albrecht pointed out, the Chinese people had the natural right to improve their standard of living, in turn leading to an even further increase in energy consumption in the future. Yet the planet can’t bear such a massive increase of energy consumption in developing and emerging nations that is mostly fueled by fossil energy sources. Thus it would be necessary to promote renewable energy sources and to increase energy efficiency. In his eyes, the German energy transition (“Energiewende”) is both a challenge and a chance to lead the example of how to transform into a post-fossil order.

Prof. YU Hongyuan, Deputy Director of the Shanghai-based Institute for Comparative Politics and Public Policy, introduced Chinese energy politics by showcasing the changing positions in power and markets, the creation of new norms, resource nationalism and questions regarding transport. China has become one of the biggest importers of oil world-wide, increasingly ousting the USA and Europe from global markets. China, he prospects, will consolidate its bargaining power in the global energy system in the future by further expanding its network of gas pipelines, for example to Russia and Central Asia. However, China’s role in the existing global energy governance system remains insignificant. To little surprise, China’s engagement in the global energy system is going to increase in the future: 1.) energy is a key element in its new security concept; 2.) China is directly or indirectly affected by all global conflicts about energy; 3.) China influences the global energy market massively due to its demand.

Dr. WANG Run, Hubei University and the Institute of Urban Environment at the Chinese Academy of Sciences, stressed in his speech the importance of a secured energy supply - including nuclear energy - for a sustainable development in China. He compared two similar Chinese regions - Hubei and Fujian - in regard of (future) energy consumption. Massive developmental differences are partly due to their specific energy supply systems. In Fujian four nuclear power plants are already connected to the energy grid, while in Hubei not a single one has even been built. Dr. Wang's therefore concludes that a region lacking natural resources like Hubei is highly dependent on low-carbon energy production using nuclear power plants, if it wants to develop.

The ongoing crisis in the Euro-Zone shows, that the structural deficits of the global finance system are not yet overcome. The second panel thus discussed the question whether the time’s ripe for a reformed Bretton Woods system. In 1944, Bretton Woods was the birth place of today’s world financial order that should govern the world after the Great Depression of the 1930s and World War II.

Dr. Thomas BSCHER, Managing Director, Thomas Bscher Beteiligungsgesellschaft mbH, introduced the old Bretton-Woods-System from 1944. At that time, exchange rates for all currencies where tied to the US Dollar and the Dollar finally was tied to Washington’s gold reserves. The system eventually failed in the 1970s, because currencies of prospering nations like Japan and Germany reevaluated quickly, forcing exchange rates to fluctuate. When restructuring the global exchange rate regime, Bscher concluded, developing countries’ interests needed to be considered more thoroughly.

Prof. PAN Rui, Center for American Studies at Fudan University, shed a light on the relationship between China and existing global economic regimes, like the World Bank or the IMF. Although China joined most institutions after 1945, the country to date is underrepresented. Pan criticized that, even though emerging economies play an increasingly pivotal role in sustaining economic growth, reform within the governing institutions has been scarce. It is concerning that the USA cooperates with the EU, Switzerland and Canada to establish a new global currency system, letting China and other emerging countries aside. Besides the progress in signing free trade agreements under the WTO, disadvantages for the BRICS remain in trade as well, e.g. the low consumer protection standards or the further opening of the agriculture or finance sector. Professor Pan identifies seven achievements crucial for the future development: 1.) expansion of the G20 as the main platform for multilateral cooperation; 2.) win-win-situation for all parties when signing free trade agreements under the WTO; 3.) reforms in the global currency system and its institutions; 4.) more Chinese cooperation and free trade with regional organizations (ASEAN); 5.) faster expansion of regional currency organizations like the Asian Development Bank; 6.) improvement of Chinese resources to provide public goods and cope with their international responsibilities; 7.) free convertibility of the Renminbi.

The following discussion’s hot topics were China’s air pollution and the international finance system. Prof. YU Hongyuan explained that, while talking about environmental issues in China, climate change is valued much higher than domestic air pollution. According to him, the Chinese government fears instability when economic growth and air pollution get out of balance. However, while the Chinese economy last year grew by 7.5%, energy production only increased by 4%, which Yu takes as a sign for a more sustainable and resource-efficient growth.

Other contributions to the discussions dealt with the design of a future Bretton Woods system. Dr. Rainer STINNER, a liberal democrat (FDP) and former member of the German federal parliament, called the term misleading. He noted that today not a single world power leads the way, rather that there are two reserve currencies (the Dollar and the Euro) and that the RMB may join as a third one. Reforms of the existing international economic organizations are necessary, so they won’t lose their influence by becoming irrelevant. There are great mutual dependences between the US, China and Europe, and that is why they have to work together to find a solution

Events within the frameworks of the annually staged "German Week" at the Tongji University show the broad German-Chinese cooperation in Shanghai and convey an impressive image of a modern Germany.

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Tim Wenniges


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