A 5% growth rate for China this year is plausible, assuming a relatively stable global scenario.

The geopolitical landscape will be significant. For instance, Donald Trump’s policies, if extreme, could disrupt global trade and impact China’s economy. Still, the composition of growth in China is changing. China is emphasizing new energy manufacturing, such as electric vehicles (EVs), solar panels, and batteries, while traditional sectors like housing are underperforming. This shift is detrimental to oil demand. The EV sector is particularly transformative; sales rose by 35% in the first 11 months of last year. Such trends reduce gasoline consumption. Similarly, LNG trucks are gaining traction over diesel-powered ones. China’s oil imports fell by about 200, 000 b/d last year, and we don’t foresee a significant rebound under current trends.

Likely response to US tariffs?

Much of their preparation has likely focused on mitigating potential damage. I believe they’ll take a calculated and composed approach. For example, instead of imposing retaliatory tariffs, they might quietly discourage buying US goods, similar to how they handled Australian coal a few years ago. There wasn’t an official ban, but imports of Australian coal effectively ceased. China has multiple tools to respond, including leveraging its significant advantage in energy transition technologies like EVs and renewable energy. However, the big question is whether they can increase exports, particularly to the Global South, to offset potential losses in US trade. If things worsen, China could pull other levers, such as selling US Treasuries, though I believe they’ll aim to maintain stability and avoid escalating tensions.

How should Gulf oil producers prepare for China demand this year?

They underestimated China’s demand last year. China’s energy mix is changing and this shift, along with a preference for domestically sourced coal and cheaper imported coal, makes crude less critical for its energy needs. OPEC members need to rethink their strategies. While petrochemicals could become a growth area, I’m skeptical that demand for these products will offset declines in gasoline and diesel.