In the News (pipelines)

Here we have some pipeline politics in the news. Now, in my biased opinion, Keystone XL is a no brainer. That Obama can really only say no to the border crossing (wouldn't it be hilarious to see a pipeline up to the border on both sides, and a bunch of rail-cars running non-stop across the border?), the refinery complex on the gulf coast wants our oil, we want to sell our oil, and MOST IMPORTANTLY citizens of both our countries continue to want to consume oil products, requires us to get on with it.

Now of course that all rests on the assumption that the Oil Sands (or Tar Sands, it's all just symantics) aren't the worst thing in the world. Which is a whole 'nother conversation.

China's reforms: No need to rush!

With the Plenum approaching, and what seems like an important juncture China's at, I have been spending a fair bit of time thinking about what sort of reforms I am hoping to see. In this post I had suggested fairly scaled back reform focused on reducing the effective tax on savers (via interest rate liberalization) and an expansion of credit for smaller independent firms.

I'll stick with that, but I'm reading many new stories and posts suggesting that this Plenum may introduce much more significant and transformational reforms:

China leader promises 'unprecedented' reforms at key Party meeting (Reuters):

A couple of news stories that caught my eye...

Russia - China Import/Export Math (WSJ):

Last week China and Russia announced a JV deal between CNPC and Rosneft to expand E&P in Eastern Siberia. But the volume of supply deals is outlined here:

The two countries have signed agreements that would increase the amount of oil flowing from Russia to China by around 700,000 barrels a day from 300,000 barrels a day currently, prompting oil watchers to ask where the additional supply will come from.

Most of the oil fields in Russia’s biggest production center, Western Siberia, which accounts for around two-thirds of its output, are more than three decades old and in decline.

And the prognosis isn’t promising. Mr. Khaziev noted that no new giant fields have been discovered in Russia since the 1980s, and unless there are such discoveries, “it will be very difficult to replace the declines in production.” The country’s crude-oil output will peak in 2018-2019, by his estimate.

Another option is to reallocate. According to the IEA, Russia exported around 4.8 million barrels a day of crude oil in 2011, with nearly four-fifths destined for Europe and around one-sixth for Asia.

The Third Plenum

After a year filled with headline grabbing events like the leadership transition, and the Bo Xilai trail, the event that has historically made the biggest news is still to come.

The Chinese Central Committee (CC) holds congress once every five years. Between these meetings they have plenary sessions (plenums). Historically, the third plenum has facilitated the unveiling of significant economic directives. Most famous was Deng Xiaoping's "seeking truth from facts" approach over the Huo Guofeng's "two whatevers" (referring to compete deference to the words and deeds of Mao). While this was a culmination of events, the political room created by Deng's acceptance of an approach not clearly defined in communist ideology set the ball in motion. The third plenum of the 12th CC saw Hu Yaobang bring some small scale reform (that moved away from collectivism) that had proved effective in rural areas to urban areas. And in 1993 the third plenum of the 14th CC approved Deng's "Socialist with Chinese Characteristics". These are the broad strokes that started and guided the Chinese down their current path.

What might this third plenum of the 18th CC bring?

The lists are long with many suggestions and imperatives. The mood seems to place a fair bit of urgency on these reforms with the expectations that the plenum will prove to be a bit of a let down. Some examples (here, here, here).

China: A place like no other

Chinese Comparisons:

Any speculation on the future direction of an economy will be fraught with oversimplifications, unrealistic assumptions and perhaps, straight up guesses. But when it comes to China we’re really grasping at straws. Here’s why.

The sheer magnitude: It’s hard to grasp quite how many people live in China. Here’s a quote from James Fallows' excellent book, ChinaAirborne (quoting Thomas P.M. Barnett):

“The United States and China have about the same geographic area, although China’s mountainous and desert expanses mean that it has significantly less arable land. But China’s population is about four times larger then America’s. To match the challenge of human scale that confronts China, the United States would have to bring in every person from Mexico, more then 110 million in all, plus the 200 million people in Brazil. Then it would also need the entire population of Cuba, and the rest of the Caribbean nations, plus Canada, Colombia, and every other country in North and South America. After doing all that, it would be up to around one billion people. IF it then also added the entire population of Nigeria, some 155 million, and every person from the hyper-crowded islands of Japan, 125 million more, it would have as many people as China – almost.”