The Peter Zeihan Podcast Series - What Is the Future of Chinese Expansion and Energy? || Ask Peter Zeihan

Episode Date: May 23, 2024

We've got some more interview style questions for you today! We'll be focusing on China, specifically looking at the potential for Chinese energy independence and if any countries surrounding China should be worried about an invasion/resource grab. Full Newsletter: https://mailchi.mp/zeihan/what-is-the-future-of-chinese-expansion-and-energy

On paper, China has considerable shale oil deposits. Why not the Chinese, especially given their history of massive state expenditure, doing more of their shale deposits, especially contrasted with their massive energy import dependence. Technically, China has the world's second largest shale deposits. So potentially it's very, very cool. And it's certainly the failure hasn't been from a lack of trying. The problem is it's not marine shale. So marine shale is shale that comes out of former ocean beds, so salt water pressure, that sort of thing. Most of China's shales are, I can't pronounce the word, all of some lacustrain.

Lachistrain, yeah. Thank you. We're lakebed shells. So a lot more debris in them, if you will. And as a result, they're kind of waxy. Well, when you frack a maritime shale, it's hard and it cracks that you get the energy out. If you frack wax, it just kind of washes around a little bit and nothing happens. So it turns out that even if the petroleum density in China's shales are the same as American shales, they can only get about 5% the energy out for every dollar that they put into the effort, even assuming that they were really good at the technology and they're at best so-so.

So only about 5% of the wells that the Chinese have drilled at this point, even remotely approach break-even. And all of those shales are in Seshawan. And Sichuan has in the past been a secessionist region in China. So the last thing that the hypercentralized communist party is China is going to do is to exploit a new type of energy in a part of the country that might one day go their runway. And even within that, the volume that they've been able to get, Cheshawin does not seem to justify a large scale expenditure. So they've steadily revised down their estimates. I think they're now down to less than 2% of what they thought they were to get 15 years ago. The thing for most people who follow you regularly or read the news, it's no surprise that

mainland China has its sights on, if one day possible, securing the island of Taiwan, bringing one of its views in Eric Robbins back under the influence of the central government. Taiwan by itself though is a relatively resource poor place. When we look at China's import needs, their economic development plans, there are neighboring readers closer to the home, Mongolia, parts of Central Asia, parts of Southern Russia, that have a lot of the resources that they're importing anyways. Is there a risk to these areas of a future Chinese land grab, occupation, cross-border conflict, kind of like you see between Indian China and the Himalayas, but obviously without a mountain range in between them? I think there's a lot of risk

but not necessarily from China. China can't go north. The Russians have made that very clear. They don't have the Navy to conquer a place like Japan or the Philippines or Indonesia. Taiwan is theoretically a possibility, but if they pick a fight over that, the chances of another naval power interrupting their energy and their food inflows and their fertilized exports would destroy China's an industrialized state. They can't go meaningfully southwest because of the Himalayas.

And if they go south, you know, they tried that in 79 with Vietnam and they got their ass handed to them just as much as we did. So there's, there's nowhere really for China to go and break a country in a meaningful way. I mean, there's Mongolia, but special case, there's not enough people there for really the matter and they're not a huge player of international markets. But I'm more concerned that if you remove China from the equation and Chinese demand for a lot of these minerals crash, you get two things going on at once. Number one, you got a gutting of the income that a lot of these mid-tier countries relying on to do everything that they do. And then number two, it's unclear where the United States is going to be a lot more narcissistic and focused on its own industrialization will need all of them.

And we're certainly going to preference specific partners like the Philippines, like Canada, like Mexico, like Australia, like Chile. And so if you're not on that short list where you're going to get under the American security or at worst economic umbrella, you need to find a new, for lack of a better word, daddy. And if it can't be China and it's not going to be the United States, your list of other options have baggage. Japan might be really to get into business. And if you're in East Asia, you remember how that went the last time. It's not that I think that the Japanese are looking to go bonsai on everybody again, but it's going to be lingering there in the back of your mind. As for the other

countries that have rejection power, Turkey, Britain, France, you know, these are all countries with a lot of baggage when it comes to former colonial relationships. Now, I wouldn't expect it's to be a neo-colonial conquering because the power difference between these states and their former colonies is not nearly as lopsided as it used to be. I think it would be more of a partnership. But everyone is going to have to find a friend and you're going to have to keep the trend interested and you're going to have to negotiate every step of that process as you go. It's a much more complex world than what we had during the Cold War, even during the colonial era. It's going to be messy and not everyone is going to be able to.