China’s Next Inflation Problem: Energy?

MAKE MONEY BLOG$;China’s inflation problem isn’t going away, at least not yet. J.P.Morganexpects the country’s consumer price index (CPI) to peak in the second-half of 2011. The investment bank says the pressures behind China’s rising prices are shifting away from food and more towards energy, and the rising price of oil is currently the greatest source of concern.

“China is one of the largest importers of crude oil in the world. In 2010 alone, the total import value reached $135 billion. On average, the country imported 4.8 million barrels a day, said Jing Ulrich, J.P. Morgan’s managing director and chairman of global markets, China. Jing was ranked 81st on the latest Forbes Word’s Most Powerful Women list.

“Currently, Brent crude is around $115 a barrel. We think Brent crude could reach $120 to $130 in the next couple of months,” she said. “We are focusing a lot on China’s development plan in the energy sector.”

Fossil fuels account for around 70% of China’s energy mix. The 12th Five-Year Plan recently unveiled by the National People’s Congress pledges to develop more alternative sources of energy like wind, hydro and nuclear, but the country’s energy-intensive growth continues to hinder progress. J.P. Morgan estimates that alternative energy sources will account for roughly one-third of the China’s electricity generating capacity by 2015.

Jing said, “The tragic incidents in Japan are causing the Chinese leadership to rethink their nuclear strategy.” She believes they’re focusing a lot more on safety rather than speed in the development of the country’s nuclear power industry.

China currently has 13 nuclear power stations in operation, while another 27 plants are under construction. Beijing had suspended the approval of all new nuclear power projects, and ordered a nationwide inspection of all existing reactors and sites two weeks ago.

Source: forbes.com

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