Global Energy Internet Benefits Now and in the Long Run

Qu Hongbin is the Chief Economist and Managing Director of HSBC Greater China. He joined HSBC in 2002 and has many years of experience in international financial markets. Before joining HSBC, he worked at Bank of China International and other institutions.

Reporter: On September 26, 2015, President Xi Jinping proposed at the United Nations Development Summit to explore the construction of a global energy internet. How do you understand the global energy internet?

Qu Hongbin: From an economic perspective, the trend of economic globalization is becoming more obvious, and the economic integration between countries is becoming closer and closer. In this context, the interconnection between global energy and resources is more important, and this interconnection is conducive to the optimal allocation of resources. Compared with demand, global energy resources are limited. At present, the challenge of energy and environment has become a global issue.

From a global perspective, improving the efficiency of resource allocation and utilization is not only beneficial to energy supply and meeting energy demand at the micro level, but also beneficial to the sustainable development of the world as a whole. There are many ways to achieve this kind of interconnection. One is to further improve the market system. Another very important aspect is the interconnection of information and the establishment of a platform for information sharing and exchange. This kind of interconnection requires the support of major technologies.

In the process of energy development in human society, all previous energy revolutions have relied on major breakthroughs in energy technology. The Global Energy Internet proposed by President Xi Jinping is a platform for solving energy development issues. Through global energy interconnection, global energy resources can be better allocated and utilized. This has global and strategic significance for implementing national strategies, promoting energy revolution, responding to climate change, and achieving coordinated development of the world economy, society, and environment.

Reporter: At present, China's economy has entered a new normal. In your article, you analyzed that the biggest risk to China's economy this year is deflation. Based on the present and looking to the future, what impact do you think the construction of a global energy internet will have on economic and social development?

Qu Hongbin: Given that both growth and inflation have fallen to a six-year low, deflation has become the main macro risk facing my country. I believe that strengthening investment in infrastructure projects is one of the important measures to combat deflation. The Global Energy Internet covers the world's energy infrastructure, involving power supply, power grid, equipment, scientific research, information and other fields. It has a large investment demand, a long industrial chain and strong driving force, and has a strong driving effect on economic growth.

Therefore, the concept of global energy internet is beneficial both in the present and in the long run, and is closely related to people's livelihood, which is a very good investment area. The central government has put forward the five development concepts of "innovation, coordination, green development, openness and sharing", and building a global energy internet is a part of green development.

At present, my country's economic development has entered a new normal, and private investment desire is relatively low. This is a great opportunity to increase green investment. On the one hand, green development is an inevitable trend, and green investment is imperative. On the other hand, current economic development also requires the expansion of effective supply and effective demand. From the perspective of both supply and demand, green investment should be increased. In the short term, it can increase effective demand, which is conducive to fighting deflation. In the medium and long term, it can optimize the energy supply structure and be conducive to China's future sustainable development. This is what I just said, which is both beneficial in the present and in the long run, and can kill two birds with one stone.

Reporter: You mentioned earlier that increasing green investment is mainly based on expanding private investment?

Qu Hongbin: Currently, there is a huge demand for green investment, but how to meet this demand requires careful consideration. The payback period of green energy investment is relatively long. Generally, short-term investment projects will naturally be determined by the market, and private sector investment will fully meet investment needs. However, green investment is different. Its investment payback period is relatively long, and it has the characteristics of semi-public investment, and there are some market failures. At this time, the government should play a role to make up for this market failure, such as encouraging green investment and private capital intervention through various incentive policies such as taxation. The economic means or incentive policies I mentioned are not completely taken care of by the government. More importantly, the government encourages and guides more social capital to invest spontaneously through incentive mechanisms. Therefore, the key point is to be more scientific in the design of incentive mechanisms. In this regard, we can learn from the mature experience of some developed countries, such as the issuance of green bonds, which can make the development of green energy more attractive.

Reporter: We noticed that you are also paying attention to the high-end equipment manufacturing industry. How do you view the space and opportunities that building a global energy Internet will provide for China's equipment manufacturing industry, the Internet, clean energy and other related emerging industries?

Qu Hongbin: From a macro perspective, any investment is not just about increasing costs. Behind every investment, new opportunities and new demands can be generated. For example, the development and prosperity of the real estate industry in the past has driven the development of mid- and downstream industries such as steel, cement, and glass. In the same way, the development of the global energy Internet can also drive the development of related strategic emerging industries such as high-end equipment manufacturing, new energy, new materials, electric vehicles, energy conservation and environmental protection, and new generation information technology. Moreover, these industries are relatively high-tech and can be said to be knowledge-intensive industries. This is also in line with my country's future development direction and has a significant role in promoting economic development, structural adjustment, and industrial upgrading.