The East Sea: North Asian Energy Hub?

Qingdao

Ximeng-Wuxi, 2018 Basin Pusan

Theoretical Median Cheju Do Jiuquan-, 2016 (South ) Fukuoka

Shaanxi-Jiangsu, 2016

Socotra Rock Jiangsu Wuxi Yacheng Cheju Kagoshima Basin Theoretical Median Japan- Xiangjiaba-, 2010 JDA

Jingping-Sunan, 2012 Longjing

Pingbei

Haijiao China- Pinghu Japan Field Yuquan Joint Development Zone Xihu (2008) Lishui Field Theoretical Median Daiyos/Senkakus Okinawa

Conoco- Philips Senkaku/Diaoyutai Islands Tachao Basin

Tainam Basin

Gaolan Terminal Liwan 3-1 Panyu Panyu 4-1 3-2 Panyu 3-1

1 Bullet Points:

By 2050, China, Japan and South Korea could be connected by an energy infrastructure. “We need to start building the infrastructure to meet the deadlines that nature will impose on us.” Benefits: Tim Flannery Environmental Author 1. It would raise cross-border energy trade. This would increase Australian Of the Year (2007) efficiency, lower prices and raise supply security.Together, the three represent a huge market.

2. Each country could serve as a source of reserve supply for the other two, given asynchronous energy demand profiles. Northern China’s peak demand is for winter heating. Japan and South Korea’s peak demand is for summer air conditioning. Sharing seasonally- idled capacity benefits all three.

3. Geopolitical benefits would ensue from cooperative infrastructure.- This would reduce the risk of conflict over territorial disputes.

4. Extending infrastructure penetration into the East China Sea would speed development of new energy sources. These could include including wind power, tidal power and ocean thermal energy conversion and solar. These are already being developed.

5. The North Sea could be a template. The East China Sea could then become template for the Timor Sea and the Northeastern United States.

2 Grenatec’s vision of a Pan-Asian Energy Infrastructure advocates that Asia:

# 1: Acknowledge The Infrastructure/Climate Change Nexus 1. ‘Asia’ (ie China, Japan, South Korea, the ASEAN states, Australia) needs trillions of dollars of new energy, transport and telecommunications infrastructure.

2. As it becomes the world’s largest regional economy, Asia holds the key to minimizing destructive global climate change.

# 2: Realize The Interconnection Potential 1. Asia already has interconnection-friendly large-scale infrastructure projects planned or underway. These include:

China: Nationwide high-voltage direct current power lines (electricity). ASEAN: Trans-ASEAN Gas Pipeline (natural gas). ASEAN: Trans-ASEAN Electricity Grid (electricity). Indonesia: Palapa Ring (telecommunications). Asia: Southeast East Japan Cable (telecommunications). Australia: National Broadband Network. Australia: LNG export buildout. # 3: Seize The Initiative 1. Asia should enhance interconnection between the infrastructure projects above and new ones yet to be built.

2. Asia should ‘bundle’ new power line, natural gas and fiber optic infrastructures to create more flexible cross-border energy and information networks. Building this network would require annual investment of 1-2% of Asian GDP over 40 years. # 4: Reap The Benefits 1. A Pan-Asian Energy Infrastructure would generate huge efficiencies.

These include: 1. Lower cost power. 2. Increased trade. 3. More competitive markets. 4. Increased Innovation. 5. Reduced geopolitical tension over energy resources. 6. Reduced regional carbon emissions. 7. Increased economic growth, reduced poverty.

3 Disclaimer The research in this report is derived from sources believed reliable. However, its accuracy is not and cannot be guaranteed.

Readers must judge the veracity of this report’s contents independently. Readers must do their own research before drawing any conclusions.

Grenatec does not guarantee the accuracy of anything in this report.

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4 Introduction The East China Sea borders Asia’s three largest economies: China, Japan and South Korea.

All three want increased trade. None of the three wants territorial trouble. Everyone can gain from working together.

The East China Sea and the North Sea have a lot in common. They’re roughly the same size. Both have oil and natural gas resources. Both are windy.

China, South Korea and Japan could learn from the North Sea’s efforts to develop cross-border energy links and deepen multilateral energy market integration.

As time goes on, these ideas will become increasingly commonsense.

Stewart Taggart Principal, Grenatec

5 EXECUTIVE SUMMARY East China Sea Cross-border energy market integration could transform the East China Sea into a regional energy hub.

The template could be the North Sea -- an ocean area of roughly equal size.

In the North Sea, natural gas pipelines connect Norway to the UK. High- capacity power lines now connect Norway to Holland. Fiber optic cables are everywhere.

The two maps below display the East China Sea and the North Sea at equal scale.

At left is existing and proposed offshore pipeline and power line infrastructure in the North Sea. At right is Grenatec’s ‘bundled’ pipeline and power line infrastructure proposed for the East China Sea. The North Sea The East China Sea

Seoul 0 kilometers 500 Grid (Existing)

Grid (New) Shetland Ximeng-Wuxi, 2018 Islands Yellow Sea Wind Sweden Basin Pusan Orkney Norway Islands

Cheju Do Jiuquan-Jiangsu, 2016 (South Korea) Fukuoka

Shaanxi-Jiangsu, 2016 Scotland Jiangsu Denmark Wuxi Yacheng Cheju Kagoshima Shanghai Basin Xiangjiaba-Shanghai, 2010

Jingping-Sunan, 2012 Longjing Gas Ireland Germany Pingbei Wind Haijiao United Pinghu Poland Field Yuquan Ocean Kingdom Netherlands Xihu

Grid (Existing) BelgiumBelgium Grid (New) Natural Gas (Existing) France ‘Bundled’ HVDC/ Natural Gas/ Fiber Optic (New)

A dense network of power lines and gas An efficient ‘bundled’ infrastructure could pipelines is planned for the North Sea. cross the East China Sea.

Grenatec’s proposed East China Sea infrastructure would head east from Shanghai. It would then follow the territorial median lines between China, Japan and South Korea.

East of South Korea’s Cheju do Island, it would then split into forks headed to Pusan, South Korea and Fukuoka, Japan. The East China Sea: Energy Hub? Offshore territorial spats between China, Japan and South Korea now dominate headlines about the East China Sea.

This obscures more positive news about cooperation.

For instance, Japan and South Korea have had a Joint Development Area in the East China Sea for decades now. In 2012, China and Japan agreed to

6 negotiate an adjacent one.

In addition, China, Japan and South Korea have agreed to negotiate a free trade agreement.

A free trade agreement coupled with expanding joint development areas could open the way for collective development of a common-carrier energy and data infrastructure across the East China Sea. All three countries would gain.

For China, it would enhance redundancy in a domestic energy network reliant on West-East and North South domestic energy transfers.

For Japan, it would reduce vulnerability to energy supply disruption. This vulnerability was brutally illustrated by the 2012 Fukushima earthquake and tsunami.

For South Korea, it would create a ‘demand-pull’ opportunity to develop and export wave and tidal energy. South Korea has targeted ocean energy as a strategic domestic technology to develop.

For all three countries, an East China Sea energy infrastructure would lay the foundation for energy market innovation. The result would be a virtuous circle of wealth creation, reduced greenhouse gas emissions and more stable international economic relations. Oil and Gas The East China Sea may hold 60-100 million barrels of oil and 1-2 trillion cubic feet of natural gas, according to the US Energy Information Administration.1

The East China Sea Basin, is the biggest prospective oil and gas area the East China Sea lies -- roughly -- midway between Japan, China and South Korea. East China Sea Gas Fields

Beijing

Bohai Basin Seoul

Yellow Sea Basin Tokyo

East China Sea Basin Gas 500 -k Shanghai Hydro Solar Grid (Existing) Geothermal Grid (New) Natural Gas (Existing) Wind Natural Gas (New) Biomass Fiber Optic (Existing) Fiber Optic (New) Ocean

The potentially oil and gas rich East China Sea Basin lies between China, Japan and South Korea. Source: Marine Policy, vol. 35 (2011), p. 27

1 “East China Sea: Background,” US Energy Information Administration, Sep 25, 2012

7 The East China Sea’s biggest piece of offshore energy delivery infrastructure is a 440-kilometer long oil and gas pipeline system connecting Shanghai to the Pinghu Field. Co-financed by Japan,2. it was built in the early 1980s. Territorial Issues The East China Sea’s festering territorial issues primarily revolve around China and Japan’s claims to Exclusive Economic Zones stretching 200 nautical miles from their respective land-based territory.

However, when countries lie closer together than 400 kilometers (allowing each a 200 kilometer EEZ), one solution has been to draw a ‘median’ halfway between them. South China Sea Median Lines

Tianjin Pyongyang

0 kms 250

Seoul

Qingdao

Yellow Sea Basin Pusan

Theoretical Median Osaka Cheju Do (South Korea) Fukuoka

Yacheng East China Shanghai Sea Basin Theoretical Median Kagoshima

Longjing Pinghu Field Pingbei

Haijiao

Yuquan

Xihu Okinawa Theoretical Median Trough

Respecting East China Sea median lines present a practical solution to festering territorial issues. Source: Marine Policy, vol. 35 (2011), p. 27

In recent years, this median line between Japan and China (and South Korea as well) has led to beneficial practical outcomes. Korea Japan Zone In 1974, South Korea and Japan agreed to a Joint Development Area in the East China Sea straddling the median line between Japan and South Korea.

The two countries have since drilled a series of exploratory oil and gas wells in the JDA. South Korea and China have been drilling separate wells in the area.

2 “East China Sea,” US Energy Information Administration, Sep 25, 2012

8 Bohai Japan-SouthBasin Korea Joint Development Area Seoul

Qingdao

Yellow Sea Basin Pusan

Theoretical Median Cheju Do (South Korea) Fukuoka

Jiangsu Wuxi Yacheng East China Kagoshima Shanghai Sea Basin Theoretical Median Japan-South Korea JDA

Longjing Gas

Pingbei

Haijiao China- Pinghu Japan Field Yuquan Joint Development Zone Xihu (2008) 0 kms 250 Korean-dirlled wells Grid (Existing)

Theoretical Median Natural Gas (Existing) Okinawa Senkaku/Diaoyutai Trough Islands

Taiwan Japan and South Korea share a Joint Development area east of the median line with China. Source: Marine Policy, vol. 35 (2011), p. 27

China-Japan Zone In 2008, China and Japan agreed to negotiate joint exploration for oil and “The two sides will, through 3 joint exploration, select by gas reserves in waters north of Taiwan. This area abuts an existing Joint mutual agreement areas for joint Development Area agreed between Japan and South Korea. development in the (East China Sea) under the principle of mutual Both China and Japan stress that benefit.” cooperation represents a practical for developing the resources of territorial Chinese Foreign Ministry, means pending final solution June 18, 2008 issues.

Elsewhere, Joint Development Areas have enabled neighboring countries to work together to develop offshore fields.Successful examples exist in offshore West Africa, the Middle East and elsewhere.

Should the Japan-South Korea or proposed Japan-China JDAs yield economic oil and gas supplies, they will need a route to market.

Given that the JDAs lie just south of the shortest route between Shanghai and the Japan’s island of Kyushu, a pipeline infrastructure could be built along the East China Sea median line. Spurs could be built as needed to other gas fields.

A gas pipeline network, therefore, could be the first step toward building subsequent infrastructure to trade electricity between the three markets and share spare capacity.

Over time, this infrastructure also could offer a route to market for more speculative energy sources such as ocean themal energy conversion

3 “China, Japan reach principled consensus on East China Sea issue,” ChinaView, June 8, 2008

9 (OTEC) and provide services to offshore aquaculture. Bohai Basin Japan-China-SK Seoul

Qingdao

Ximeng-Wuxi, 2018

Yellow Sea Basin Pusan

Theoretical Median Cheju Do Jiuquan-Jiangsu, 2016 (South Korea) Fukuoka

Shaanxi-Jiangsu, 2016

Jiangsu Wuxi Yacheng East China Kagoshima Shanghai Sea Basin Theoretical Median Xiangjiaba-Shanghai, 2010 Japan-South Korea JDA

Jingping-Sunan, 2012 Longjing Gas

Pingbei

Haijiao China- Pinghu Japan Field Yuquan Joint Development Zone Xihu (2008) 0 kms 250 Korean-dirlled wells Grid (Existing)

Theoretical Median Grid (New) Natural Gas (Existing) Okinawa ‘Bundled’ HVDC/ Senkaku/Diaoyutai Trough Islands Natural Gas/

Taiwan Fiber Optic (New) An East China Sea gas pipeline could head East from Shanghai and then northeast along the China-Japan-South Korea median lines. Source: Marine Policy, vol. 35 (2011), p. 27

East of the South Korean island of Cheju Do, the line could split off to Pusan, South Korea and Fukuoka, Japan. This would have the advantage of skirting unresolved territorial issues -- as the JDAs themselves do -- while enabling construction of infrastructure and exploitation of resources.

For China and Japan, it would provide a larger infrastructure through which any finds in their proposed joint development area could be shipped.

For Japan and South Korea, it would provide a trunkline for exploration and production in their Joint Development Area south of the median line. South Korea would gain the same benefits for its exploration areas north and east of its respective median lines with Japan and China.

For China, it would enable pipeline spurs to be potentially laid down to other fields surrounding the Pinghu oil and gas field, pipelines which Japan helped build. Renewable Energy Resources The East China Sea has large renewable energy resources that an comprehensive, cross-sea electricity and natural gas infrastructure would help access.

China has wind resources along its east coast, while both Japan and South Korea have wind resources along their west coasts. All three countries are developing these.

10 South Korea has moved forcefully into developing the technology with the aim of becoming a world leader. China also has experimented with tidal power near Shanghai.

Japan is experimenting with offshore solar farms, or ocean-floating platforms crammed with solar photovoltaic panels. These could similarly benefit from interconnection with an energy infrastructure spanning the East China Sea.

Already, near-shore wind farms have been built just outside Shanghai and off of South Korea. These could march further out to sea in coming years, riding a wave of other infrastructure development such as natural gas pipelines and fiber optics.

In the North Sea, the idea has been that Norway’s hydro dams could become the ‘battery’ for Europe. In the East China Sea, it could be seafloor compressed air sacs4 or even stored hydro from China’s west.

Given this, the experience gained in developing the North Sea’s wind resources can provide a handy development template not only the East China Sea, but also for the Timor Sea TianjinEast China Sea Renewable Energy Projects

0 kms 250 “Until these (East China Seoul

Sea territorial) disputes are Qingdao

Ximeng-Wuxi, 2018 resolved, it is likely that the Sinwa, East China Sea Tidal will remain Pusan Jeollabukdo, underexplored and its energy Jeollanamdo Wind Osaka Jiuquan-Jiangsu, 2016 Cheju Do Fukuoka resources will not be fully (South Korea) developed.” Cheju Do, Shaanxi-Jiangsu, 2016 Wind Rduong, Fukuoka, Gas Wind US Energy Information Jiangsu Wind Wuxi Yacheng Wind Administration, Kagoshima Shanghai Kagoshima Ocean 2012 Jinshan, Wind, Solar Xiangjiaba-Shanghai, 2010 Wid

Jingping-Sunan, 2012 Grid (Existing) Grid (New) Natural Gas (Existing) Natural Gas (New) Fiber Optic (Existing) Fiber Optic (New)

A number of renewable energy projects already are under development in the East China Sea.

North Sea Similarities Roughly 700 kilometers separate Shanghai from Japan’s island of Kyushu and South Korea’s southeastern coast. That’s roughly the same distance as between Aberdeen, Scotland and southern Norway or London and Copenhagen, Denmark

4 “Compressed air energy storage has bags of potential,” The Engineer-UK, April, 7, 2011

11 Comparative Distances: East China Sea, North Sea

0 kilometers 500 Grid (Existing)

Wind Sweden Beijing Norway

Seoul 0 kilometers 500

Scotland South Tokyo m

k

Korea 0

0 Denmark

5 m k m 0 Fukuoka k 0 0 7 m 0 ~ k 8 Chongqing 00 km ~7 Japan 0 China Ireland 0 7 Germany Shanghai United Poland Kingdom Netherlands

BelgiumBelgium

“China has massive national France self-interest in ensuring that climate change is effectively dealt Roughly 700 kilometers separate Roughly 700 kilometers separate the UK with. China from Japan and South Korea. from Norway and Denmark. Otherwise, China’s moment in the sun – that is, the next decade or two of China’s economic and political Other Visions position in the world – could be undermined.” Grenatec is not alone in advocating electricity and/or natural gas pipeline Kevin Rudd, interconnections between China, Japan and South Korea. The idea has a Foreign Minister, Australia pedigree stretching back nearly a decade. Electricity: Asia Super Grid Japanese telecommunications billionaire Mahayoshi Son argues in favor of building HVDC cables across the East China Sea to connect Japan, South Korea, China and mainland Russia in an Super Grid.

This is just part of Son’s vision of an even This is just part of a larger vision of interconnecting Northeast Asia’s large economies with those of the ASEAN nations further south as part of an Asian Super Grid. Mahayosh Son’s East Asia Super Grid

Wakkanai

Tomari

Gas

Hydro Mihama Kashiwazaki Solar Geothermal Kariba East Wind Biomass

Ocean

100 -k Asian Fukuoka 500 -k Grid (Existing) 1,000 -k Grid (New) Natural Gas (Existing) Japan Super Grid Super Natural Gas (New) Fiber Optic (Existing) Fiber Optic (New) 4GW Undersea HVDC Grid

The East China stretches from southern China to Northeast Asia. It is rich in both fossil fuel and renewable energy resources. Source: Mahaoyshi Son, Japan Renewable Energy Foundation, 2011

12 Electricity: Gobitec The Germany-based Hans Seidler Foundation has suggested Mongolia and Inner Mongolia’s abundant wind and energy be harvested and delivered into the Chinese grid and eventually onward delivery to South Korea and Japan.

Electricity: Asia-Pacific Energy Research Center In 2004, the Tokyo-based Asia-Pacific Energy Research Center (APERC) concluded deeper electricity grid interconnections between China, Japan and South Korea would benefit all three countries.

In a detailed study, APERC concluded that excess electricity generating capacity could be efficiently shared between the three countries.The main reason was that northern China’s annual peak energy needs occur in winter for heating. Japan and South Korea’s annual peak energy needs occur in summer for air conditioning.

Electricity: Free Trade Pacts In November 2012, China, Japan and South Korea agreed to begin “The Free Trade Agreeement 5,6 between China, Japan and Korea negotiations on a free trade agreement. is an important vehicle towards broader integration of trade and If energy were included, multiple breakthroughs could occur at once. It could economy in this region.” Chinese Foreign Ministry, open the way for Chinese deployment of offshore HVDC for wind, wave and November, 2012 tidal energy. It could also open the way Japanese natural gas pipelines like those put in place for Pinghu.

These in turn could part of larger market reforms in the three countries to increase efficiency in downstream energy markets and encourage competition.

5 “East Asian powers agree on trade pact talks,” Reuters, May 13, 2012 6 “China to hold trade talks with Japan, South Korea,” Reuters, Nov 19, 2012

13 Summary of current regulation in APEC electricity markets, 2009 Electricity Natural Gas Unbundling Third- Wholesale Unbundling Third- Retail Generation Party Pool Transmission Party Competition Access Access Australia Yes Yes Yes Yes Yes Yes Singapore Yes Yes Yes Yes Yes Yes South Korea Yes Yes Yes China Yes Yes Yes Japan Yes Yes Yes Yes Indonesia Yes Yes Thailand Yes Yes Philippines Yes Hong Kong Malaysia Taiwan Vietnam China, Japan, South Korea, Austraila and Singapore already lead the way in opening up electricty and gas markets to competiation Sorce: “The Impacts and Benefits of Structural Reforms in the Transport, Energy and Telecommunications Sectors in APEC Economies” APEC Policy Support Unit January 2011

Natural Gas Pipelines: Extending the Network China is investing heavily in expanding its domestic natural gas pipeline network and negotiating deeper interconnections to it to both Russia and central Asia. These are ideally-situated for future interconnection to Japan and South Korea. Gas Pipeline Projects For Asia Irkutsk Sakha

Russia Sakhalin

Sakhalin Turkmenistan Mongolia Central Asia West-East Gas Pipeline Beijing

Seoul Tokyo Natural Gas (Existing)

Natural Gas (New)

Chongqing Shanghai

Hong Kong

Bangkok Manila A number of gas pipelines converging on the East China Sea are either being built or are planned. Source: ”Natural Gas Pipeline Development in Northeast Asia,” Asia-Pacific Energy Research Center, 2000

Regional Interconnection: the South China Sea Further east, the pipeline could connect with a sea-based Pan-Asian Energy Infrastructure coming up from the South China Sea. The benefits of that infrastructure would be multiple.

14 Proposed South China Sea Joint Development Areas

Hong Taiwan台湾 Kong 越南（北）

Hainan Tonkin北部湾 Gulf Philippines菲律� Paracel 西沙群� Islands Scarborough Manila 黄岩� Shoal 泰国 Laos老� Thailand

越南（北） Reed礼�� 柬埔寨 Vietnam Spratly Cambodia 南沙群� Bank Islands

South Vietnam

巴拉望

�来西� Natuna �土�

Pan-Asian泛�天然气管道

�来西� Gas Pipeline Malaysia Joint Development Zone�合开�区 Indonesia 印尼 Joint Development Areas connected to multilaterally-accessible infranstructure would lead to more cooperative development of the South China Sea’s resources, starting with natural gas.

Pipelines Vs. LNG At present, pipelines have been losing out on investment to large, expensive LNG plants that require alot of coastal infrastructure and are good for only one thing: compressing, uncompressing and shipping LNG.

As energy markets evolve LNG will be viewed, in hindsight, as hugely wasteful. This is particularly so as markets progressively integrate and carbon pricing takes hold.

The reason is that pipelines can carry hydrogen, biofuels and even waste carbon. This flexibility will gain in value in coming years, reducing the attractiveness and the long-term payback of LNG.

But the biggest reason is that natural gas pipelines already have routes laid out for them across Asia and they can provide the second leg of a tripartite infrastructure that can include electricity power lines.

As that occurs, hugely expanded energy market flexibility will occur as natural gas can be substituted for electricity as market reforms progressively shift the energy industry away from long-term contracts and more toward an open market governed by dynamic price signals.

These reforms will benefit producers, consumers and the goal of reducing climate change by allowing the market to determine the best, low-cost, low- emission energy mix for Asia.

Free Trade+Bundled Infrastructure=Transport or Transmit? Once Joint Development Areas and free trade agreements are in place, multilateral infrastructure could be the next step. This would create a more frictionless Northeast Asia regional energy market.

With suitable interconnection, either natural gas or electricity could flow across the sea to all three markets. This would provide a major economic boost to all three economies through increasing supply security and lowering cost through greater competition.

15 Under such a system, the lowest-cost, carbon-adjusted power sources would be dispatched first. These would likely be Chinese and Japanese wind energy, South Korean wave and tidal energy and Japanese geothermal.

Uncorrelated regional intermittences would largely cancel each other out. Residual load-balancing needs could be met through rapid-response hydropower (seconds to minutes) followed by natural gas with prices further adjusted by congestion, distance and volume needed.

Swiss HVDC cable manufacturer ABB has researched the cross-over point at which natural gas is cheaper to pipe to its final location than electricity generated nearer the upstream gas source. In an interconnected network, these kinds of calculations would influence the flow.

ABB has calculated a crossover, but no one knows how this relationship will fare in the future. The Crossover Point for HVDC and Natural Gas Pipelines

6,000 9

8 5,000 Gas Pipeline 7

4,000 6

5 3,000 4

2,000 3

HVDC 2 ransmission Capacity (MW) 1,000 T HVAC 1 Equivalent Gas Flow (bcm/year) 0

0 1,000 2,000 3,000 4,000 5,000 6,000

Distance (Kilometers)

Swiss HVDC manufacturer ABB believes that over long distances and high volumes, HVDC is more competitive than gas pipelines for transmitting energy.

The ultimate backstop for supply would be sidelined coal-fired power plants made uneconomic by carbon pricing but still in good working order.

These could be maintained in reserve to meet longer-term spikes in demand, such at seasonal demand peaks during heatwaves. Coal-fired power plants also could be used to make up shortfalls caused by, or instance, natural disaster knocked out lower-emission capacity elsewhere in the system. Conclusion The East China Sea is where all the benefits of a Pan-Asian Energy Infrastructure come together.

Deepening interconnection between energy networks and deepening international cooperation in energy trade will increase efficiency, lower energy market volatility, reduce geopolitical tension.

16 It will also lead to a reindustrialization of the region around the industries of tomorrow. Best of all, it will pull the smaller economies of the region (ASEAN and Australia) along with it in a symbiotic relationship.

An example of this is State Grid of China. It can build the region’s HVDC networks and operate grid infrastructure like South Australia’s Electranet, while Australia and other countries can sell premium priced solar, wind and hydro to a regnal grid dominated by renewables.

This would not concentrate geopolitical risk. For instance, having State Grid build new electricity grids would be no more risky that having Chinese companies build toll roads.

The infrastructure is immovable once built. Therefore, China has every incentive to keep the customer happy. Plus, as with a toll road, control over toll collection remains in the hands of the buyer.

17