According to the International Energy Agency, China (NYSE: FXI) is now the world’s most voracious consumer of energy. This is a monumental moment in world history because the US has held the top spot for more than a century. Moreover, energy consumption is one of the most powerful indicators of a vibrant economy.
So, where does this new era in energy history lead? First, it takes us into the final act of changing the economic superpower guard. The first act of this ritual started when the US exported industrial production and jobs. That strategic blunder transformed our economy from a Boeing (NYSE: BA) Dreamliner 787 engine into a lightweight hallowed drone. The second act proceeded by turning countries such as Japan and China into our sovereign versions of Capital One (NYSE: COF) credit cards.
Now, in the third act, China will continue to manifest a domestic consumer class modeled after the 20th-21st century American. As we have seen over the past several years, China has scoured the globe to control as many large scale energy reserves as possible. This is not a preemptive move to deal with a nation of rising hippies. It is a move showcasing the long term plans for continued growth and power as both producers and consumers in the world economy.
Of course, the final act of the changing of the guard will be the epic moment when, according to a Deutsche Bank (NYSE: DB) study, China’s GDP surpasses US GDP in the early 2020s. A lot will happen between now and then. However, you can bet the new era of energy history will lead investors and businesses to one of the greatest macro investment trends of our lifetimes.
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