Overview: China Risk Series

AUTHOR

Geoffrey Craig, Senior Product Strategist

What economic indicators should be monitored for signs that China is preparing for military conflict? This critical question was the focus of a hearing held on June 13 by the US-China Economic and Security Review Commission on Capitol Hill.

Gabriel Collins, a fellow at Rice University’s Baker Institute, was among the experts who testified. He emphasized the importance of coal, oil, and natural gas, which together account for 82% of China’s primary energy use.

“Energy production and storage trends are key indicators that a country might be preparing for conflict,” Collins stated. He explained that warfare requires a massive amount of energy, which is why increases in production and stockpile buildups often occur before a country engages in war.

Although China is a significant energy producer, a “prospective belligerent” seeks to increase output and stockpile resources for several reasons, Collins noted. 

A buffer is essential to maintain the “industrial metabolism” of a nation at war, particularly one under blockade or embargo, and to withstand the initial phases when energy consumption is exceptionally high.

As a general matter, the bigger the stockpile, the greater the resilience. “‘Just in time’ peacetime inventory management strategies please investors for their financial leanness but mean that even a handful of enemy strikes can seriously crimp supply,” he added.

Moving from theory to action, Collins identified a number of warning signals to monitor:

  • Aboveground crude oil storage utilization rates topping 65% of capacity
  • Construction of more underground crude oil storage facilities
  • Increased levels of oil tanker activity indicating the filling of underground storage
  • Construction of new cross-border oil pipelines or expansion of existing oil pipelines
  • Increased activity at refined product storage depots within 500 miles of Taiwan
  • Expansion of coal inventories above 3-year and 5-year averages
  • Attempts to interfere with synthetic aperture radar (SAR) measurements

The last bullet point mentions SAR, a type of spaceborne sensor known for its effectiveness in monitoring opaque places, such as China, as it is unaffected by geographic, political, or weather-related limitations.

Indeed, without this technology, it might be impossible to monitor China for these warning signals.

For this reason, Collins recommended that Congress fund the acquisition of commercial, off-the-shelf space-based data, citing providers like Ursa Space.

At Ursa Space, we leverage our radar satellite network and data fusion expertise to detect changes in the physical world, including many of the warning signals described above. 

In future blog articles, we will delve into each warning signal in greater detail, exploring effective monitoring methods.

The next article in this multi-part series will examine the warning signals associated with above-ground crude oil storage.

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