How does the winter clean heating policy affect China’s gas market?

In December 2017, the Chinese government set out new objectives to reduce air pollution in the north of the country in its Winter Clean Heating Policy for 2017-2021. This followed a massive wave of coal-to-gas switching throughout 2017 that led to record Chinese LNG demand this winter: 5.5 million households in the 2+26 provinces switched away from coal, exceeding the 3.5 million target. However, this huge shift in demand also led to widespread winter gas shortages. Will the new policy create another wave of coal-to-gas switching? Will China face similar supply crunches in future winters? What are the implications for LNG imports in northern China, especially in light of new pipe imports coming from Russia and existing infrastructure bottlenecks? In this insight, we address how the Winter Clean Heating Policy will affect gas demand through to 2021 and China’s options to secure sufficient supply.