Chinese oil production: In permanent decline?

China's domestic oil production accounts for 5% of global supply in 2016, making it the seventh largest crude producing country in the world. But that share looks set to shrink considerably over the next decade as the country faces a severe decline in oil production. China's liquids output is forecast to fall from 4.2 million b/d in 2015 to 3.5 million b/d by 2020. What is driving our forecast of falling output – is it natural field decline, capital cuts or government policy, or all of the above? In other words, is this a long-term trend that would exist even without the price drop or is it just a short-term cyclical fluctuation? Understanding this is vital to attaining a clear picture of the long-term outlook for China's output.