Deutsche Bank CEO: War reshapes energy landscape, China becomes "winner" Choosing clean energy stocks with a "healthy balance sheet" is preferred

Jacky Tang, Chief Investment Officer of the Private Banking Department of Deutsche Bank, stated that the global energy security competition is making China stronger due to the significant fluctuations in the oil and gas markets caused by the war. In an interview, he said, "From an economic and energy structure perspective, China is the winner of this war." A senior executive of Deutsche Bank pointed out that China, as the world's largest producer of clean technology, has a unique advantage in assisting governments eager to break away from traditional fossil fuels. Tang stated that in the long term, "everyone knows" that the world "cannot rely on oil." Tang believes that this understanding will force Asia, the largest importer of Middle Eastern oil, to readjust. He said that Japan, South Korea, and India are now more likely to seek pathways towards energy structure diversification, and the equipment needed to achieve this diversification will inevitably come from China. As the Middle East conflict fluctuates between threats of life and death and fragile ceasefires, oil and gas prices are experiencing significant fluctuations. A two-week ceasefire agreement on Wednesday morning brought a slight respite, with one of the conditions of the agreement being the reopening of the Strait of Hormuz. However, the next steps remain uncertain. Against this backdrop, governments around the world will continue to strive for energy independence. China remains the world's largest consumer of coal and is rapidly developing its clean technology industry to achieve its energy independence goals. According to a report released by Ember in February, low-carbon energy currently accounts for nearly 40% of China's electricity generation, compared to approximately 25% a decade ago. Barclays estimates that renewable energy accounts for nearly 50% of China's installed capacity. A team led by Jian Chang, Chief Economist for China at Barclays Bank, pointed out in a report sent to clients on April 8 that over the past decade, renewable energy construction and electrification processes have significantly reduced the impact of energy shocks on China. She stated that as a result, oil and gas "now make up only a small share of China's electricity generation." According to a viewpoint report sent to clients by the Chief Investment Officer's office of Lombard Odier this month, China's long-term focus on electrification has made it more resilient to energy price shocks. The report also notes that China's strategic oil reserves accumulation provides an effective short-term buffer against rising oil prices. Tang stated that a new wave of demand for renewable energy will identify winners in the clean technology sector, as years of high-speed growth have pushed prices down to levels where some companies can no longer compete. Tang said, "The problem in China is that competition is fierce. The ultimate winners will be those companies with healthy balance sheets, strong fundamentals, and pricing power." Tang stated that equipment exporters with profit margins strong enough to withstand higher costs and cash flow sufficient for mergers and acquisitions will perform the best. He also mentioned that Deutsche Bank advises its private banking clients to look for companies with lower debt levels than their peers. Tang said, "Unfortunately, many infrastructure companies have high leverage because they are small-cap companies that need loans from banks." He stated that in a typical client investment portfolio, the allocation of clean energy stocks is usually around 10% to 15%. "We try to avoid overexposure because market volatility is still high." In the initial weeks after the outbreak of the war, Chinese stocks performed the best in the S&P Global Clean Energy Transition Index, but since then, most stocks have lost much of their gains. To address overcapacity in the clean technology sector, the Chinese government has initiated measures to combat industry overcapacity. Its latest five-year plan has downplayed the influence of the solar industry, and as countries point out trade imbalances, the Chinese government is canceling or reducing export tax rebates for products including CECEP Solar Energy batteries. Tang said, "China is determined to ensure prices remain at competitive levels while ensuring that companies can survive."