Weakening oil demand is shining a spotlight on structural flaws in China’s economy that the government may struggle to remedy, and which could push policy making in ominous directions. Up until 2020, rising property values were the tide that lifted all boats in China. During China’s boom years, steady wage growth sustained demand for new apartments and encouraged real estate developers to buy land from local governments to build tower blocks. That, in turn, drove demand for oil — diesel for haulage and distributed power, naphtha for plastic fixtures and fittings, and bitumen for expansion of the road network (see graph: Real estate investment vs oil demand).
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