The security of energy import: Do economic policy uncertainty and geopolitical risk really matter?

Abstract

Examining the roles of economic policy uncertainty (EPU) and geopolitical risk (GPR) in energy import (EI) is vital to ensuring energy security in China. The exploration utilises the TVP-SV-VAR methodology to seize the time-varying connection among EPU, GPR and EI. In light of the quantitative discussion, we discover that EPU exerts an adverse effect on EI, emphasising that the uncertainties in economic policies would reduce energy imports in China, which conforms to the theoretical hypothesis. GPR had a favourable impact on EI before COVID-19, primarily due to the changes in energy prices and diversification of imports, which turned negative after this epidemic because of economic recovery and more severe geopolitical events, which is not perfectly consistent with the qualitative analysis. Besides, the exploration replaces EI with oil import (OI) and ascertains the robustness of the reported conclusion. By comparing, the influences from EPU and GPR on coal import (CI) and natural gas import (NGI) are entirely different from OI primarily due to the substitution effect and geopolitical property. In the increasingly challenging economic and political environment context, the exploration will offer significant lessons for China to ensure the security of energy imports.