Introduction

In 1933, Alice Tisdale Hobart, wife of the Standard Oil Company of New Jersey manager in Nanking, published Oil for the Lamps of China.¹ Hobart had traveled widely in China and proved to be a very observant imperialist. Her fictional account of her experiences, not surprisingly, focused on the role played by Western businessmen, especially those engaged in importing and selling petroleum products. One thread that runs through her work is Chinese dependence on foreign sources of energy supplies, which remains the case today. This dependence on foreign-controlled sources means that Beijing’s efforts to ensure the availability of energy resources adequate to fuel the nation’s economic growth have important national security implications.
China is the second largest energy-consuming country in the world after the United States.² Beijing is determined to maintain continued economic growth after a quarter-century of remarkably high economic performance in the face of a population of 1.3 billion and a changing political system. The Organization for Economic Cooperation and Development (OECD) estimates that the average annual economic growth rate for China, including Hong Kong, will be 5.6 percent for the period 1995 to 2020, compared to 8.5 percent for the period 1971 to 1995.³ China could be the largest economy in the world by 2050, in terms of purchasing power parity, with a gross domestic product slightly less than half of that of the 30 OECD member-nations combined. In a best-case prognosis, China has the strong potential to rank as at least the second largest world economy by the new century’s mid-point. Economic expansion of that magnitude means China’s domestic energy demand over the next 20 years would grow at a rate that is more than that of any other nation.⁴
China’s economic growth has been accompanied by energy consumption growth averaging 5 percent per year—with electricity growth of 8 percent annually.⁵ China was responsible for 9.6 percent of global energy consumption in 1997, a figure projected to grow to 16.1 percent by 2020. Coal accounted for approximately 74 percent of the country’s energy production in 2000. In the same year, petroleum accounted for 18 percent, hydropower 5 percent, natural gas 2 percent, and nuclear power less than 1 percent. Total energy consumption in 2000 included 71.3 percent produced from coal, 21 percent from oil, 5 percent from hydropower, and 2 percent from natural gas.⁶
China became dependent on international sources of petroleum in 1993 and on all forms of international energy supplies in 1996, a dependence that continues to increase. Reliance on non-domestic energy sources is exacerbated by the fact that 10 percent of domestic production comes from offshore wells that are almost all the product of joint ventures with foreign companies.
In May 2000, Beijing announced a long-range comprehensive plan for its energy sector that includes development of thermal, nuclear, and hydroelectric power, in addition to oil, coal, natural gas, “and other new and renewable energy sources,” including geothermal, solar, biomass, wind, and tidal energy. This plan also lines up with the current drive to develop China’s western regions economically, with coal, hydropower, and the oil and gas industries all focusing in the west.⁷
The reliance on foreign energy sources also complicates this plan’s chance for success; the deputy director of the State Economic and Trade Commission (SETC) has estimated that “China will have to rely on international markets for 50 percent of its oil supply in 2020.”⁸ In December 2000, senior industry spokesmen stated that “Beijing had no plans to depart from a schedule freeing up the country’s oil products market to foreign investors.”⁹
Beijing recognizes the strategic implications of national reliance on foreign energy sources and is attempting to lessen this reliance. China is the world’s fifth largest petroleum producer but imported more than 18 percent of its petroleum consumption in 1999.¹⁰ It imported twice as much oil in 2000 as it did in 1999, and 15 percent more in 2002 than in 2001.¹¹ The demand for imported petroleum will continue increasing, assuming continued economic growth, with imported oil contributing as much as 40 percent of all petroleum requirements by 2010 and with as much as 8 million barrels a day imported by China in 2020.¹² Maintaining the rate of economic growth to which the Chinese people have become accustomed is key to sustaining the legitimacy of the current political system in China as its ideological basis erodes.

A further complicating factor is Beijing’s campaign to privatize many important sectors of the economy hitherto dominated by the state. The power industry is one such sector; the government has announced its determination to end monopoly, enhance competition, and introduce competitive pricing in this industry.¹³ National authorities undoubtedly are determined to conduct this campaign and recognize the inevitable social and political fallout of privatization. They are equally determined to change China’s economic character while retaining the Chinese Communist Party (CCP) in power, but numerous statements by Beijing officials and Chinese academics indicate government flexibility in the face of economic priorities.

This essay addresses Chinese energy dependence and future policy options. An introductory review of Beijing’s current energy situation is followed by a discussion of the government organizations that still dominate the energy sector, despite China’s privatization campaign. Next are reviews of China’s dominant coal industry, current oil production and imports, and natural gas sector. Other power sources are discussed, followed by a review of the electrical power distribution system envisioned by Beijing.
Environmental concerns associated with energy production are addressed, as is the effectiveness of Beijing’s Ninth and Tenth 5-Year Plans and future energy policies. Defense of energy resources is reviewed, with a focus on both military and civilian police resources and apparent plans. The conclusion focuses on China’s potential to solve its energy questions in the new century.¹⁴

Endnotes

 ¹Alice Tisdale Hobart, Oil for the Lamps of China (New York: Bobbs-Merrill, 1933). [BACK]

²“China,” Department of Energy-Energy Information Agency (DOE-EIA) Country Analysis Brief, April 2000, accessed at <www.eia.doe.gov/emeu/cabs/china.htm>, 1.. [BACK]

³Cited in Felix K. Chang, “Chinese Energy and Asian Security,” Orbis 45, no. 2 (Spring 2001), 213. [BACK]

⁴4Statement to author by senior U.S. Department of Energy official, December 2001.[BACK]

⁵“China: Environmental Issues,” DOE-EIA, October 1999, 2.[BACK]

⁶These numbers are probably approximately correct, but it is easy to find different estimates for the energy sector. For instance, 17.4 percent is given as the percentage of China’s total power output for 2001 provided for hydropower in “Profile of China’s Electric Power Industry,” Asia Pulse (January 6, 2003), in Alexander’s Gas and Oil Connections (Alexander’s) 8, no. 2 (January 24, 2003). [BACK]

⁷“China Drafts Energy Development Strategy for 21st Century,” Xinhua (Beijing edition, unless otherwise indicated), May 23, 2000, in Foreign Broadcast Information Service (FBIS)-CPP20000523000134. As will be discussed below, the other energy sources range from biomass to tidal power and wind power.[BACK]

⁸“China to Rely Increasingly on International Markets for Its Oil Supply,” Xinhua, in Alexander’s 6, no. 15 (August 14, 2001), accessed at <www.gasandoil.com/goc>.[BACK]

⁹“Beijing Has No Plans to Depart From Foreign Investors Schedule,” Reuters, in Alexander’s 6, no. 15 (August 14, 2001). [BACK]

¹⁰Table 2, “East Asia: The Energy Situation,” DOE-EIA, August 1999, 5. [BACK]

¹¹36 million tons in 1999 and 70 million tons in 2000; reported in Zhu Yuan, “Sino-Russian Oil Deal,” China Daily, September 11, 2001, in FBIS-CPP20010911000131; the 2002 figures are from the Chinese Customs Service, reported in Takungpao News, February 11, 2003, in Virtual Information Center, “Asia-Pacific Daily News Summary.” [BACK]

¹²“China Increasingly Reliant on Imported Fuel Supplies,” Associated Press, quoted in Alexander’s 5, no. 14 (August 7, 2000); “China,” DOE-EIA, 1[BACK]

¹³“PRC to End State Monopoly, Urges Competition in Utility,” Xinhua, November 21, 2000, in FBIS-CPP20001121000079. [BACK]

¹⁴Other works that address this topic include Selig S. Harrison, China, Asia, and Oil: Conflict Ahead? (New York: Columbia University Press, 1977); Yingzhong Lu, Fueling One Billion: An Insider’s Story of Chinese Energy Policy Development (Washington, DC: Washington Institute Press, 1993); Mark J. Valencia, Southeast Asian Seas: Oil Under Troubled Waters: Hydrocarbon Potential, Jurisdictional Issues, and International Relations (New York: Oxford University Press, 1992), and Conflict Over Natural Resources in Southeast Asia and the Pacific (New York: Oxford University Press, 1996); Xiannuan Liu, China’s Energy Strategy: Economic Structure, Technological Choices, and Energy Consumption (Westport, CT: Praeger, 1996); Mark J. Valencia, Jon M. Van Dyke, and Lowell A. Ludwig, Sharing the Resources of the South China Sea (Honolulu: University of Hawaii Press, 1999); Erica Strecker Downs, China’s Quest for Energy Security (Santa Monica, CA: RAND, 2000); Robert A. Manning, The Asian Energy Factor: Myths and Dilemmas of Energy, Security and the Pacific Future (New York: Palgrave, 2000); Felix K. Chang, “Chinese Energy and Asian Security,” Orbis 45, no. 2 (Spring 2001), 211–240; Amy Myers Jaffe and Steven W. Lewis, “Beijing’s Oil Diplomacy,” Survival 44, no. 1 (Spring 2002), 115–134.[BACK]