By 2010, China successfully fulfilled the goals of yet another Five-Year Plan. As part of the newly implemented twelfth Five-Year Plan, which will run until 2016, Chinese policymakers now seek to broaden the country’s myopic focus on economic growth, which has come at the expense of domestic energy sustainability. During the past decade, China has shifted from a net oil exporter to the world’s second largest importer of oil. For this reason the new Five-Year Plan represents a policy-driven effort to move the country away from its historical dependence on coal, oil, and other fossil fuels. This new Five-Year Plan will emphasize a low carbon economy and green development.
In this article, Xingjian Zhao shares his thoughts on China’s new-found efforts to reduce its reliance on petroleum, and in turn, decrease its vulnerability to the shifting sands of the Middle East’s political climate. This article is particularly relevant to foreign investors who will seek to invest in China’s rapidly growing renewable energy sector.
By the end of 2010, China had successfully fulfilled the goals of yet another “Five-Year Plan.” Since issuing its inaugural “Five-Year Plan” in 1953, the Chinese government has used five-year detailed policy benchmarks as central developmental blueprints to encourage the growth of the country’s domestic infrastructure. As part of the newly implemented twelfth Five-Year Plan, which will run until 2016, Chinese policymakers now seek to broaden the country’s myopic focus on economic growth, which has come at the expense of domestic energy sustainability.
During the past decade, China has shifted from a net oil exporter to the world’s second largest importer of oil. Nevertheless, domestic energy sources still sustain more than 90 percent of China’s overall energy demand – a remarkable figure in context. However, in light of skyrocketing domestic demand and increasing reliance on imported energy sources, there is growing concern about the continued sustainability of China’s access to foreign energy markets. China’s future oil imports, for example, depend heavily on maritime shipping from politically volatile regions such as the Persian Gulf, West Africa, and Latin America (especially Venezuela). Nearly all of China’s natural gas imports rely on an overland pipeline system that runs almost entirely through Russian territory. As China’s economy continues its unparalleled expansion, the country will become increasingly vulnerable to disruptions in global and regional energy supply.
Under the new Five-Year Plan, China will continue to meet its surging energy demand with mainly domestic supplies. China is the world’s largest producer and consumer of coal. With proven reserves of more than 114.5 billion tons, coal remains as China’s “traditional” domestic energy source, accounting for two-thirds of the country’s total energy consumption. Yet, the cost of coal power is high and its consumption inherently inefficient. Overreliance on coal power will depress China’s net energy consumption efficiency and inflate its net energy demand. Therefore, in order to raise efficiency and preserve sustainability, China must diminish reliance on its domestic coal reserves. The new Five-Year Plan foresees this possibility, providing strong economic incentives for the development of new sources of nuclear, solar, wind, and hydroelectric power.
Additionally, the current Five-Year Plan substantially toughens fuel economy standards for cars and trucks sold in China – which will soon surpass the U.S. as the world’s largest user of automobiles. The Plan also allocates funds for the domestic development of hybrid and bio fuel cells, as well as for efforts to strengthen China’s manufacturing capabilities for these key products. Already the third-largest ethanol producer and one of the largest consumers of alternative fuels in the world, China is continuing to reduce its reliance on petroleum, and in turn, its vulnerability to the shifting sands of the Middle East’s political climate.
Meeting the benchmarks of the new Five-Year Plan will move China many steps closer to long-term energy sustainability. Yet, China must continue to tread the fine line between promoting economic growth and encouraging energy independence with caution.