Energy Security in China Beyond Traditio

Energy Security in China: Going Beyond the Traditional Approach
Energy Security in China: Going Beyond the Traditional
Approach1
GAO Yang
yang.gao@vuw.ac.nz
Political Science and International Relations Programme,
Victoria University of Wellington,
Wellington, New Zealand
Abstract
As the world’s largest energy consumer today, China’s economic growth has been largely
driven by surging energy consumption. To examine the nexus of energy and China’s national
security becomes an urgent task for both scholars and policy makers in the country. Over the
last decade, China has adopted an energy security approach emphasizing its external energy
supply, which is quite similar to the Western approach. However, as the largest energy
producer in the world, China only needs to import a small percentage of primary energy to
meet the demand. Its energy mix is also in sharp contrast with that of Industrialized Western
countries’ (IWCs), especially when we realize that coal consumption constantly accounts for
about 70 percent of China primary energy mix, and oil less than 20 percent. This is largely
due to Chinese industrial sector’s significant contribution to its GDP and its increasing
demand for coal-based electric power, China’s energy-economy nexus is therefore
profoundly different with that of the IWCs at this stage. Therefore, it is argued that, over the
last decade, both the Chinese scholars and policy makers have not developed and employed
an energy security approach reflecting its actual energy vulnerabilities and to cope with the
urgent energy security threats the country faces. For a developing economy like China, a
broader energy security approach should be developed to guide the scholarly research and
policy making in the future.
Introduction
Energy security as an analytical concept has been established since the 1970s, when two
energy crises (or oil shocks) struck the major industrialized Western countries (IWCs) such
as the United States, Japan and major Western European economies. The heavy external
1
This paper was presented on the 5th Oceanic Conference on International Studies, The University of Sydney,
18 July-20 July 2012, http://www.ocis.org.au/.
1
energy dependence and supply risks not only threatened their economic interest and thus their
national security, but also shaped energy security thinking and behavior. A traditional energy
security approach characterized by a supply-sided, primarily oil-oriented strategic thinking,
as well as a foreign policy response to safeguard energy security, has been the mainstream in
the major IWCs. 2
Since the mid-1990s, Chinese academia and government agencies have been particularly alert
to China’s increasing energy demands and growing energy deficit. As a rising economy that
has been a net energy importer since only 1996, examining the nexus of energy and national
security is an urgent task for scholars and policy makers. Generally speaking, over the last
decade, China has also adopted an energy security approach emphasizing its external energy
supply, especially the oil supply, which is quite similar to the Western approach. As Erica
Downs points out, mainstream thinking on energy security in China shares characteristics of
the traditional energy security approach. 3 Chinese scholars and policy makers largely equate
energy security to the security of external energy supply. For instance, in a major research
supported by the Chinese government, Feng and Zhou conclude “energy security more
accurately is oil security”. 4
2
See Edward R. Fried and Philip H. Trezise, Oil Security: Retrospect and Prospect (Washington, D.C.:
Brookings Institution, 1993); and Paul B. Stares, "Introduction and Overview" in Rethinking Energy Security in
East Asia, ed. Paul B. Stares (Tokyo: Japan Center for International Exchange, 2000).
3
See Erica S. Downs, "The Chinese Energy Security Debate" The China Quarterly 177 ( May 2004).
4
Fei Feng and Fengqi Zhou, "Zhongguo Nengyuan Fazhan Zhanlue Yu Zhengce Yanjiu Baogao [Report on
China’s Energy Development Strategy and Policy]" Jinji Yanjiu Cankao [Review of Economic Research],
2004:83 (2004).
2
However, the fact is that over the last decade China’s most urgent energy security issue did
not exist in the oil sector. On the contrary, the power sector has been the most problematic
and curbed China’s economic growth. As the largest energy producer in the world, China
only needed to import about 10 percent primary energy to meet the demand in 2009. 5 China
does not share the high oil consumption and high external energy dependence features of
major IWCs. Moreover, its energy mix is also in sharp contrast. Coal consumption constantly
accounts for around 70 percent in China’s primary energy mix, and oil less than 20 percent. 6
This is largely due to the industrial sector’s significant contribution to gross domestic product
(GDP) and the increasing demand for coal-based electric power. China’s energy-economy
nexus is therefore profoundly different with that of the IWCs at this stage. This indicates that
external energy supply, especially the oil supply, is only one part of the energy security
challenges that China is facing, and is probably not even the key issue in China’s
comprehensive energy security picture. Therefore, it is argued in this article that, over the
last decade, both Chinese scholars and policy makers have not developed and employed an
energy security approach reflecting China’s actual energy vulnerabilities nor one to cope with
the urgent energy security threats the country faces. For large developing economies like
China, a broader energy security approach is required to guide scholarly research and policy
making.
5
The World Bank, "World Development Indicators: Energy Net Imports as Percentage of Energy Use", The
World Bank Website, at <http://data.worldbank.org>, accessd May 2011. Unless otherwise stated, the data on
energy net imports as percentage of energy use in this article are from this source.
6
Unless otherwise stated, China’s energy data cited in this article are derived from NBS, Zhongguo Tongji
Nianjian 2009 [China Statistical Year Book 2009], ed. National Bureau of Statistics of China (Beijing: China
Statistics Publish Service, 2009).
3
The article is structured into the following sections. The first section presents a comparison
study between the major IWCs and China. It demonstrates that while the IWCs constructed
their energy security approach based on their actual energy vulnerability and threat, the
mainstream energy security approach in China has largely built on the Western experience
instead of its own energy insecurity over the last decade. The Second section puts forward a
comprehensive reassessment of China’s energy situation to identify the urgent energy
insecurity that China faces. I argue the current approach largely overlooks China’s unique
and present energy insecurity. Thus to employ the traditional approach to safeguard China’s
energy security is far from adequate.
China and the West: A Convergence of Approaches
A Traditional Energy Security Approach in the IWCs
Traditionally, the concept of security in International Relations studies was commonly
perceived as “the ability of a nation to protect its internal values from external threats”. 7
However, since the 1970s, it has been argued by many security scholars that the threat to
national security is not only from military aggression but also from other sectors. A series of
influential articles have been published since the early 1980s, with the purpose of redefining
and broadening the neo-realist conception of security to cover a wider range of potential
threats.8 The major shift is marked by Barry Buzan. Buzan defines the broadened security
agenda in terms of security threats from different sectors such as the political, economic,
7
P. G. Bock and Morton Berkowitz, "The Emerging Field of National Security" World Politics 19: 1 (1966): p.
112.
8
Richard H. Ullman, "Redefining Security" International Security, 8: 1 (1983); K. Krause and M. C. Williams,
"Broadening the Agenda of Security Studies: Politics and Methods" Mershon International Studies Review 40: 2
(1996).
4
social and ecological sectors.9 Moreover, running against the orthodox view under the realist
paradigm that all states are essentially the same, Buzan contends that states are exceedingly
varied despite their fundamental similarities. Because of this diversity, the particular nature of
security issues differs substantially from state to state. According to Buzan, “insecurity
reflects a combination of threats and vulnerabilities”, and, “…(the) distinction between
threats and vulnerabilities points to a key divide in security policy, namely, that states can
seek to reduce their insecurity either by reducing their vulnerability or by preventing or
lessening threats...In other words national security policy can either focus inward, seeking to
reduce the vulnerabilities of the state itself, or outward, seeking to reduce external threat by
addressing its sources”.10
The mainstream energy security discourse in the West, in particular in the United States, has
been marked by an outward-looking approach focusing on the security of external energy
supply. Defined by Daniel Yergin, the most influential concept of energy security in the West
involves: “…assuring adequate, reliable supplies of energy at reasonable prices and in ways
that do not jeopardize major national values and objectives”. 11 In the aftermath of the crises
in the 1970s, the major IWCs developed similar policies to cope with their energy insecurity.
The ‘inward-looking’ policies like increasing the domestic energy production and raising the
share of nuclear power have to some extent alleviated their energy vulnerabilities. 12
Nevertheless, the reliance on overseas fossil fuel resources has been built into their
9
Barry Buzan, People, States and Fear, 2 ed. (Boulder, Colorado: Lynne Rienner Publishers, 1991), p.19.
10
Ibid., p.112.
11
Daniel Yergin, "Energy Security in the 1990s," Foreign Affairs 67: 1 (1988), p. 111.
12
For example, the United States began “Project Independence” after the first energy crisis in 1973-74, which
was designed to end the need for U.S. energy imports by 1980. See Gawdat Bahgat, "United States Energy
Security" The Journal of Social, Political, and Economic Studies 26: 3 (2001).
5
development model. The external supply risks have been a constant threat and the
vulnerability of heavy energy dependence is almost unshakable.
In the U.S., the primary energy mix has not changed much from that of the 1970s. Oil and
gas, the two biggest primary energy sources, are still imported in substantial quantity,
supplying about 61 percent of its total primary energy demand. According to the World Bank,
the U.S. net energy imports accounted for about 29 percent of its energy use in 2007,
including almost half of its oil and all gas demands. 13 Moreover, the key suppliers
concentrate in the Middle East, Africa and South America, which have been geopolitically
unstable regions over the last few decades.
For Japan, the net energy import accounted as much as 84 percent of its energy use in 2008,
including all fossil fuels consumed. Imported oil alone accounted for nearly 50 percent in
Japan’s energy mix. Japan has been primarily dependent on the Middle East for its oil
supplies, as roughly 90 percent of Japanese crude oil imports are from that region, up from 70
percent in the mid-1980s. Similarly, among the major European Union economies,
Germany’s energy import rate was 59 percent in 2007, mainly in the form of oil and gas.
Germany’s oil consumption (2.4 million bbl/d) accounted for about 33 percent of its energy
mix. As much as 94 percent of its oil demands depended on imports in 2007. For France,
imported oil accounted for over 70 percent of its energy mix in the early 1970s. Today an
important feature of France’s energy situation is the large share of domestically produced
nuclear power. Nevertheless, virtually all (99 percent) of its oil demand (about 1.9 million
13
Unless otherwise stated, energy data of IWCs are derived from U.S Energy Infomation Administration (EIA),
"International Energy Statistics" at <http://www.eia.doe.gov>, accessed August 2010.
6
bbl/d) and 97 percent of its natural gas consumption still need to be imported, which made
France’s net imports as percentage of energy use close to 50 percent in 2007.
Therefore, with unshakable external energy dependence over the past few decades, these
IWCs have a strong imperative to mainly focus on ‘outward-looking’ policies to pin down
external threats to their energy security. By the early 1980s, abandoning the hope of energy
independence, the U.S. shifted emphasis to developing a military deterrent capability against
the Soviet Union to protect the energy supply from the Middle East. This policy shift came to
be known as the Carter doctrine. 14 For Japan, access to essential sources of energy and raw
materials has been the edifice of the country’s development in the post-war era. However,
after the 1970s’ crises, Japan came to realize that because of its heavy dependence on foreign
energy producers, political relations with energy supplier countries could not be ignored.
Japan’s main instrument in the pursuit of security has been the so-called ‘economic
diplomacy’ or ‘resource diplomacy’, the function of which is to combine the protection of the
nation's economic prosperity with the exercise of influence abroad, and to satisfy the need to
be seen as a major power without provoking potential enemies. 15 After the catastrophic
Fukushima nuclear station disaster caused by the earthquake and tsunami of March 2011, for
the Japanese government, to reduce the share of nuclear power, coal and natural gas imports
must be further expanded to fill the electric power supply gap in the short and medium
term.16
14
See Michael T. Klare, "Oil, Iraq, and American Foreign Policy: The Continuing Salience of the Carter
Doctrine," International Journal 62: 1 (2006).

15
See Wolf Mendl, "The Security Debate in Japan," International Affairs 56: 4 (1980).
16
The nuclear power currently accounts for about 13 percent of Japan’s primary energy consumption.
7
Like Japan, the major Western European economies have responded to the vulnerability of
dependence and the threats of supply risks through bilateral and multilateral solutions since
the late-1970s. For instance, Germany and France struck natural gas pipeline deals
respectively with the Soviet Union despite the tensions this decision would create in US-
Germany/France relations.17 Since the turn of the century, as gas dependence on Russia has
been rapidly increased, particularly in light of Russia’s cutting gas supplies to the Ukraine in
2006 and 2009, as well as the threats of oil supply cut-offs from Tehran over Iran’s disputed
nuclear project, strategic considerations and foreign policy responses are taking a greater
policy salience in Europe. More recently, as the European Union has been heavily dependent
on Libyan oil, when unrest in Libya broke out in the early 2011, EU members were
immediately suffered from a new oil shock.18
In sum, there are two features shared by the major IWCs in their respective energy situations:
the large share of oil (and to a less extent, natural gas) in their energy mix over time and high
energy import dependence. Moreover, a substantial share of these countries’ primary energy
supply depends on the regions that have suffered from unstable geopolitical and domestic
political situations in the last few decades, such as the Middle East. Therefore, it is the
constant vulnerability of external import dependence and the threat of supply risks that
constitute the material basis and historic context of energy insecurity. The nature of IWCs’
17
Amy Myers Jaffe and Ronald Soligo, "Militarization of Energy: Geopolitical Threats to the Global Energy
System," in The Global Energy Market: Comprehensive Strategies to Meet Geopolitical and Financial Risks
(Houston, Texas: James A. Baker III Institute for Public Policy, Rice University, 2008), p. 48.
18
The IEA says Libyan oil in 2010 accounted for over 20 percent of imports to Austria, Ireland and Italy,
around 15 percent to France and Greece, over 10 percent to Spain and Portugal and around 8 percent to
Germany and the UK. See Andrew Rettman, "EU Registers First Energy Shock from Libya Unrest" EU
Obeserver Website, at < http://euobserver.com >, published Feburary 23, 2011, accessed June 2011.
8
energy insecurity is therefore an external supply issue, which requires primarily outward-
looking approach of strategic thinking and foreign policy to safeguard energy security.
The Dominance of the Traditional Approach in China
Since the mid-1990s, one of the most important changes in the world energy situation is that
China has moved from being a minor and self-sufficient energy consumer to become the
world’s fastest-growing energy consumer. For coping with increasing dependence on foreign
energy imports, Chinese analysts and decision-makers began to look closely at the IWCs’
experiences of energy insecurity and their strategies as China became a rapidly-growing
energy importer in the world.
After 1949, with aid from the Soviet Union, China established its energy industry and
achieved energy self-sufficiency in the early 1960s. This became a pre-eminent symbol of the
‘self-reliance’ policy. Then, due to economic reforms since the 1970s, rapidly increasing
energy demand from the expanding industry sector has been met by huge investment in
energy supply infrastructure and a substantial quantity of energy imports, especially in the oil
sector. In 1993, the country became a net oil importer. According to Chinese government
data, China consumed 365 million metric tons (mmt, 7.3 million bbl/d) of crude oil in 2008,
and imported oil stood at 175 mmt (3.5 million bbl/d) making it the second-largest oil
consumer and importer in the world.
The influence of the traditional energy security approach in China is reflected in the strategic
thinking and foreign policy response to ‘energy insecurity’ that over the last decade. This
should not come as a surprise given that many influential Chinese energy specialists strongly
advocate learning the lessons of the West, while others simply adopt the concepts and
9
recommendations found in the Western literature on energy security. A significant number of
influential scholarly works define energy security in accordance with their Western
counterparts, especially Daniel Yergin’s definition that emphasis the availability, reliability
and affordability of energy supply. 19 Therefore, it is a common perception in China that the
energy security problem is the growing oil deficit, or as Feng and Zhou argue, “energy
security more accurately is oil security”. 20 As early as 1993, the then-Premier Li Peng set the
stage for this approach by defining the objectives of the country’s energy policy as “to secure
the long-term and stable supply of oil to China”. 21 This fundamental objective guided most of
the energy decisions taken during the rest of the decade.
In the first decade of this century, this approach continued to prevail. Energy security topped
the list of strategies to develop the energy sector in Beijing’s tenth five-year plan of economic
19
For example, see Xinhua Liu and Yi Qin, "Zhongguo De Shiyou Anquan Jiqi Zhanlue Xuanze [China's Oil
Security and Strategies]," Xiandai Guoji Guanxi [Contemporary International Relations] 2002: 12 (2002);
Wenmu Zhang, "Zhongguo Nengyuan Anquan Yu Zhengce Xuanze [China's Energy Security and Policy
Choices]," Shijie Jingji yu Zhengzhi [World Economics and Politics] 2003: 5 (2003); Daojiong Zha, "Cong
Guoji Guanxi Jiaodu Kan Zhongguo Nengyuan Anquan [China's Energy Security - from an International
Relations Perspective]," Guoji Jingji Pinglun [International Economic Review] 2005: 6 (2005); Qingyou Guan
and He Fan, "Zhongguo De Nengyuan Anquan Yu Guoji Hezuo [China’s Energy Security and International
Energy Cooperation]," Shijie Jingji Yu Zhengzhi [World Economics and Politics] 2007: 11 (2007); and Lei Wu
and Xuejun Liu, "Nengyuan Anquan Yu Zhongmei Guanxi De Zhengzhi Jingji Xue Fengxi [Energy Security and
Sino-US Relations: An Analysis from Political Economic Perspectives]," Fudan American Review 2009: 1
(2009).
20
Feng and Zhou, "Zhongguo Nengyuan Fazhan Zhanlue Yu Zhengce Yanjiu Baogao [Report on China’s Energy
Development Strategy and Policy]."

21
Felix K Chang, "Chinese Energy and Asian Security," Orbis 45: 2 (2001), p. 233.
10
and social development.22 The salience of this traditional approach was also evidenced at a
central economic work conference in 2003, where the State President Hu Jintao
conceptualized oil and finance as the two national economic security issues. 23 This traditional
understanding of energy security is also revealed in many Chinese scholarly works, as energy
security is often associated with energy or oil geopolitics or the struggle among great powers
to reach pre-eminence. Recommendations proffered by these academics to policy-makers, in
general, stay close to the external supply-sided strategies and tend to emphasize
diversification of supply sources to lower the risk of China being subject to an embargo.24
Therefore, guided by a traditional approach, Beijing perceives its primary energy security
problem as an increasing external dependence, mainly on oil import dependence issue, which
is in essence similar to that of the IWCs. This understanding has largely directed Beijing’s
energy security strategy and policies to date.
First, most Chinese analysts are worried about the reliability of oil imports from both sources
of supply and from transport through the Sea Lines of Communications (SLOCs), as 93
percent of China’s oil imports are shipped by sea, 90 percent of which are shipped by
22
NDRC, "Guomin Jingji He Shehui Fazhan De Dishige Wunian Jihua - Nengyuan Fazhan Zhongdian
Zhuanxian Guihua [the Tenth Five-Year Plan of Social and Economic Development - Special Section on Energy
Development]," ed. China National Development and Reform Commission (NDRC: Beijing 2001).
23
People’s Daily, "Chongqing Lizheng Zhongmian Shiyou Guandao Ruyu [Chongqing Fights for the Passage of
the China-Burma Oil Pipeline]," Renmin Wang [People's Daily Online], July 19, 2005.
24
See Wang Jiashu, Shiyou Yu Guojia Anquan [Oil and National Security] (Beijing: China Geology Publish
House, 2001); Yishan Xia, "Zhongguo Nenyuan Wenti Ji Jiejue Qianjing [China's Energy Security and Some
Perspectives of Solution]," Heping Yu Fazhan [Peace and Development] 2003: 4 (2003); and Yuyan Zhang and
Qingyou Guan, "Shijie Nengyuan Geju Yu Zhongguo Nengyuan Anquan [The World Energy Siutation and
China's Energy Security]," Shijie Jingji [World Economics] 2007: 9 (2007).
11
international tankers and more than 80 percent of which are shipped through the Malacca
Strait, the possibility of a deliberate interruption of energy supply by potential adversary
poses one of the biggest threats to China’s energy security. 25 As a result, the Chinese
government has made great efforts to expand its domestic oil tanker fleet to ship oil imports
and to expand the People’s Liberation Army Navy fleet to protect its oil imports. The Chinese
government planned to invest in a USD 10 billion program to allow its domestic crude tanker
fleet to ship half of the country’s total imports. 26 Meanwhile, as part of China’s military
modernization drive, it is speeding up its navy upgrading to build blue water navy
capabilities. Although it still does not have a sufficient power projection capacity yet, the
long-term goal is that military modernization will eventually allow China to protect the key
SLOCs which its oil imports go through, by the Chinese navy fleet. In January 2009, the first
group of Chinese naval ships sailed into the Gulf of Aden to join the international anti-piracy
fleet, making the first step to protect the energy SLOCs far from China’s traditional sphere of
influence.
The leadership’s concern about the security of seaborne energy imports and a desire to
diversify oil supplies away from the Middle East, as well as diversify the energy transport
route from a few SLOCs have also sparked Chinese interest in investing in Russian and
Central Asian oil fields and in the construction of large, long-distance pipelines to China
from these regions. Most Chinese analysts regard participation in the development of Russian
and Central Asian energy resources as an important source of energy security. As the
25
Bo Kong, "An Anatomy of China's Energy Insecurity and Its Strategies," (Seattle, WA: Pacific Northwest
Center for Global Security, 2005), p.15.

26
China Daily, "China to Increase Oil-Supply Security," China Daily Online (in English), at <http://china.org.cn
>, published on Jan 7, 2004, accessed May 2010.
12
influential Chinese strategist Zhang Wenmu argued in the late 1990s, oil imported overland
by pipeline would be less vulnerable to disruption than oil arriving by tanker. 27 Therefore,
Beijing reached an agreement with Moscow in 2001 to build an oil pipeline from Angarsk in
Russia’s East Siberia to Daqing in Northeast China. In 2005, the then-Russian President Putin
declared that Russia will build the China section of the Taishet-Nakhodka pipeline. It will be
built to ship 20 million tons of oil (400, 000 bbl/d) to Daqing per annum and an additional 10
million tons (200,000 bbl/d) will be sent on railway to Nakhodka.28 Construction of the first
phase of the pipeline was completed in August 2010 and put into test. However, Japan’s
involvement in persuading Russia to build a longer pipeline from Angarsk to Nakhodka,
known as the ‘pipeline incident’, strengthened Beijing’s perception that security of energy
supply is an important aspect of strategic competition, which confirmed the Western
experience.
Besides seaborne energy imports and pipeline projects, overseas energy investments and
energy diplomacy are also key aspects of China’s energy security policy. Supported by the
government, the major state energy enterprises began ‘going out’ (Zou Chu Qu) to acquire
overseas oil assets in the mid-1990s. Beijing considers the acquisition of equity oil is great
importance to China’s energy security, as the Chinese leadership believes that China cannot
depend on Western oil companies or the international oil market in times of crisis. 29 Most of
27
Wenmu Zhang, "Meiguo De Shiyou Diyuan Zhanlue Yu Zhongguo Xizang Xinjiang Diqu Anquan [U.S. Oil
Geopolitical Strategy and the Security of Tibet and Xinjiang]," Zhanlue yu Guanli [Strategy and Management]
1998: 2 (1998).
28
Weijia Ning, "Nengyuan Diyuan Zhengzhi Geju Xia De Zhongguo Zhanlue [China's Strategy in the World's
Current Energy Geopolitics Situation]" , Master Thesis, Shanghai Academy of Social Sciences, 2009.
29
See Zhang and Guan, "Shijie Nengyuan Geju Yu Zhongguo Nengyuan Anquan [the World Energy Siutation
and China's Energy Security]."
13
the Chinese state energy enterprises’ business activities have been firmly supported by the
Chinese leadership’s energy diplomacy to establish close relationships with energy producing
countries. The Chinese way of conducting energy diplomacy is also influenced by the
Western experience. Since the mid-1990s, Chinese scholars and analysts have been
suggesting the government should learn from Western experience and adopt ‘energy
diplomacy’ to address China’s energy issues. 30 The Chinese former Foreign Minister Li
Zhaoxin claimed in an interview, “Our diplomatic work should provide vigorous support to
those efforts aiming to promote international energy cooperation”. 31 With a distrust of the
international energy market, Beijing believes that special relationships with energy producers
will guarantee the country reliable access to oil imports.
As we can see, in the first decade of the 21st century, China’s energy security thinking and
policy have been overwhelmingly focused on the security of overseas energy supply,
especially the oil supply. However, with profoundly different energy contexts between IWCs
30
For example, see Qiang Wu, "Nengyuan Waijiao: 21 Shiji Zhongguo Waijiao Xin Keti [Energy Diplomacy:
The New Task to China’s Diplomacy in the 21st Century]," Guoji Zhengzhi Yanjiu [Studies of International
Politics] 2001: 1 (2001); Xuanren Qin, "Guoji Dahuanjing Ji Daguo Nengyuan Waijiao Yunchou [the
International Environment and the Energy Deplomatic Strategies of the Leading Natoions]," Guoji Shiyou Jingji
[International Petroleum Economics] 12: 1 (2004); Hui Chen, "Jingji Quanqiuhua Beijing Xia De Zhongguo
Nengyuan Zhanlue He Nengyuan Waijiao [China's Energy Strategy and Energy Diplomacy in the Context of
Economic Globalisation]," Zhongguo Baodao [China Report] 2006: 5 (2006); Hongtu Zhao, "Toushi Nengyuan
Waijiao - Jiantan Dui Zhongguo Nengyuan Waijiao de Sikao [A Perspective on Energy Diplomacy - with
Reflections on China's Energy Diplomarcy] " Guoji Shiyou Jingji [International Petroleum Economics] 2007: 10
(2007).
31
21st Century Economics, "Dapo E, Mei, Ri, Yin De Baowei Quan, Zhongguo Nengyuan De Wuhuan Waijiao
[Breaking through the Besiege of Russia, U.S., Japan and India: The Five-Circle Energy Diplomacy of China],"
21 Shiji Jingji Baodao [21st Century Business Report], Apirl 2, 2004.
14
and China, this energy security approach is largely problematic to China. To understand case,
a reassessment of China’s comprehensive energy-economy situation is necessary to indentify
clear and present threats and vulnerabilities in China’s energy sector.
Reassessing China’s Energy Security
An overview of China’s Energy Situation and Economic Structure
As economic growth has exploded, both China’s primary energy production and consumption
have increased significantly. As is widely known, in terms of total primary energy
consumption, China is the second largest energy consumer, 32 but what is less known is that
China is also the world’s largest energy producer and maintains an energy self-sufficiency
rate of over 90 percent.33
In terms of domestic energy production (See Figure 1), there appear to be three distinct
periods during the last two and half decades. From 1985 to 1995, during the rapid growth of
the economy, the energy supply began to be in shortage. This was followed by a period of
consumption stagnation and decline from 1995 to 2000. With the slowdown in economic
growth, the total energy consumption trended downward. However, from 2001 energy
consumption increased rapidly, and a gap between supply and demand has persisted since.
32
In July 2010, the International Energy Agency (IEA) announced China overtook the United States to become
the world’s largest energy consumer. However, Beijing questioned this conclusion, citing the different statistics
techniques used by China and the IEA. See IEA, "China Overtakes the United States to Become World’s
Largest Energy Consumer " International Energy Agency, at <www.iea.org>, accessed October 2010 ; and
Xinhua News, "Why IEA Names China World's Top Energy User " Xinhua News Agency Website, at <
http://news.xinhuanet.com >, published on July 22, 2010, accessed September 2011.

33
According to the World Bank, China maintained an energy self-sufficiency rate of 93 percent in 2007.
15
Despite the ups and downs, the composition of China’s primary energy production has
changed little over time. Coal continued to dominate primary energy production with a share
of over 76 percent in 2008. The share of oil production has obviously declined over time and
this trend has accelerated since 2000. Natural gas and other primary energy production have
increased, although with fluctuations. Other primary energy production shares increased at an
average of approximately three percent per annum.
A similar scenario can be found in primary energy consumption and its composition (See
Figure 2). The only difference is that, with a higher growth rate for consumption, the role of
coal as a major energy source declined slightly from over 75 percent in the 1980s and 1990s
to about 68.7 percent in 2006. Despite the economic slowdown in exports and domestic
demand since 2008, China’s demand for energy remains high. Total primary energy
consumption has also increased rapidly, and amounted to 2850.0 million tons of coal
equivalent (Mtce) in 2008, second only to that of the United States.34
34
For a comprehensive analysis on China’s energy production and consumption, see Hengyun Ma, "China’s
Energy Economy: Reforms, Market Development, Factor Substitution and the Determinants of Energy
Intensity" , PhD Thesis, The University of Canterbury, 2009.
16
Figure 1: China’s Primary Energy Production, 1978-2008

Quantity (Million Tons of Coal Equivalence)
300000
250000
200000
150000
100000
50000
Year
Coal Oil Natural Gas Nuclear and Renewable Energy
Data Source: China National Bureau of Statistics (NBS), China Statistical Year Book 2009 CD-ROM, ed.
National Bureau of Statistics of China (Beijing: China Statistics Publishing House, 2009).
Figure 2: China’s Primary Energy Consumption, 1978-2008

Quantity ( Million Tons of Coal Equivalence)
300000
250000
200000
150000
100000
50000
Year
Coal Oil Natural Gas Nuclear and Renewable Energy
Data Source: NBS, Zhongguo Tongji Nianjian 2009 [China Statistical Year Book 2009].
17
As shown in the figures above, a striking feature of China’s energy production and
consumption is a high level of dependence on coal. Based on the coal production volume in
2007, China’s coal reserves can meet the domestic coal demand for the next 80 years. 35 The
IEA estimates that China’s remaining coal resources are second only to Russia’s in the world,
totaling 1003 billion tons and yielding a reserve-to-production ratio of around 50 years. 36
Although the estimates by different agents various, there is no doubt that domestic coal
reserves will meet the bulk of its domestic demand in the foreseeable future. Oil demand has
been growing quickly, with its share in the primary energy mix reaching 20 percent in the
mid-1990s. But it has been declining in recent years. Natural gas and the country’s many
hydropower projects contribute about 10 percent. Nuclear power and renewable power
contribute just over one percent.
Evidently, China’s energy mix is in sharp contrast to that of the IWCs. Primary energy
consumption has involved a constantly high share of coal which is supplied primarily
domestically. In order to understand this situation, we need to further examine the structure of
China’s economic sector with a focus on the ‘pillar’ of Chinese economic growth in the last
three decades, the industrial sector and its energy demand.
35
Minxuan Cui, ed. Zhongguo Nengyuan Fazhan Baogao [Annual Report on China's Energy Development
2008] (Beijing: China Social Science Academic Press, 2008), p. 34.

36
OECD/IEA, World Energy Outlook 2007: China and India Insights, ed. International Energy Agency, World
Energy Outlook (Paris: International Energy Agency, 2007a), p. 334.
18
Industrial Sector, Electric Power and Energy Security in China
Since the first five-year plan in 1953, following the development model of the Soviet Union,
China has put industry (referred to as the ‘secondary sector’, Di Er Chan Ye in China), 37
especially heavy industry, as the absolute priority in its modernization project. As a result, the
most striking characteristic of the Chinese economy today is the dominant share of industry
output in its GDP. In 2008, China’s industry contributed more than half of its total GDP,
while industry in the U.S. and Japan only accounted for about 22 percent of their respective
GDPs. 38 China’s economic growth and the consequent energy demands have been largely
driven by the fast development of the secondary sector over the last decades (See Figure 3).
In 2007, industrial energy demand accounted for about 71 percent of total energy
consumption. Thus, China’s industrial sector was dominant in contributing to China’s
economy.
37
The Chinese definition of economic sectors includes primary, secondary and tertiary sector. The primary
sector mainly involves changing natural resources into primary products. Major businesses in this sector include
agriculture, forestry, animal husbandry and fishery. The secondary sector of economy includes mining,
manufacturing, production and supply of electricity, gas and water, which can be further divided as light and
heavy industry. Construction is also counted as secondary sector. The tertiary sector is involved in the provision
of service.
38
CIA, "The World Fact Book," at < http://www.cia.gov>, accessed October 2010.
19
Figure 3. China's Primary Energy Consumption by Sectors, 1995-2008
2500.00
Million Tons of Coal Equivalence (Mtce)
2000.00
1500.00
1000.00
500.00
0.00
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Year
Agriculture Industry Service
Industrial energy consumption reached 2131 Mtce in 2008, and its share in total energy
consumption reached 73.1 percent, doubling that of 1990 and tripling that of the OECD
average of 22 percent.39 Thus, in terms of production output and energy demand, industry
plays a vital role in China’s economy. As coal consumption has been on the rise in China
over the last decade and has become increasingly important to China’s economy, coal use and
the Chinese economy are closely connected by both the industrial direct end use and coal-
based electric power generation.
Similar with its overall primary energy consumption structure, coal is also the dominant
source of China’s industrial energy demands. Direct coal use accounts for half of total
industrial energy consumption. The second most important energy source is electricity,
accounting for 21.6 percent industrial energy end use in 2008. Oil only accounted for 15.2
39
OECD/IEA, World Energy Outlook 2007: China and India Insights, P. 291.
20
percent, and it has been decreasing rapidly from a peak of 20.3 percent in 2002.40 See Figure
4.
Figure 4 China's Primary Energy Consumption Structure by Source and Sector, 2008
Hydro, Coal-Other
Nuclear and Use
Other 21%
Natrual Gas Sources
4% 9%
Petroleum
(domestic)
9%
Coal-Power Coal-
Petroleum Generation
(Imported) Industrial
35% Direct Use
9%
13%
The industrial sector was responsible for as much as 95 percent of coal consumption in China
in 2007, both in the form of direct coal use and coal-based electric power demand. 41
Industrial coal consumption is mainly concentrated in four sub-sectors, namely power and
heat generation, metallurgy, chemical production and building materials. Power generation is
the biggest consumer of coal, using about 50 percent of coal consumption in China in 2008,
which means more than one-third of China’s total primary energy demands went to power
industry. The long-term trend of China’s industrial coal consumption is a monotonic shift
from direct end use to the demand for coal-based electric power. Between 1990 and 2007,
40
Guy C.K. Leung, "China's Oil Use, 1990-2008," Energy Policy 2: 38 (2010), p. 936.
41
This includes the coal used for industrial electricity generation.
21
industrial end use of coal increased on an absolute basis, but its share of total coal
consumption dropped from 34 percent to 19 percent. Over the same period, power generation
coal use increased from 26 percent to 50 percent. 42 This shows how power generation,
industrial output and economic growth closely are closely interconnected. In other words,
power generation, industrial output and economic growth actually form the basic context in
which the major energy security threats and vulnerabilities exist over the last 10 years in
China.
Energy Crises with Chinese Characteristics: 2003-2011
Electricity is the main form of secondary energy used around the world. In the countries
where industry is the major driver of economic growth, electric power accounts for a high
proportion of the total energy end use and is thus vital to a country’s overall economic
performance. In recent years studies on the relationship between electric power consumption
and economic growth have focused more on emerging economies such as China. It is well
established that electricity has been a key limiting factor to China’s economic growth and that
any shocks to the energy supply have a severe negative impact on the economy. 43 Today,
China has the second largest electricity market in the world second only to the United States.
In 2007, China had a total installed electricity generating capacity of 731 GW and about
3,042 billion kWh of generation. Among the generating capacity, 76 percent (554 GW) came
from coal. This share is one of the highest in the world, only lower than countries such as
42
Nathaniel Aden, David Fridley, and Nina Zheng, "China's Coal: Demand, Constraints, and Externalities,"
(Ernest Orlando Lawrence Berkeley National Laboratory, 2009), p. 17.

43
Alice Shiu and Pun-Lee Lam, "Electricity Consumption and Economic Growth in China," Energy Policy 32: 1
(2004); Jiahai Yuan et al., "Electricity Consumption and Economic Growth in China: Cointegration and Co-
Feature Analysis," Energy Economics 29: 6 (2007).
22
Australia, South Africa and Poland. Thus, China’s electric power system is predominantly
coal-based, which has been a consistent trend over the last three decades.
Although capacity building in the electricity production sector has increased rapidly in China,
it remains the case that it still cannot meet the rising demand for electricity. As a result,
between 2003 and 2011, there have been three waves of severe electricity shortage in China.
The damage to China’s economy from the shortage makes them the greatest real and present
energy crises since China’s emergence as a rising economy in the world.
The first wave nation-wide electric power shortages from 2003 to 2005 were without
precedence. At the peak of the shortage in 2004, a total of 24 provincial areas experienced
power brownouts, 27 provincial electricity grids had to ration power to both industrial and
residential consumers. The State Grid Corp44 alone had to cut power approximately 800, 000
times in 2004. 45 The nation-wide power deficit amounted to 50 GW, about 17 percent of
China’s total installed capacity in 2004. 46 Among regions that suffered from the shortages,
the most developed coastal provinces such as Zhejiang experienced continual power cuts and
therefore bore the heaviest loss. For instance, in the summer of 2003, all the cities and
counties in the Province had to practice power rationing, especially in industrial plants, which
44
In 2002, the State Power Corporation, which enjoyed a monopoly position in Chinese power market, was split
into two transmission companies and five power generation groups. State Grid Corporation of China (SGCC)
and China Southern Power Grid (CSG) cover respectively about 80 percent and 20 percent of the national
market.
45
Zhongyuan Zhu, "Dianhuang = Linglei Sars? [Power Shortage = Another Wave of Sars?]," Zhongguo
Baodao [China Report] 2006: 4 (2006).

46
People’s Daily, "Severe Energy Shortage Warned," at <http://english.peopledaily.com.cn>, accessed October
2010.
23
only allowed industry plants to operate on certain days of the week. The provincial capital,
Hangzhou, experienced no less than 10,000 power cuts, causing severe loss to the city’s
booming tourism industry. Province wide, there were power-cuts every day during the second
half of 2003. As a comparison, it is estimated the 2003 nation-wide SARS pandemic cost 0.3
percent of Zhejiang province’s GDP in that year while the power shortages costs at least 0.7
percent of Zhejiang’s GDP in 2003 alone. 47 By the end of 2004, Zhejiang’s electricity deficit
amounted to 7.5 GW, causing RMB 100 billion in losses, accounting for 8.6 percent of
Zhejiang’s GDP in 2004. Moreover, the Yangtze Delta area, where the Beijing-Tianjin-Hebei
economic zone is located and heavy industry is concentrated, suffered heavy economic losses
from power shortages as well. Central and western regions like Shanxi and Inner Mongolia
were also hit by large-scale brownouts. In Shanxi, the largest coal producing province, due to
the power control policy of ‘Residents First, Industrial Plants Second’, industrial plants,
including coal mining plants, had to cease production to guarantee residential electricity
supply, which caused at least RMB 18 billion in direct losses in 2004. According to estimates
by Chinese energy economists, the nation-wide incremental power shortages from 2000 to
2005 caused at least RMB 1 trillion in losses. Given that China’s total GDP in 2004 were
only about RMB 16 trillion, this is a considerable economic loss. 48
The power shortages in 2003-05 stimulated a sharp rise in new power station construction
across China. Most of the new capacity was made up of coal-fired plants, which is the key
factor driving coal consumption in the last several years. From 2002 to 2007, investment in
47
Huikai Ding, Wen Jin, and Jiying Jin, "Dianhuang Chansheng De Yuanyin Ji Yingdui Celue Fenxi [the
Reason of Electrical Power Shortage and the Countermeasure Analysis]," Journal of Shanghai Institute &
Electric Power 20: 4 (2004), p. 46.

48
Yilin Yang, "10000 Yi Wunian Dianhuang Sunshi Dangtou Banghe [Five Years of Electricity Shortage
Caused 1 Trillion Loss]," Xinyuanjian [C-Thinking] 2005: 2 (2005).
24
generation capacity increased from RMB 74.7 billion to RMB 322.6 billion at an average
annual increase of 28 percent. At the same time, investment in grids annually increased by 9
percent, from RMB 157.8 billion to RMB 245.1 billion. 49 China brought two additional coal-
fired power plants to the power grid every week, and a total 361 plants were established
between 2002 and 2006.50 Approximately 100 GW of new electric power were generated
every year, roughly the equivalent of the UK and Thailand’s total capacities combined. 51
China had 380 million KW of installed power generating capacity by the end of 2003. By the
end of 2007, this figure jumped to 713 GW. Chinese electricity output has jumped three-fold,
from 1910.6 GWh in 2003 to 3271.2 GWh in 2007.
In the first two months of 2008, a total of 19 provincial areas experienced power blackouts
and brownouts similar to the ones in 2003-05. Given the vast territory and the geographic
mismatch of major coal producing regions and consuming regions, the transportation of coal
has been a key factor determining China’s energy economy performance in the last 40
years. 52 Since 2001, coal transportation has accounted for no less than half of the national
railway capacity and a quarter of the highway capacity. As the main inter-provincial energy
transportation, railway shipments of coal reached 1.2 billion tons in 2007, accounting for
49
Qiang Wang, Huan-Ning Qiu, and Yaoqiu Kuang, "Market-Driven Energy Pricing Necessary to Ensure
China’s Power Supply," Energy Policy 37: 7 (2009a), p. 2498.

50
J Kater et al., "The Future of Coal," (Cambridge, MA: Massachusetts Institute of Technology, 2007).
51
R. M Wasser, "Clean Ambitions", at <http://www.chinadialogue.net>, published November 7, 2007, accessed
October 2010.
52
There are 27 out of 32 provincial regions in China that produce coal. But the geographic distribution of coal
resource is quite uneven across regions. The major deposits are found in the Northern China, but the major
consumer provinces are located at Southeast China. See Ma, "China’s Energy Economy: Reforms, Market
Development, Factor Substitution and the Determinants of Energy Intensity", p. 80.
25
almost half of China’s coal production and half of total railway cargo in that year. 53
However, heavy snow and ice that lasted for two weeks at the beginning of 2008 cut power
supplies to the rail networks in central China that carry the bulk of coal to power stations and
damaged electricity grids as well. A total number of 36,700 power lines were cut off and
2,018 substations were deactivated, with more than 30 million people and thousands of
industrial enterprises affected by blackouts or brownouts. 54 Shortages continued after coal
supplies were disrupted to 17 provinces in February. The fuel stocks for power stations in
southern China were operating with 16.5 million tons of fuel stock, a record low. These fuel
stocks were only enough to meet demand for seven days. In response, the government had to
divert extra rail cars to move coal and sharply increase volumes shipped south by sea from
the major northern port of Qinhuangdao in Hebei Province. 55
Then again in 2011, a robust power consumption increase and huge supply gap brought
another wave of shortages. According to China Electricity Council (CEC), electricity
consumption for the first quarter of 2011 rose 12.7 percent over the previous year to exceed
one trillion KWh. Power consumption in some energy-hungry industries such as construction,
manufacturing and smelting climbed 11.1 percent year-on-year to 351.2 billion KWh during
the January-March period, the greatest demand seen since the second quarter of 2010.56 The
53
Ibid., p. 86.
54
Ping Zhang, "Guowuyuan Guanyu Kangji Diwen Yuxue Bingdong Zaihai Ji Zaihou Chongjian Gongzuo
Qingkuang De Baogao [the State Council's Report on the Blizzards Harzard and the Countermeasures],"at
<http://npc.people.com.cn>, published April 22, August, accessed October 2010.

55
David Lague, "Blizzards and Coal Shortages Strain China’s Rail Network " The New York Times, February 1,
2008.
56
China Daily, "Chinese Provinces Grapple with Power Shortage" at < http://www.chinadaily.com.cn>,
published April 29, 2011 accessed May 2011.
26
State Grid Corp expected the most recent power crisis would be even worse than the 2003-05
shortages. In May 2011, CEC and the State Grid Corp confirmed that some 26 provincial
regions would suffer combined power shortages of at least 30 Mkw in the summer. This
figure, according to an energy analyst, is about twice the shortage that Japan was facing after
the catastrophic earthquake and tsunami in March 2011. 57 At least 10 provincial grids,
covering the country’s export-oriented eastern provinces such as Beijing, Tianjin, Shanghai
and industrial provinces of Hebei, Jiangsu and Zhejiang, were expected to be hit by power
shortages again. 58 Zhejiang Province was facing power shortages of up to 2.7 Mkw in April
alone, the region's worst shortage since 2004. Power rationing measures had to be practiced
again, which severely constrained the national industrial output. It is expected that China's
industrial output in the second quarter of 2011 would fall by one percentage point, to 14
percent from the earlier expectation of 15 percent, while the GDP growth rate will be dragged
down by 0.5 percentage points to 9.7 percent.59
To meet the demands for power in the coming decades, China will need to add nearly nine
times as much electricity generation capacity as the United States will. 60 Despite the
enormous effort this will entail, the power shortages demonstrate that increasing only power
capacity does not suffice to ensure adequate power supply. Besides the generating capacity
and coal transportation issues, construction and development of power grids in China also
57
Judith Wang, "News Focus: China Power Shortage Hits Petrochemicals" at < http://www.icis.com>,
published May 21, 2011, accessed July 2011.

58
China Daily, "Power Shortage May Be Worse Than the Worst" at < http://www.chinadaily.com.cn>,
published May 23, 2011, accessed July 2011.

59
Judith Wang, "News Focus: China Power Shortage Hits Petrochemicals."
60
Keith Bradsher, "China Leading Global Race to Make Clean Energy" at <http://www.nytimes.com>,
published January 30, 2010, accessed October 2010.
27
tends to be sluggish. Even when the seven individual grid systems function well, their
interconnectedness is far from adequate, resulting in insufficient inter-grid electricity
exchange capacity. 61 More importantly, the problematic institutional arrangements of China’s
power sector, which is referred as ‘institutional insecurity’ by Johns Hopkins University
analyst Bo Kong, have gradually become one of the biggest threats to China’s long-term
energy security. 62 For instance, although China's installed generative capacity has continued
to increase since 2005, the amount generated by thermal power actually decreased in the first
half of 2011, causing the country's total amount of ‘effective power supplies’ to decline,
according to the CEC. Increasing coal prices have removed incentives for power companies
to expand capacity. Some of these companies have even temporarily shut down their plants
because of coal shortages.63
Therefore, reform of the coal and electricity markets is a much more profound issue that is
likely to decide China’s overall energy security situation in the long run. China’s coal and
electricity industries have a strong reliance on each other. In order to guarantee the fuel
supply for electricity generation, the Chinese government made the policy of ‘Coal-
Electricity Interaction’ (Mei Dian Lian Dong) in 2004.64 Nevertheless, it is very difficult for
61
Wang, Qiu, and Kuang, "Market-Driven Energy Pricing Necessary to Ensure China’s Power Supply," p.
2498.
62
Bo Kong, "Institutional Insecurity," China Security, 2006: 3 (2006). For a detailed analysis on the instituional
problem in China’s electricity sector, see Chung-Min Tsai, "The Reform Paradox and Regulatory Dilemma in
China's Electricity Industry," Asian Survey 51:3 (2011).

63
China Daily, "Chinese Provinces Grapple with Power Shortage."
64
China News, "Zhikao Meidian Liandong Gaige Diyi Nian - Meidian Zhizheng Zenyang Huajie [the First Year
of 'Coal-Electricity Interreaction' Reform, How to Deal with the Quarrel between Coal and Electric Sectors?],"
at <http://www.chinanews.com >, published January 7, 2010, accessed October, 2010.
28
these two sectors to form stable, reasonable, and transaction cost-saving relationships under
the excessive intervention of government policies and instructions. Disputes over coal price
and production-consumption quotas occur frequently between the two sectors. The coal
market has been competitive since 1980 due to a dual track approach, but coal sold to the
power sector was still tightly controlled by government-guided pricing. Unlike coal, entry to
the electric power sector was gradually relaxed but generation and retailing tariffs are still
strictly regulated. As energy demand and prices soared over the last decade, coal and
electricity enterprises become increasingly dissatisfied with price setting of coal sold to the
electricity industry.65 In both 2008 and 2011, the shortages deteriorated rapidly due to a large
number of power plants struggling to secure increasingly costly coal (which was caused by
the coal price reforms the year before) while other power plants shut down capacity rather
than racking up losses by selling electricity at low rates. For all the recent discussion of
energy security, major energy crises caused by power shortages are still looming on the
horizon. The CEC expects power shortages to persist or worsen around the middle of the 12th
Five-Year Plan (2011-2015).66
Conclusion and Future Prospects
With the analysis in the preceding sections, we find that the major IWCs mainly constructed
outward-looking policies to safeguard their energy security over last few decades due to the
common vulnerability of external energy dependence and the threat of supply risks as they
faced. In China’s case, although a similar approach was established, there is clearly a gap
65
Bing Wang, "An Imbalanced Development of Coal and Electricity Industries in China," Energy Policy 35: 10
(2007), p. 4959.
66
China Daily, "Chinese Provinces Grapple with Power Shortage."
29
between the approach and the energy security situation. Unlike the IWCs, the primary energy
vulnerability in China has been the reliance on coal-based electric power to fuel economic
growth; and the primary threats have been lagged power capacity building, domestic energy
transportation and problematic institutional arrangements. All these findings indicate that a
primarily outward-looking approach as China has employed over the last 10 years, may not
contribute much to address the most urgent energy security problem. As the influential
energy security scholar, Professor Daojiong Zha of Beijing University comments, “…we are
limiting ourselves to understand China’s energy security issue from the view of external
energy dependence and overseas supplies to meet China’s energy demand… our mainstream
research has almost exclusively based on the strategic considerations in the event of China
67
being involved in war, which is the worst scenario of energy insecurity”. For China, a
outward-looking energy security approach provides only a very limited understanding of
China’s energy security situation and is unhelpful when it comes to addressing energy
security issues comprehensively. Instead, a broader energy security approach which is also
with ‘Chinese characteristics’ that integrates more energy sectors and inward-looking issues
such as coal based-electric power, and includes issues like the security of domestic energy
development should be developed to guide scholarly research and policy making.
However, we should also keep in mind that China is a country in economic transition as well
as in ‘energy transition’. International research suggests that structural change in the
economy, from agriculture to industry then to services, causes similar structural shifts in
67
Daojiong Zha, "Kuozhan Zhongguo Nengyuan Anquan Yanjiu De Keti Jichu [Expanding the Research Area of
Energy Security in China]," Shijie Jingji yu Zhengzhi [World Economics and Politics] 2008: 7 (2008), p. 80.
30
energy consumption.68 It is undeniable that, albeit slowly for such a large country, China’s
energy situation is undergoing a similar structural transition, from low efficiency solid fuels
to oil, gas, and electric power, from heavy industry to lighter and high-tech industry.
Accordingly, rapid economic growth and industry upgrade in China will possibly translate
into a need to significantly expand the share of oil and gas in its energy consumption
structure, and enhance energy imports. Such an increase will bring serious supply pressures
on both domestic and external energy supplies. According to IEA, China’s oil imports in
2030 alone will be equal to the European Union’s imports at the same time.69 Thus, if the
material basis will become increasingly similar to that of the IWCs, will the traditional
approach in China be justified as the mainstream?
The development of energy situation in China will depend on technological progress, the
development of an energy-intensive sector, and the adoption of appropriate policies such as
private automobile control and public transportation now and to the near future. Increasing
fossil fuel imports can be offset by increasing domestic energy production or by
improvements in the efficiency of use, particularly in the production of electric power.70
Although it is predicted that economic growth and industry upgrade will expand the share of
oil and gas in China energy consumption, it is also true that coal will remain the dominant
fuel in China’s energy mix and coal-based electricity generation will continue to be the key to
68
For instance, Andreas Schäfer illustrates such structural energy consumption shifts for 11 world regions from
1971 through 1998. See Andreas Schäfer, "Structural Change in Energy Use " Energy Policy 33: 4 (2005).
Similar analysis can also be found in Nebojša Nakićenović, Arnulf Grübler, and Alan McDonald, eds., Global
Energy: Perspectives (Cambridge, UK: Cambridge University Press, 1998).

69
OECD/IEA, World Energy Outlook 2007: China and India Insights, p. 283.
70
F. Gerard Adams,,and Yochanan Shachmurove. “Modeling and Forecasting Energy Consumption in China:
Implications for Chinese Energy Demand and Imports in 2020.” Energy Economics 30: 3 (2008), p. 1263.
31
drive China’s economic growth. Coal consumption is expected to grow slightly in the near
term before slowly falling back to 63 percent by 2030. The electric power sector will remain
the main coal user through to 2030, accounting for more than two-thirds of the incremental
coal demand. Coal use for coal-liquids (CTL) plants is expected to rise rapidly, compensating
a significant amount of oil deficit. 71 Electricity supply will be continually under heavy
pressure. In order to sustain continuing economic growth, power generation is projected to
more than triple by 2030. China’s generation by that time will be comparable to the current
level of production in OECD North America and Europe combined. 72 Therefore China will
continue to rely on domestic energy production to meet the majority of its energy demands in
the foreseeable future. As the largest energy producer in the world, China is unlikely to
transit to a high external energy dependence economy such as Japan and Western Europe.
Nevertheless, one particular issue will become increasingly problematic in China’s
comprehensive energy security picture. The constant high share of coal in energy mix means
the pollution will persist and the huge quantity of Green House Gas (GHG) emission will
keep China the world’s champion in terms of GHG emitter. The blurred boundary of energy
security and environment security will put China in a dilemma between economic growth and
the environment responsibility to its own people and to the world. Being aware of this, China
is actively seeking for the way out with ambitious plan to promote the ‘new energy
technology’ such as wind power, solar power and nuclear electricity. Although with huge
investments in recent years, the combined energy production of hydro, nuclear and new
71
Ibid., P. 288.
72
Ibid., p. 344.
32
energy sources only accounts for about 10 percent in China’s energy mix. 73 Thus, the world
has to accept a coal-based Chinese economy at least in the next few decades. Therefore, how
to incorporate the coal-electricity sector and its environmental dimension to an energy
security approach with ‘Chinese characteristics’ is likely to become the biggest challenge in
the long run.
73
In 2009, China overtook the United States as the largest renewable and clean energy investor in the world.
China invested USD 34.6 billion in renewable energy, almost twice as much as the United States did in that
year. By the end of 2010, China had 13 installed nuclear reactors and another 28 are under construction, nuclear
electricity accounts for only one percent in primary energy mix. In the foreseeable future, the share of nuclear
energy in China’s energy mix will not exceed three percent. See Simon Rogers, "How China Overtook the US in
Renewable Energy," at <http://www.guardian.co.uk>, published March 25, 2010, accessed October 2010; and
"Zhongguo Hedian Bili Jiang Buchaoguo 3% [the Share of Nuclear Energy Will Not Exceed 3%]" Di Yi Cai
Jing Bao [The First Financial News], March, 29 2011.
33

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Energy Security in China: Going Beyond the Traditional Approach

Energy Security in China: Going Beyond the Traditional

security approach characterized by a supply-sided, primarily oil-oriented strategic thinking,

the major IWCs. 2

accurately is oil security”. 4

Statistics Publish Service, 2009).

comprehensive reassessment of China’s energy situation to identify the urgent energy

energy security is far from adequate.

China and the West: A Convergence of Approaches

A Traditional Energy Security Approach in the IWCs

Traditionally, the concept of security in International Relations studies was commonly

reflects a combination of threats and vulnerabilities”, and, “…(the) distinction between

seek to reduce their insecurity either by reducing their vulnerability or by preventing or

addressing its sources”.10

been marked by an outward-looking approach focusing on the security of external energy

vulnerability of heavy energy dependence is almost unshakable.

unstable regions over the last few decades.

"International Energy Statistics" at <http://www.eia.doe.gov>, accessed August 2010.

France’s net imports as percentage of energy use close to 50 percent in 2007.

Doctrine," International Journal 62: 1 (2006).

immediately suffered from a new oil shock.18

The Dominance of the Traditional Approach in China

experiences of energy insecurity and their strategies as China became a rapidly-growing

energy importer in the world.

consumer and importer in the world.

recommendations found in the Western literature on energy security. A significant number of

the energy decisions taken during the rest of the decade.

Development Strategy and Policy]."

to reach pre-eminence. Recommendations proffered by these academics to policy-makers, in

energy security strategy and policies to date.

China's Energy Security]," Shijie Jingji [World Economics] 2007: 9 (2007).

Strait, the possibility of a deliberate interruption of energy supply by potential adversary

Center for Global Security, 2005), p.15.

>, published on Jan 7, 2004, accessed May 2010.

involvement in persuading Russia to build a longer pipeline from Angarsk to Nakhodka,

supply is an important aspect of strategic competition, which confirmed the Western

and China's Energy Security]."

will guarantee the country reliable access to oil imports.

21 Shiji Jingji Baodao [21st Century Business Report], Apirl 2, 2004.

a reassessment of China’s comprehensive energy-economy situation is necessary to indentify

clear and present threats and vulnerabilities in China’s energy sector.

Reassessing China’s Energy Security

An overview of China’s Energy Situation and Economic Structure

have increased significantly. As is widely known, in terms of total primary energy

rate of over 90 percent.33

http://news.xinhuanet.com >, published on July 22, 2010, accessed September 2011.

average of approximately three percent per annum.

equivalent (Mtce) in 2008, second only to that of the United States.34

Intensity" , PhD Thesis, The University of Canterbury, 2009.

Figure 1: China’s Primary Energy Production, 1978-2008

Figure 2: China’s Primary Energy Consumption, 1978-2008

contribute just over one percent.

three decades, the industrial sector and its energy demand.

2008] (Beijing: China Social Science Academic Press, 2008), p. 34.

Energy Outlook (Paris: International Energy Agency, 2007a), p. 334.

Industrial Sector, Electric Power and Energy Security in China

consumption. Thus, China’s industrial sector was dominant in contributing to China’s

Figure 3. China's Primary Energy Consumption by Sectors, 1995-2008

based electric power generation.

Energy Crises with Chinese Characteristics: 2003-2011

(Ernest Orlando Lawrence Berkeley National Laboratory, 2009), p. 17.

Feature Analysis," Energy Economics 29: 6 (2007).

energy crises since China’s emergence as a rising economy in the world.

Baodao [China Report] 2006: 4 (2006).