China's Quest for Energy

November 2011  |   Nam D. Pham, Ph.D.

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China’s rapid industrial growth in the past three decades—averaging nearly 12% per year—has fueled a surging demand for energy. Indeed, in 2009, China edged out the United States to become the world’s largest energy consumer and in the late 1990s China shifted from being a net energy exporter to a net importer. China’s demand for energy continues to grow and is expected to account for a quarter of global energy consumption by 2035. Consequently, the quest for energy supplies has taken on strategic importance. Evidence shows that China has led an intensive search for all available energy supplies, ranging from coal to hydroelectric power, both at home and abroad.

Like most other countries, fossil-based fuels, mainly coal, are the largest component in China’s energy mix, and this is not expected to change anytime soon. Although nuclear energy is currently less than 1% of the country’s energy mix, many nuclear power plants are currently being built. And alternative energy sources, although growing rapidly, still account for a negligible share of China’s energy consumption. Nonetheless, Chinese manufacturers are major exporters of solar panels and wind turbines.

Chinese energy and power companies enjoy heavy sales volumes, and high profit margins, and are major employers. In addition, Chinese national oil companies, supported by Chinese banks and government agencies, are actively pursuing foreign investment opportunities in fossil-fuel-based energy projects overseas. To secure these reserves, they are using multiple strategies including market-for-resources, equity shares, service contracts, and long-term loans. China is in the quest of energy. Although investment in clean energy is rising, it is still a long way for clean energy to gain a significant share of China energy consumption.