China’s Energy Development: Strategic Dominance And Exclusivity

By William Hawkins | September 1, 2010

At the July meeting of the Association of Southeast Asian Nations (ASEAN), Secretary of State Hillary Clinton said that Washington has grown increasingly concerned about the competing claims for territory in the South China Sea. The struggle between China, Vietnam, Malaysia, Indonesia, Brunei, Taiwan, and the Philippines for control of the region’s waterways is bound up with the global competition for energy supplies. The South China Sea is the principle trade route through which 85 percent of the oil for the industrial economies of Northeast Asia moves. Meanwhile, the islands and atolls of the region confer oil and mineral rights in the adjacent seabeds.

Beijing vehemently protested Clinton’s statement. A July 26 editorial in the Chinese Communist Party publication Global Times called it American “interference in disputed areas.” The voice of the ruling party declared, “China’s long-term strategic plan should never be taken as a weak stand. It is clear that military clashes would bring bad results to all countries in the region involved, but China will never waive its right to protect its core interest with military means.” And to prove its point, the Chinese held a major military exercise in the South China Sea the following week.

As China’s economy booms with 10 percent growth rates, energy development is a top priority of both foreign and domestic policy. China needs to raise the living standards of over a billion people, so while efficiency is important to central planners, conservation and ecology are not. Beijing announced last December at the UN climate conference in Copenhagen that it would reduce its carbon intensity by 40-45 percent by 2020 (relative to 2005), but would still be increasing total emissions for decades to come.

China has led the developing countries in their absolute rejection of any UN agreement that would limit greenhouse gas emissions or slow economic growth. Beijing holds to the view that when it comes to the environment, it will only take “voluntary actions” in accord with “national conditions”—and national conditions require high economic growth rates.

China’s largest source of renewable energy is hydro-electric with wind power second. China is the world’s leading producer of wind turbines and is exporting them to the U.S. There is rapid expansion planned for solar power. Chinese industry now accounts for 40 percent of world solar panel production. But even in China, solar will produce only a fraction of the power needed, well behind hydro and wind, and even further behind conventional sources such as coal, oil and natural gas. China is the third largest coal producer in the world, and the second largest oil importer.

Coal generates 80 percent of Chinese electricity, and China burns more coal than the U.S., European Union and Japan combined. More plants are being brought online rapidly. Anyone who has been to China has seen the heavy smog over its cities, unlike anything seen in America. Only half the country’s coal-fired power plants have the emissions control equipment to remove sulfur compounds that cause acid rain. There are no regulations for greenhouse gas emissions. Only about 60 percent of the new plants being built use “clean coal” technology because of its expense.

China has 24 nuclear power plants under construction, and more being planned. Nuclear plants can be located in coastal areas that are inconveniently far from the coal fields. Though currently dependent on Western technology, Beijing’s goal is to create a self-reliant nuclear industry, with a rising share of electricity coming from the atom.

Beijing’s lust for energy will most affect the world through its increasingly aggressive foreign policy. Its 2008 Defense White Paper asserts that “struggles for strategic resources, strategic locations, and strategic dominance have intensified.” The Pentagon’s 2009 report to Congress on the Chinese military cited “dependence on secure access to markets and natural resources, particularly metals and fossil fuels, has become an increasingly significant factor shaping China’s strategic behavior,” One consequence has been Beijing’s support for rogue regimes like Iran and Sudan which are major suppliers of oil. Indeed, Chinese diplomatic support for the Tehran regime as it develops nuclear weapons, tests long range missiles, and sponsors militia groups in neighboring states indicates that Beijing has concluded that Iran is the “strongest horse” to which it should hitch its policy in the oil-rich region.

China is also spreading its influence in Central Asia, Africa and Latin America, wherever there is oil or other natural resources its industry needs. As Robert Kaplan argued in the May/June 2010 issue of Foreign Affairs, “Beijing cares little about the type of regime with which it is engaged; it requires stability, not virtue as the West conceives of it.” And wherever it can, it buys the oil and gas fields, not just what the fields produce. If it is going to import energy, it wants to import from itself. Its state-owned companies explore, drill, and ship; running fields and providing security with their own people. They are not going to sell in the open market, they are taking resources off the market for China’s exclusive use. Beijing is trying to secure itself both physically and financially as the global competition for energy heats up and prices rise.

Last January, China created a strategic energy planning office called the National Energy Commission (NEC) consisting of 21 ministers and directors. This super-ministry has raised energy development to the highest national level possible, while centralizing power for energy planning.

Beijing knows what it needs and is going after it. Can America claim to be doing the same, either at home or abroad?

William R. Hawkins, a former economics professor and Congressional staffer, is a consultant specializing in international economics and national security issues. He is a contributor to

SFPPR News & Analysis.