Vladimir MATVEEV

Vladimir Matveev, Ph.D. (Econ.), chief researcher at the Center for SCO Studies and Regional Security Problems, RAS Institute of Far Eastern Studies (Moscow, Russia)

The development of Chinas gas industry cannot be reviewed outside the context of the development problems that have arisen throughout its entire energy sphere.

The growth of the Chinese economy in the midterm is largely related to the increase in the share of consumption of efficient energy resourcesnatural gas, oil, hydro-, and nuclear power, although at present their share in the production structure of energy resources is relatively small. But drawing effective energy resources into circulation is fraught with a fair number of problems.

At the present time, the high rates of growth in the Chinese economy are not sustained by corresponding development in the fuel and energy complex. The PRC is increasingly becoming a net importer of energy resources. Over time, the shortage of energy resources will only rise, and meeting the needs of the national economy for them in full measure will become one of the active factors in the states foreign policy strategy.

A key facet of Chinas energy diplomacy is stable and guaranteed provision of the countrys needs for highly efficient energy resources, meaning oil and natural gas. Due to the PRCs extensive involvement in the globalization processes, significant attention should be given to such external factors of world energy market movement as a change in the geopolitical situation and the related increase in political risks and instability in hydrocarbon production, increase in world prices for oil and gas, greater state participation in world energy resource trade, and so on.

In addition, several national features of the countrys oil and gas sector should be taken into account in Chinas energy policy, in particular:

the high level of state participation in the development of oil and gas resources;

the discovery of new promising oil and gas fields in difficult-to-access mountainous and desert terrains;

the underdevelopment of the gas transport infrastructure.

And another no less significant factor of Beijings energy policy is the need to optimize the countrys energy consumption. At present, the Chinese leadership has been giving great attention to the problem of excessive energy consumption. The first session of the Chinese National Peoples Congress of the 11th convocation held recently in March 2008 paid special attention to this.

As early as 2006, in order to economize on energy resources, there were plans to reduce their use per capita GDP by 20% over five years. But in 2006 no energy resource saving was accomplished, while in 2007 only 3.7% was saved instead of the planned 5%. In addition, it is becoming clear that most of the foreign direct investments drawn into the PRC are going into the energy-intensive branches of the economy, which only aggravates the high demand for energy resources.

Due to these negative trends, the Chinese government has been taking several major steps over the past five years. In particular, it closed down a large number of small and inefficient thermal power stations, small coal mines, and outmoded energy-intensive production units in metallurgy, the cement industry, and so on. During the Eleventh Five-Year Plan (2006-2010), as Premier of the PRC State Council Wen Jiabao stated, progress in national sciences and technology is a high-priority and strategic task. China has entered that historical period when scientific-technical progress and innovations are giving an ever-greater boost to

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