Academic journal article Forum for Applied Research and Public Policy

Energizing China's Economy

Academic journal article Forum for Applied Research and Public Policy

Energizing China's Economy

Article excerpt

The moderate growth of China energy sector has not hampered its soaring economy.

China, the last of the major Communist nations, has made massive strides during the past two decades toward becoming an industrialized nation with a market-driven economy. Its people--a fifth of the world's population--are still among the world's poorest, but rapid industrialization and urbanization are preparing them to make China a major economic power in the 21st century.

The rising economy and rising health standards are already having a profound impact on China's welfare. In the second half of the 20th century, for instance, the lifespan of the average person in China has doubled.

But there have been some costs as well. The environmental deterioration accompanying rapid industrialization and urbanization is using up about a seventh of China's gross national product and may take a heavy toll on the nations health during the next few decades.

Despite the dramatic rise in China's economy, the country's energy consumption has grown at a much more modest pace. Unlike other developing countries in Asia, both the amount of energy and carbon consumption per dollar of gross domestic product have decreased dramatically in China during the past two decades. With average GDP growth rates about 10 percent and growth rates of energy consumption averaging 5 percent, China shattered the traditionally held notion that economic growth and energy consumption are intrinsically coupled. Nevertheless, in 1994, China overtook Russia and is still today second only to the United States among the largest energy consumers in the world.

China's experience suggests that energy limitations may not be a constraint to rapid economic growth. Indeed, China's economy has managed to thrive despite limitations in energy supplies and low energy efficiencies. Whether or not China can sustain this level of growth remains to be seen.

Supply and Demand

China's energy system is primarily fueled by coal. Today, 75 percent of China's power system relies on coal, the highest of any major world economy. Although coal once provided over 90 percent of China's energy supply, that portion began to decline in the 1960s as new oil and gas fields were brought online, and it reached a low of 69 percent in 1976. Since about 1980, however, the importance of coal and hydropower has slowly increased in terms of production and consumption, while the shares of oil and natural gas have experienced relative decline.

The most significant energy policy change China has experienced during the past few decades has been in the way energy is mobilized, processed, and used. In 1980, for example, only a fifth of the coal consumed was burned in utility plants to generate power and heat for end users. The vast majority was consumed directly in boilers, stoves, and other self-standing units. By 1998, the proportion of coal consumed by utility plants had increased to about a third.

China has basically two energy systems. One system feeds into industrialized and urban zones and is dominated by fossil fuels. The other system, which is rural and largely agricultural, is dominated by biomass; 75 percent or more of the country's rural population depends largely on wood, straw, and dung for its daily heating and cooking needs.


As the world's largest producer of coal, China produces about 1.6 billion tons a year. The country's resource base is more than sufficient to support this production. At 115 billion tons, China's proven coal reserves are the third largest in the world, following the former Soviet Union and the United States.

Most of China's easily accessible high-quality coal is located in northern China. Coal from the southern part of China is generally higher in sulfur and ash, making it costly and potentially environmentally damaging for many uses. Consequently, large amounts of coal are shipped from China's north to its south, putting a great strain on the transportation system, especially the railroads. …

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