Without a doubt, China has undergone the most spectacular transformation of any country in the world since the 1980s (see box below). From a closed and faltering Communist economy, it has embraced globalization, constructing ports and sprawling metropoles and emerging as the world’s biggest car market. Today, it is the second-largest global economy behind the United States and is slated to take the number one spot between 2030 and 2035.
Energy Consumption Slowdown
To fuelFuel is any solid, liquid or gaseous substance or material that can be combined with an oxidant... such huge expansion, massive quantities of energy were required. Consumption tripled between 1990 and 2015, from 650 million metric ton of oil equivalent (toe)Unit of energy measurement corresponding to the energy produced by the combustion of a ton of oil... (Mtoe) to 1,900 Mtoe (in comparison, France consumes 162 Mtoe). In 2016, China was the world’s largest energy consumer, accounting for 23% of global energy consumption1. Relative to the number of inhabitants, energy consumption in China still remains low. It slightly exceeds the global average, but is almost two times less than the average of the most developed OECDFounded in 1960, the OECD promotes policies that will improve the economic and social well-being of people around the world... countries2.
26.4%: The share of renewable energies in Chinese electricity generation.
In 2016, energy consumption growth in China (1.3%) still exceeded the global average (1%). However, it was much slower than in previous years (energy consumption growth averaged 5.3% a year between 2005 and 2015), reflecting a slowdown in the Chinese economy after years of double-digit expansion and the measures taken by the Chinese government to improve the country’s “energy intensity”3. The only way China can contain its energy needs while pursuing further growth is by using energy more efficiently (see Close-Up: “China’s New Responsibilities”).
Coal, Dominant for Years to Come
China’s economic leap was powered by coalCoal is ranked by its degree of transformation or maturity, increasing in carbon content from... , a resource that the country has in abundance. Not only does China produce more coal than any other country (it holds the second-largest coal reserves behind the United States), it imports more coal than any other country too, including India. Coal accounted for 62% of the country’s primary energyAll energy sources that have not undergone any conversion process and remain in their natural state.. mix in 2017, down from 74% in the mid-2000s. In the same year, coal was used to generate 65% of its electricityForm of energy resulting from the movement of charged particles (electrons) through a conductor... , compared with 1.8% in France and 30.1% in the United States. See the graphs below.
Despite the Chinese authorities’ proactive efforts to reduce the use of coal in order to tackle the resulting air quality and health problems, coal will continue to dominate the country’s energy landscape. Illustrating the rigidity of China’s energy system, the share of coal in its primary energy mix will still exceed 40% in 20404.
Coal will still account for more than 40% of China’s primary energy mix in 2040.
China boasts the largest hydroelectric capacity in the world, symbolized by the giant Three Gorges Dam on the Yangzi Jiang river, which came on stream between 2006 and 2009. Wind and solar were added to its energy mixThe range of energy sources of a region. in 2000. Both energy sources have grown steadily ever since, with installed solar photovoltaic capacity more than doubling between 2015 and 2017 and China holding around one-third of global installed wind capacity, despite the pace of growth in wind powerIn physics, power is the amount of energy supplied by a system per unit time. In simpler terms, power can be viewed as energy output... slowing since 2015.
Consequently, China is now the world’s leading producer of renewable electricity. In 2017, renewables accounted for 26.4% of its electricity generation. The trend is reflected at the industrial level, with China producing more than a third of the world’s solar panels and holding a place among the world’s leading wind turbine manufacturers.
Oil and Gas
China is not a major oil and gas producer and must therefore import most of what it consumes. Its oil dependency rate hit 68% in 2016, a record high. The country has become the world’s leading oil importer. Gas only accounts for slightly more than 5% of its total primary energy consumption, but imports jumped 33% in 2017. The trend is set to pick up pace and China will become a key player in the world liquefied natural gas (LNG)LNG is composed almost entirely of methane. Liquefying the gas reduces its initial volume by a factor of around 600... market over the coming years.
Such oil and gas dependency has a very strong influence on geopolitics. China is reinforcing its military capabilities and opening many new bases around the world, as well as investing heavily in global ports in order to protect its shipping supply routes and create markets for its products. In addition, it is increasing gas purchases from Central Asia and Russia in order to diversify its supply.
China has embarked on a long-term nuclear power development plan. At the end of 2017, its installed nuclear capacity totaled 34 gigawatts. It has set itself the objective of reaching 58 gigawatts by 2020, the equivalent of France’s installed nuclear capacity. However, the country wants to go even further and is targeting 150 gigawatts to 200 gigawatts by 2030, around half of current global installed nuclear capacity5. Despite such ambitions, nuclear power will only represent 6% or 7% of its total electricity generation, versus 4% today.
Graphique 1: Final Pimary Energy Consumption 2017 - source Statista
Graphique 2: Electricity Generetion by Source 2017 - source ChinaEnergyPortal
Two years after the death of Mao Zedong in 1976, China began a period of economic reform and opening-up to the world. Between 1978 and 1988, Mao’s successor, Deng Xiaoping, decollectivized agriculture, created special economic zones for foreign investment and transformed the country into a market economy without dismantling any of its Communist institutions.
First dubbed the "workshop of the world", China flooded the markets with its products, thanks to its low salaries and the undervalued yuan. Over the subsequent years, its industries have developed increasingly sophisticated technologies with the help of foreign companies that are drawn to the huge Chinese market. Boasting substantial monetary reserves, China holds more U.S. debt than any other country in the world.
From more than 80% in 1970, its rural population fell to 43% in 2016. Some 500 million Chinese people have moved to cities. With the explosion of the middle classes in China, per capita GDP has risen from $200 to more than $8,000 (France: $37,000). The number of cars sold increased fivefold between 2005 and 2015.
The only area where growth is flat is the population. According to official statistics (which are sometimes disputed), China officially has 1,380 million inhabitants, or almost 20% of the global population. It is forecast to be overtaken by India in 2025 (current population: 1,324 million). The demographic stagnation is due to the "one child" policy, which was strictly enforced until 2015. It is starting to have a negative effect on the Chinese economy, as the rural labor pool is shrinking, which is pushing up salaries and weighing on companies' profitability. In addition, the one child policy has resulted in accelerated aging of the Chinese population, but China does not have similar pension schemes to OECD countries.
(3) Energy intensity measures energy consumption against gross domestic product (GDP).
(5) See study by the French Nuclear Energy Society (SFEN) (in French only)