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5 White Paper on the Business Environment in China
2.2 Chemicals, bio-chemicals and energy
THE MAJORITY OF power generation in the PRC— “Green groups,” writes Reuters, “were expecting the action
approximately 70 percent—is via coal. According to plan to include detailed regional coal consumption cuts, but
a former National Energy Administration o cial, this is those cuts appear to have been left to the provinces to settle
roughly 30 percent higher than the world average.1 themselves.”10
Whereas persistent power shortages at the generation level Such e orts may have repercussions far beyond China’s
have historically been attributed to shortages in production, own borders, as well:
as well as infrastructure unable to support the extensive
circulation necessary to keep plants running in areas lacking A choking smog across much of northern China
local supplies2, the decrease in power consumption as factories threatens not just the health of local residents, but
closed during the economic slowdown in 2008 actually led to also of major coal projects globally that are still on the
the encouragement of exporting coal.3 drawing board.
At that time, PRC National Development and Reform […]
Commission Vice Chairman Zhang Guobao observed that
“the downward trend in the domestic consumer price index With China’s coal demand the primary driver for a
and falling international prices for major staple energy com- slew of mine investments over the past decade, this
modities provide an opportunity and room to normalize the trend could derail a list of capital intensive coal proj-
pricing mechanism for coal used in power plants.”3 ects from Australia toIndonesia and Mozambique.
Nonetheless, today coal demand outpaces domestic Even without the environmental drive, new railways
production4 and coal exports have declined since 2008. In from mines to ports, falling investment in coal- red
January 2011 China Daily reported a 31 percent increase in generation and slowing power demand growth could
net coal imports over 2010 following a 29 percent increase in see China’s miners export some of their surplus output
2009 and a predicted increase of as much as 63 percent for at competitive prices, hitting regional miners and the
the remainder of that year. By comparison, coal exports were viability of new projects.
reported to have declined by 15 percent in 2010.5
is is a major shift for a country that built an average
Domestic coal production is concentrated in thirteen large of two coal- red power plants every week in the last
“coal production bases” across the country, which “produced decade, went from net exporter in 2009 to the world’s
2.8 billion tons in 2010, accounting for 87.5 percent of the top importer just two years later, and burns nearly as
country’s production.” A fourteenth, in Xinjiang, is expected much coal as the rest of the world combined.
to be completed within ve years.6
“China is kicking its coal addiction,” said Chen Ya-
Given an increase in net imports and continued e orts fei, vice-director at the China Coal Research Institute.
to expand domestic production capacity, coal will likely con- “With slower economic growth and a big push to-
tinue to play a primary role in the nation’s power production wards gas and renewables, the golden decade for coal
in the near future—a situation which will bene t from e orts is over.”11
made since at least 2008 to upgrade power plants to become
more e cient, with approximately 60 percent of new plants As noted by Mr. Chen, a growing proportion of capacity
being built incorporating technologies that would allow them formerly served by coal may go to non-traditional sources.
to achieve higher energy conservation e ciency rates than the
most e cient plants in the United States (albeit only if actu- In March 2011, non-fossil fuels were estimated to account
ally used in daily operation).7 for 8 percent of the nation’s total energy consumption, with
the 12th Five-Year Plan setting the goal of increasing that g-
Similarly, Xinhua reports that many of the most ine cient ure to 11.4 percent by 2015.8 e category of non-fossil fuels
coal- red plants have been closed.8 e net e ect may be is understood to include “the energy sources of hydropower,
minimal for the short term, however: one new coal burning wind power, solar power, biogas, and nuclear.”12
power plant goes under construction every week.9
White Paper contributors Dezan Shira & Associates
In 2013 the government announced a new plan to address
widespread and sometimes severe pollution problems. Part of
that plan entails cutting total consumption of coal “to below
65 percent of primary energy use by 2017.”10
112
2.2 Chemicals, bio-chemicals and energy
THE MAJORITY OF power generation in the PRC— “Green groups,” writes Reuters, “were expecting the action
approximately 70 percent—is via coal. According to plan to include detailed regional coal consumption cuts, but
a former National Energy Administration o cial, this is those cuts appear to have been left to the provinces to settle
roughly 30 percent higher than the world average.1 themselves.”10
Whereas persistent power shortages at the generation level Such e orts may have repercussions far beyond China’s
have historically been attributed to shortages in production, own borders, as well:
as well as infrastructure unable to support the extensive
circulation necessary to keep plants running in areas lacking A choking smog across much of northern China
local supplies2, the decrease in power consumption as factories threatens not just the health of local residents, but
closed during the economic slowdown in 2008 actually led to also of major coal projects globally that are still on the
the encouragement of exporting coal.3 drawing board.
At that time, PRC National Development and Reform […]
Commission Vice Chairman Zhang Guobao observed that
“the downward trend in the domestic consumer price index With China’s coal demand the primary driver for a
and falling international prices for major staple energy com- slew of mine investments over the past decade, this
modities provide an opportunity and room to normalize the trend could derail a list of capital intensive coal proj-
pricing mechanism for coal used in power plants.”3 ects from Australia toIndonesia and Mozambique.
Nonetheless, today coal demand outpaces domestic Even without the environmental drive, new railways
production4 and coal exports have declined since 2008. In from mines to ports, falling investment in coal- red
January 2011 China Daily reported a 31 percent increase in generation and slowing power demand growth could
net coal imports over 2010 following a 29 percent increase in see China’s miners export some of their surplus output
2009 and a predicted increase of as much as 63 percent for at competitive prices, hitting regional miners and the
the remainder of that year. By comparison, coal exports were viability of new projects.
reported to have declined by 15 percent in 2010.5
is is a major shift for a country that built an average
Domestic coal production is concentrated in thirteen large of two coal- red power plants every week in the last
“coal production bases” across the country, which “produced decade, went from net exporter in 2009 to the world’s
2.8 billion tons in 2010, accounting for 87.5 percent of the top importer just two years later, and burns nearly as
country’s production.” A fourteenth, in Xinjiang, is expected much coal as the rest of the world combined.
to be completed within ve years.6
“China is kicking its coal addiction,” said Chen Ya-
Given an increase in net imports and continued e orts fei, vice-director at the China Coal Research Institute.
to expand domestic production capacity, coal will likely con- “With slower economic growth and a big push to-
tinue to play a primary role in the nation’s power production wards gas and renewables, the golden decade for coal
in the near future—a situation which will bene t from e orts is over.”11
made since at least 2008 to upgrade power plants to become
more e cient, with approximately 60 percent of new plants As noted by Mr. Chen, a growing proportion of capacity
being built incorporating technologies that would allow them formerly served by coal may go to non-traditional sources.
to achieve higher energy conservation e ciency rates than the
most e cient plants in the United States (albeit only if actu- In March 2011, non-fossil fuels were estimated to account
ally used in daily operation).7 for 8 percent of the nation’s total energy consumption, with
the 12th Five-Year Plan setting the goal of increasing that g-
Similarly, Xinhua reports that many of the most ine cient ure to 11.4 percent by 2015.8 e category of non-fossil fuels
coal- red plants have been closed.8 e net e ect may be is understood to include “the energy sources of hydropower,
minimal for the short term, however: one new coal burning wind power, solar power, biogas, and nuclear.”12
power plant goes under construction every week.9
White Paper contributors Dezan Shira & Associates
In 2013 the government announced a new plan to address
widespread and sometimes severe pollution problems. Part of
that plan entails cutting total consumption of coal “to below
65 percent of primary energy use by 2017.”10
112
