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6 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 a for- plan to include detailed regional coal consumption cuts, but
mer National Energy Administration official, this is roughly 30 those cuts appear to have been left to the provinces to settle
percent higher than the world average.1 themselves.”10
Whereas persistent power shortages at the generation level Such efforts may have repercussions far beyond China’s own
have historically been attributed to shortages in production, as borders, as well:
well as infrastructure unable to support the extensive circulation
necessary to keep plants running in areas lacking local supplies2, A choking smog across much of northern China threat-
the decrease in power consumption as factories closed during ens not just the health of local residents, but also of ma-
the economic slowdown in 2008 actually led to the encourage- jor coal projects globally that are still on the drawing
ment of exporting coal.3 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 and With China’s coal demand the primary driver for a slew
falling international prices for major staple energy commodi- of mine investments over the past decade, this trend
ties provide an opportunity and room to normalize the pricing could derail a list of capital intensive coal projects from
mechanism for coal used in power plants.”3 Australia to Indonesia and Mozambique.
Nonetheless, today coal demand outpaces domestic pro- Even without the environmental drive, new railways
duction4 and coal exports have declined since 2008. In January from mines to ports, falling investment in coal-fired
2011 China Daily reported a 31 percent increase in net coal im- generation and slowing power demand growth could
ports over 2010 following a 29 percent increase in 2009 and a see China’s miners export some of their surplus output
predicted increase of as much as 63 percent for the remainder at competitive prices, hitting regional miners and the
of that year. By comparison, coal exports were reported to have viability of new projects.
declined by 15 percent in 2010.5
This is a major shift for a country that built an average
Domestic coal production is concentrated in thirteen large of two coal-fired power plants every week in the last de-
“coal production bases” across the country, which “produced cade, went from net exporter in 2009 to the world’s top
2.8 billion tons in 2010, accounting for 87.5 percent of the importer just two years later, and burns nearly as much
country’s production.” A fourteenth, in Xinjiang, is expected to coal as the rest of the world combined.
be completed within five years.6
“China is kicking its coal addiction,” said Chen Yafei,
Given an increase in net imports and continued efforts to vice-director at the China Coal Research Institute.
expand domestic production capacity, coal will likely continue “With slower economic growth and a big push towards
to play a primary role in the nation’s power production in the gas and renewables, the golden decade for coal is over.”11
near future—a situation which will benefit from efforts made
since at least 2008 to upgrade power plants to become more ef- As noted by Mr. Chen, a growing proportion of capacity for-
ficient, with approximately 60 percent of new plants being built merly served by coal may go to non-traditional sources.
incorporating technologies that would allow them to achieve
higher energy conservation efficiency rates than the most effi- In March 2011, non-fossil fuels were estimated to account
cient plants in the United States (albeit only if actually used in for 8 percent of the nation’s total energy consumption, with
daily operation).7 the 12th Five-Year Plan setting the goal of increasing that figure
to 11.4 percent by 2015.8 The category of non-fossil fuels is
Similarly, Xinhua reports that many of the most inefficient understood to include “the energy sources of hydropower, wind
coal-fired plants have been closed.8 The net effect may be min- power, solar power, biogas, and nuclear.”12
imal for the short term, however: one new coal burning power
plant goes under construction every week.9 White Paper contributor Dezan Shira & Associates reports
that “China will spend an estimated US$1.54 trillion on clean
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
128
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 a for- plan to include detailed regional coal consumption cuts, but
mer National Energy Administration official, this is roughly 30 those cuts appear to have been left to the provinces to settle
percent higher than the world average.1 themselves.”10
Whereas persistent power shortages at the generation level Such efforts may have repercussions far beyond China’s own
have historically been attributed to shortages in production, as borders, as well:
well as infrastructure unable to support the extensive circulation
necessary to keep plants running in areas lacking local supplies2, A choking smog across much of northern China threat-
the decrease in power consumption as factories closed during ens not just the health of local residents, but also of ma-
the economic slowdown in 2008 actually led to the encourage- jor coal projects globally that are still on the drawing
ment of exporting coal.3 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 and With China’s coal demand the primary driver for a slew
falling international prices for major staple energy commodi- of mine investments over the past decade, this trend
ties provide an opportunity and room to normalize the pricing could derail a list of capital intensive coal projects from
mechanism for coal used in power plants.”3 Australia to Indonesia and Mozambique.
Nonetheless, today coal demand outpaces domestic pro- Even without the environmental drive, new railways
duction4 and coal exports have declined since 2008. In January from mines to ports, falling investment in coal-fired
2011 China Daily reported a 31 percent increase in net coal im- generation and slowing power demand growth could
ports over 2010 following a 29 percent increase in 2009 and a see China’s miners export some of their surplus output
predicted increase of as much as 63 percent for the remainder at competitive prices, hitting regional miners and the
of that year. By comparison, coal exports were reported to have viability of new projects.
declined by 15 percent in 2010.5
This is a major shift for a country that built an average
Domestic coal production is concentrated in thirteen large of two coal-fired power plants every week in the last de-
“coal production bases” across the country, which “produced cade, went from net exporter in 2009 to the world’s top
2.8 billion tons in 2010, accounting for 87.5 percent of the importer just two years later, and burns nearly as much
country’s production.” A fourteenth, in Xinjiang, is expected to coal as the rest of the world combined.
be completed within five years.6
“China is kicking its coal addiction,” said Chen Yafei,
Given an increase in net imports and continued efforts to vice-director at the China Coal Research Institute.
expand domestic production capacity, coal will likely continue “With slower economic growth and a big push towards
to play a primary role in the nation’s power production in the gas and renewables, the golden decade for coal is over.”11
near future—a situation which will benefit from efforts made
since at least 2008 to upgrade power plants to become more ef- As noted by Mr. Chen, a growing proportion of capacity for-
ficient, with approximately 60 percent of new plants being built merly served by coal may go to non-traditional sources.
incorporating technologies that would allow them to achieve
higher energy conservation efficiency rates than the most effi- In March 2011, non-fossil fuels were estimated to account
cient plants in the United States (albeit only if actually used in for 8 percent of the nation’s total energy consumption, with
daily operation).7 the 12th Five-Year Plan setting the goal of increasing that figure
to 11.4 percent by 2015.8 The category of non-fossil fuels is
Similarly, Xinhua reports that many of the most inefficient understood to include “the energy sources of hydropower, wind
coal-fired plants have been closed.8 The net effect may be min- power, solar power, biogas, and nuclear.”12
imal for the short term, however: one new coal burning power
plant goes under construction every week.9 White Paper contributor Dezan Shira & Associates reports
that “China will spend an estimated US$1.54 trillion on clean
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
128
