Page 234 - 2019 White Paper on the Business Environment in China
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9 White Paper on the Business Environment in China
harmonizes prices for different in May 2018. Regulators free-market practices common in the US and Europe,
announcement that the pricing mechanism for gas sold replacing decades of strictly regulated buying and selling
for residential use would match those for industrial (Bloomberg, Next up in China’s).
customers, including higher city-gate prices, or the
amount distributors pay suppliers. PetroChina, the Coal
nation’s biggest producer, importer and seller of the fuel,
stands to gain as the policy helps to ease losses from The biggest economic story and the biggest climate
selling costly overseas supply at lower government-set story of the 21st century is the same story: China and
rates. The move will boost earnings by 5 percent in 2018 coal. Chinese coal capacity grew five times between
and a further 13 percent next year. China’s NDRA said 2000 and 2017, to reach 935 GW — half the world’s total.
the new policy will “promote construction of natural gas Just as it seemed coal power in China had peaked, lately
production, supply, storage and sale systems, as well as it has been surging (Roberts). China’s carbon emissions
the sustained and healthy development of the industry” growth has accelerated since the beginning of 2018,
(Bloomberg, China Gas Revamp). leading to warnings that the country could be headed
for its largest annual increase in climate pollution since
“In the next five years, global gas markets are being re- 2011. The government has been running an aggressive
shaped by three major structural shifts,”said International stimulus program for the last two years that has breathed
Energy Agency (IEA) Executive Director Dr Fatih Birol. life to smokestack industries and set the clock back on
“China is set to become the world’s largest gas importer the economic transformation and clean energy transition
within two-to-three years, US production and exports will that are so crucial for the country’s future. The increase
rise dramatically strongly and industry is replacing power in coal demand is driven almost entirely by power
generation as the leading growth sector. While gas has a sector. Power demand increased 6.7 percent in 2017
bright future, the industry faces tough challenges. These and 9 percent in the first four months of 2018. Growth in
include the need for gas prices to remain affordable demand, however, was mainly driven by heavy industry,
relative to other fuels in emerging markets and for with service industries being the second-largest driver
industry to curb methane leaks along the value chain.” (Boren and Lammi).
Chinese gas demand was forecasted in June 2018 to grow
by 60 percent between 2017-2023. China alone should State Administration of Work Safety announced in
account for 37 percent of the growth in global demand February 2018 that it would carry out “special action” to
in the next five years and becomes the largest natural crack down on illegal coal mining to ensure safe mine
gas importer by 2019, overtaking Japan. The IEA also operations and reduce output capacity. Coalmines that
forecasts strong growth in gas use in other parts of Asia, fail to meet safety measures or operational standards will
including in South and Southeast Asia, driven by strong be ordered to close and rectify violations, according to
economic growth and efforts to improve air quality (IEA). the statement. Common violations include employees
working longer hours than permitted, oversized
China are expected to push ahead with a plan to mine capacity, and employing too many workers, the
merge the national pipeline network under one company statement said. China aims to eliminate all coalmines
that would unify transport and investment decisions with a capacity of less than 90,000 tons a year to reduce
in the near future. A unification of natural gas and oil safety risks at coalmines. Some regions have said they
pipeline assets of the three state energy giants would plan to raise the threshold to 150,000 tons or more
be worth as much as 500 billion yuan (US$78 billion) (Reuters, China Will Crack).
and may be spun off into a new SOE. The move, under
discussion since at least 2014, would reinforce President The China government has extensively cut back on
Xi Jinping’s commitment to overhaul state-owned its domestic production of coal. More imports could
enterprises and streamline industrial capacity. Under the eventually be a boon for American coal-producing
plan, state-controlled and private funds will inject capital states. While China pursues a long-term goal of lowering
sufficient to lower the combined stake held by the three coal’s share of its energy mix, the country still produces,
oil majors to about 50 percent. The company may then consumes and imports more of the fuel than any other
file for an initial public offering. The proposal hasn’t been nation. It purchased 271 million metric tons from
finalized and may change. Gas transport reform would be overseas in 2017, according to customs data. The US
the latest change China has made amid efforts to adopt exported about 3.2 million short tons to China, according
234
harmonizes prices for different in May 2018. Regulators free-market practices common in the US and Europe,
announcement that the pricing mechanism for gas sold replacing decades of strictly regulated buying and selling
for residential use would match those for industrial (Bloomberg, Next up in China’s).
customers, including higher city-gate prices, or the
amount distributors pay suppliers. PetroChina, the Coal
nation’s biggest producer, importer and seller of the fuel,
stands to gain as the policy helps to ease losses from The biggest economic story and the biggest climate
selling costly overseas supply at lower government-set story of the 21st century is the same story: China and
rates. The move will boost earnings by 5 percent in 2018 coal. Chinese coal capacity grew five times between
and a further 13 percent next year. China’s NDRA said 2000 and 2017, to reach 935 GW — half the world’s total.
the new policy will “promote construction of natural gas Just as it seemed coal power in China had peaked, lately
production, supply, storage and sale systems, as well as it has been surging (Roberts). China’s carbon emissions
the sustained and healthy development of the industry” growth has accelerated since the beginning of 2018,
(Bloomberg, China Gas Revamp). leading to warnings that the country could be headed
for its largest annual increase in climate pollution since
“In the next five years, global gas markets are being re- 2011. The government has been running an aggressive
shaped by three major structural shifts,”said International stimulus program for the last two years that has breathed
Energy Agency (IEA) Executive Director Dr Fatih Birol. life to smokestack industries and set the clock back on
“China is set to become the world’s largest gas importer the economic transformation and clean energy transition
within two-to-three years, US production and exports will that are so crucial for the country’s future. The increase
rise dramatically strongly and industry is replacing power in coal demand is driven almost entirely by power
generation as the leading growth sector. While gas has a sector. Power demand increased 6.7 percent in 2017
bright future, the industry faces tough challenges. These and 9 percent in the first four months of 2018. Growth in
include the need for gas prices to remain affordable demand, however, was mainly driven by heavy industry,
relative to other fuels in emerging markets and for with service industries being the second-largest driver
industry to curb methane leaks along the value chain.” (Boren and Lammi).
Chinese gas demand was forecasted in June 2018 to grow
by 60 percent between 2017-2023. China alone should State Administration of Work Safety announced in
account for 37 percent of the growth in global demand February 2018 that it would carry out “special action” to
in the next five years and becomes the largest natural crack down on illegal coal mining to ensure safe mine
gas importer by 2019, overtaking Japan. The IEA also operations and reduce output capacity. Coalmines that
forecasts strong growth in gas use in other parts of Asia, fail to meet safety measures or operational standards will
including in South and Southeast Asia, driven by strong be ordered to close and rectify violations, according to
economic growth and efforts to improve air quality (IEA). the statement. Common violations include employees
working longer hours than permitted, oversized
China are expected to push ahead with a plan to mine capacity, and employing too many workers, the
merge the national pipeline network under one company statement said. China aims to eliminate all coalmines
that would unify transport and investment decisions with a capacity of less than 90,000 tons a year to reduce
in the near future. A unification of natural gas and oil safety risks at coalmines. Some regions have said they
pipeline assets of the three state energy giants would plan to raise the threshold to 150,000 tons or more
be worth as much as 500 billion yuan (US$78 billion) (Reuters, China Will Crack).
and may be spun off into a new SOE. The move, under
discussion since at least 2014, would reinforce President The China government has extensively cut back on
Xi Jinping’s commitment to overhaul state-owned its domestic production of coal. More imports could
enterprises and streamline industrial capacity. Under the eventually be a boon for American coal-producing
plan, state-controlled and private funds will inject capital states. While China pursues a long-term goal of lowering
sufficient to lower the combined stake held by the three coal’s share of its energy mix, the country still produces,
oil majors to about 50 percent. The company may then consumes and imports more of the fuel than any other
file for an initial public offering. The proposal hasn’t been nation. It purchased 271 million metric tons from
finalized and may change. Gas transport reform would be overseas in 2017, according to customs data. The US
the latest change China has made amid efforts to adopt exported about 3.2 million short tons to China, according
234
