Power can be derived from a country’s ability to leverage its resources toward economic and political gains. Conversely, dependency on foreign resources—such as energy—restricts policy options, thereby reducing the avenues through which a country can cultivate its national power. Sudden shifts in the energy market and overseas political instability may also diminish access to foreign energy sources or dramatically increase the cost of energy imports, further compromising the ability of import-dependent countries to pursue their national objectives.
Fueling China’s Rise
Decades of rapid economic growth have dramatically expanded China’s energy needs. China is now the world’s largest consumer of energy, the largest producer and consumer of coal, and the largest emitter of carbon dioxide.
China’s industrial sector accounts for two-thirds of the country’s total energy consumption. In particular, manufacturing drives a large proportion of China’s energy demand, with much of the energy coming from burning coal. In 2019, manufacturing accounted for about 55 percent of China’s total energy consumption, and 59.6 percent of the manufacturing sector’s energy came from coal.
As China’s economy has grown, its demand for coal has surged. From 1990 to 2019, China’s coal consumption nearly quadrupled from 1.06 billion million metric tons of coal to 4.02 billion metric tons, and since 2011, China has consumed more coal than the rest of the world combined. As of 2020, coal made up 56.8 percent of China’s energy use.
China’s dependence on coal for industrial power generation has significantly contributed to air pollution. According to Carbon Atlas, 69.5 percent of China’s CO2 emissions came from coal in 2020, compared to 65 percent in India, 22.6 percent in Russia, and 18.9 percent in the United States.
China’s heavy use of “subcritical” coal plants has exacerbated the issue, since such plants are notorious for burning coal in a dirty and inefficient manner. As part of efforts to clean up coal production by renovating old coal-burning facilities, ultra-low emissions technology was incorporated into 80 percent of China’s coal-fired energy capacity by 2019, and more lower-emission plants continue to be built.
Households also contribute to China’s emissions problem. While urban household CO2 emissions predominantly come from natural gas and liquefied petroleum gas, coal contributed over 65 percent of China’s rural household emissions in 2015. In 2020, an estimated 36 percent of China’s population was exposed to harmful emissions from the household burning of coal and other solid fuels like wood.
China’s cumulative carbon emissions are the largest in the world. Between 1990 and 2020, China and the United States were responsible for 22 and 19.5 percent of total global emissions, respectively. During this period, China’s global carbon input was larger than that of all other developed countries.
Powering China's Future
China is increasingly looking to secure its future energy needs with sustainable alternatives. In accordance with the 2016 Paris Agreement, China committed to make non-fossil fuel energy 20 percent of its energy supply by 2030 and to peak CO2 emissions by 2030. Chinese President Xi Jinping expanded on that commitment in a speech to the United Nations in September 2020 when he announced that China aims to achieve carbon neutrality by 2060.
Ahead of the late 2021 UN Climate Change Conference in Glasgow, China pledged to “strictly limit” the increase of domestic coal consumption, increase the share of non-fossil fuels in primary energy consumption to around 25 percent, and bring China’s total installed capacity of wind and solar power to over 1.2 billion kilowatts by 2030. On the sidelines of the Glasgow summit, China also signed a joint declaration with the United States that included various measures for cooperating on climate-related issues, most notably reducing methane gas emissions.
Amid efforts to pivot to cleaner energy, China has emerged as the world’s single largest investor in clean energy transition. In 2021, China invested $266 billion in energy transition measures, accounting for more than one-third of the global total ($755 billion). The United States invested the second-largest amount, at $114 billion, followed by Germany ($47 billion), the United Kingdom ($31 billion), and France ($27 billion).
Due to large-scale investments in massive infrastructure projects, hydroelectric power has become China’s main source of renewable energy production. The controversial Three Gorges Dam, completed in 2012 at a cost of over $37 billion, is the largest hydroelectric dam in the world and boasts a generation capacity of 22,500 megawatts (MW) The dam generates 60 percent more electricity than the second-largest hydropower dam, the Itaipu Dam in Brazil and Paraguay.
Including the Three Gorges Dam, China has constructed 4 of the top 10 largest energy-producing hydroelectric dams in the world. From 2000 to 2019, China’s generation of hydroelectricity grew nearly sixfold from 222.4 terawatt-hours (TWh) to 1,304.4 TWh. As a result of the Three Gorges Dam and other projects, China became the world leader in hydropower in 2014, and as of 2019, it accounted for 30.1 percent of global hydroelectricity generation.
Over the past decade, China has also emerged as a global leader in wind and solar photovoltaic (PV) energy. China’s electricity generated by wind power accounted for just 2.1 percent of its total consumption in 2012, compared to 3.7 in the United States and 9.4 percent in Germany. By 2019, however, China’s wind-energy generation surged to 406 TWh, well ahead of the United States (298 TWh). As a result, China accounted for roughly 28.4 percent of global wind-energy production in 2019. In solar PV, China is both the leading supplier and consumer. Due to rapidly decreasing costs, aggressive policy incentives, and low-interest loans from local governments, China is home to two-thirds of the world’s solar-production capacity.
The future development of China’s solar industry, however, has been called into question. Due to an over-saturated domestic market, Beijing halted all new solar projects and lowered tariffs on imported clean energy in June 2018. Concerns about human rights abuses in Xinjiang, which is a critical player in global solar energy supply chains, have also raised the prospects of weakening China’s prominence in the industry.
Over the past two decades, new extraction techniques have made shale gas—a type of natural gas trapped in sedimentary rock—into a viable energy source. Natural gas is less carbon-heavy than coal when efficiently combusted, emitting up to 60 percent less CO2. In 2019, natural gas made up 8.1 percent of China’s total energy consumption, a notable increase from a decade earlier, when just 3.5 percent of China’s energy consumption was from natural gas. To further promote natural gas consumption, China pledged to source 10 percent of its energy demands from natural gas by 2020. Based on the trajectory in recent years, China is likely to have come close to meeting this goal in 2020.
China is also turning to nuclear power to decrease its reliance on fossil fuels. As of January 2022, China operated 53 nuclear power reactors, which generated a total of 50,769 MW of energy. Since 2019, China has trailed only France and the United States in terms of nuclear electricity generation. China’s national economic blueprint, the 14th Five Year Plan, reaffirmed the country’s commitment to nuclear energy and outlined plans to increase the installed capacity of operating nuclear power plants to 70,000 MW by 2025.
Securing China’s Energy Needs
Despite measures to rely more on renewable energies, much of China’s energy supply comes from foreign countries in politically unstable regions and must travel through narrow straits and contested waterways before reaching China. Securing guaranteed access to foreign sources of energy is vital for China’s ongoing growth and development.
China holds the third-largest coal reserves in the world, which it has historically leaned on to satisfy its domestic energy needs. Yet as its economy has grown, China has increasingly relied on imported coal. In 1990, China produced 1.02 billion tons of coal for consumption, needing just 2 million tons of additional imports. By 2009, China’s rising demand drove it to become a net importer of coal, importing 125.8 million tons of coal to meet domestic consumption demand.
Securing China’s access to energy and other key resources is a central feature of China’s Dual Circulation Strategy. Learn more about China’s economic strategy, what Beijing is doing to achieve its economic objectives, and the obstacles China faces.
China fulfills its demand for coal by purchasing it from regional neighbors. Prior to 2017, North Korea was China’s fourth-largest coal supplier, ahead of Indonesia and Mongolia. Due to the implementation of UN sanctions on North Korea, China has suspended all coal imports from the regime. As a result, China has shifted to rely more on Russia and Mongolia to fulfill its coal needs.
In late September 2021, China’s reliance on foreign coal led to wide-scale energy blackouts in northeastern China. China’s energy market structure, wherein electricity prices are capped by the central government, was a leading driver of the problem. As the price of coal almost doubled between March and September 2021, energy companies could not subsequently raise the price of electricity, leading many energy companies to halt electricity generation instead of generating at a loss.
Growing demand for foreign oil is also causing energy security concerns for China. Since 1993, China has been a net importer of crude oil, and in 2017, it surpassed the United States as the largest importer in the world. About 67.3 percent of China’s crude oil supply in 2019 came from imports. This dependence on foreign energy is likely to increase. Some estimates have suggested that by 2040 around 80 percent of China’s oil needs will be sourced from elsewhere.
Given its political instability, the Middle East represents an important energy security concern for China, as roughly half of China’s oil imports come from the region. China’s reliance on Middle Eastern oil is only likely to increase in the future. The International Energy Agency predicts that China will double its Middle East imports by 2035.
China’s oil trade with Iran is especially illustrative of this uncertainty. While sanctions against Iran had for years restricted Chinese access to Iranian oil, this quickly changed once a preliminary agreement on Iran’s weapons program was reached in November 2013. Chinese imports of Iranian oil in 2014 surged by 28 percent compared to 2013. In 2018, China imported 6.4 percent of its crude oil from Iran, just behind Oman at 7.4 percent and Iraq at 9.6 percent. The US withdrawal from the Iran nuclear deal in May 2018 has had seemingly little effect on this exchange, as China remains a top destination for Iranian oil.
China has diversified its oil portfolio by investing heavily in Africa. Africa only possesses around 9 percent of global proven petroleum reserves (compared to 62 percent in the Middle East), but there is considerable potential for gaining access to untapped resources.China has pursued a strategy of offering economic development loans to African states, such as Angola, in exchange for favorable access to oil reserves. Additionally, in 2015 China sent troops to support UN peacekeeping operations in South Sudan, where China has considerable oil investments. While South Sudan’s oil represents a minuscule amount of China’s total imports, 23.1 percent of its oil exports were sent to China in 2018.
Securing maritime energy shipments is another critical energy-security priority for China. Over 80 percent of Chinese maritime oil imports by sea pass through the Strait of Malacca. Therefore, this strategic waterway represents a potential risk to China should it be unable to protect its shipping interests in the narrow strait.
China is also seeking to mitigate its dependence on foreign oil by building a strategic petroleum reserve (SPR), which is designed to insulate China from external market shocks. In November 2014, China’s Bureau of Statistics announced for the first time the size of China’s SPR, claiming to have 91 million barrels, or around nine days of reserves. China’s most recent update on SPR levels came in December 2017, when it reported a volume of 276.6 million barrels. China aims to accumulate 600 million barrels of oil, which would meet the OECD standard of 90 days of import reserves.
With over 60 percent of its trade in value traveling by sea, China’s economic security is closely tied to the South China Sea. Learn more about China's South China Sea Trade.
Although China holds the world’s largest shale gas reserves, the amount of natural gas readily available for extraction is much lower due to geographical complexities. Some deposits are buried as deep as 3,500 meters underground, making extraction difficult. In 2019, 42.6 percent (4.6 trillion cubic feet) of China’s natural gas needs were met by foreign sources.
China currently relies on foreign natural gas delivered via land pipelines and carriers in the form of liquefied natural gas (LNG). Two existing pipelines supplied 46 percent of China’s natural gas imports in 2017, with three-quarters of this coming from Turkmenistan. The share of overland energy sources is likely to increase in the coming years. In 2014, China and Russia signed a 30-year, $400 billion deal to deliver Russian natural gas to China, and in December 2019, the $55 billion Power of Siberia pipeline sent its first shipments of natural gas from Russia to China.
However, China also imports LNG from several other countries, including Australia (47 percent), Qatar (21 percent), and Malaysia (11 percent) in 2017. The International Energy Agency predicts that in 2030, over 60 percent of China’s natural gas demands will have to be met through imports. In 2022, China is expected to replace Japan as the world’s top LNG importer annually by 2022.