China’s energy security: Perception and reality Guy C.K. Leung n Hong Kong Energy Studies Centre, Hong Kong Baptist University, Kowloon Tong, Hong Kong Special Administrative Region article info Article history: Received 15 June 2010 Accepted 1 December 2010 Available online 7 January 2011 Keywords: China Energy security Oil abstract China, now the world’s second-largest economy, is worried about energy security, which underpins the core objectives of Beijing and the political legitimacy of the Communist Party of China. The purpose of this study is to explore certain popular myths about China’s energy security. The study consists of six parts. After the introduction, it formulates the obscure concept of ‘‘energy security’’ and attempts to contextualize it with ‘‘Chinese characteristics.’’ Then it explicitly points out that the largest driver of oil demand by China as the ‘‘World’s Factory’’ is transport instead of industry. Next, it explores the effectiveness of transnational pipelines as a measure of energy security and explains why they are less effective than many observers have previously assumed. Furthermore, it investigates the global expansion of Chinese national oil companies and questions their actual contribution to energy security. A few concluding remarks then follow. & 2010 Elsevier Ltd. All rights reserved. 1. Introduction The People’s Republic of China (PRC), home to 1.3 billion inhabi- tants with 44,000 births every day (Fenby, 2008, p. 36), passed Japan in the second quarter of 2010 to become the world’s second- largest economy (Barboza, 2010). Sharply weaker overseas demand amid an unfolding global economic crisis hastened China’s eco- nomic slowdown in late 2008; yet the country has managed to maintain its staggering growth in Gross Domestic Product (GDP) 1 : 9.6% in 2008 and 8.7% in 2009, the fastest among ‘‘the BRIC countries’’ (IMF, 2010). Despite shining performances on economic development since the 1978 economic reform, which unleashed China’s productivity, the country ranks 89th on the list of Human Development Index (HDI), behind many developing countries like Turkmenistan (87th), Colombia (79th), Georgia (74th) and Iran (70th), according to Human Development Report 2010 (UNDP, 2010). Hence, in 2007 Beijing’s leaders set themselves a target of quadrupling per capita GDP by 2020 (Fenby, 2008, p. 37), in search of a ‘‘harmonious society’’ (Fan, 2006). Regarded as one of the fastest growing world’s great powers, China is at the center of any debates on international energy governance. While a country’s economic size tends to reflect its energy demand, China’s appetite for energy is unsurprisingly mammoth, with its Primary Commercial Energy Consumption (PEC) amounting to 3066.5 million tons of coal equivalent (Mtce) in 2009, up 5.2% year on year (Table 1). In other words, China’s energy needs, currently the second- largest worldwide, 2 are larger than those of the other BRIC counter- parts combined (BP, 2010, p. 40). Reportedly, China has accounted for nearly three quarters of world energy demand growth in recent years (BP, 2009, p. 2). China’s fuel mix is largely dependent on coal, but, as will be discussed at greater length in the coming section, oil is the form of energy that has produced most of the insecurity of Beijing’s leaders over ensuring energy supplies. Oil has not traditionally taken up a dominant proportion in China’s fuel mix; it accounted for 17.9% of the country’s total commercial energy needs in 2009, with coal occupying 70.4%, primary electricity 7.8% and natural gas 3.9%. Yet given the brisk oil demand and stagnant oil supplies, China has been increasingly reliant on foreign oil. China became a net importer of oil in 1993 when 7.5% of its oil consumption had to be imported. In 2009, China’s oil demand reached 408.3 million tons (Mt) and import dependency of oil – the percentage of net imports over total demand – reached 53.5% (Table 2). Whereas domestic oil production has increased slowly – climbing from 138.3 Mt in 1990 to 198.8 Mt in 2009 – China’s oil consumption has grown rapidly from 114.9 Mt in 1990 to 408.3 Mt in 2009, yielding an average annual growth rate of 7.0%. The stagnation in oil supplies stems from the aging of China’s oil fields, particularly those in the northeast. Daqing oilfield, for instance, discovered almost half a century ago in the northeastern province of Heilongjiang, remains the Contents lists available at ScienceDirect journal homepage: www.elsevier.com/locate/enpol Energy Policy 0301-4215/$ - see front matter & 2010 Elsevier Ltd. All rights reserved. doi:10.1016/j.enpol.2010.12.005 n Tel.: + 852 6039 2586; fax: + 852 3411 5990. E-mail address: guyleung@gmail.com 1 Measures introduced encompass an economic stimulus package of 4 trillion Renminbi (RMB), announced in November 2008, to boost infrastructure spending. The National Development and Reform Commission (NDRC) announced that more than one-third of the stimulus package had been spent by June 2009 (EIU, 2010). 2 The preliminary data of IEA (2010b, p.47) suggest that China overtook the U.S. in 2009 to become the world’s largest energy user. Beijing, however, has rejected such claims (Watkins, 2010). Energy Policy 39 (2011) 1330–1337