Energy security

Energy supply security is a precondition of a stable economy and China's leadership knows this well.

To ensure that, National People's Congress approved the establishment of the National Energy Administration in March. The administration's head Zhang Guobao announced that China would explore more renewable energy and nuclear power options to enlarge its energy structure.

Meanwhile, it is using overseas resources to meet its manufacturing demands.

Recently, the administration said China plans to raise its total installed nuclear power generating capacity to 70 million kilowatts by 2020, 75 percent higher than the target the set in 2006.

This is an effort to raise the proportion of China's nuclear power to 5 percent of the total installed electricity generating capacity by 2020, up 1 percent from the goal set in 2006. The current installed capacity of nuclear power is only about 9 million kilowatts, or 1.3 percent of the total installed electrical generating capacity.

The installed capacity of thermal power stations already accounts for 76 percent of China's total installed generating capacity. Contributing to about 84 percent of the overall power supply, coal-based power has become a major source of carbon dioxide emissions. In 2007, China's primary energy output was estimated at 2.4 billion tons of standard coal while its consumption was about 2.7 billion tons, ranking second in the world.

In recent years, the government has rolled out a host of fiscal and tax incentives to boost the development of the alternative energy sector, including a 50-percent cut in the value-added tax for wind power plants.

The installed capacity of wind power in the nation is expected to exceed 10 million kW by the end of 2008, compared with 4.03 million kW in 2007. The increase came as the government promoted the use of renewable energy in the face of rising oil prices.

In 2007, wind power, biomass and hydropower accounted for 8.5 percent of the nation's total energy use. That figure is set to increase to 10 percent in 2010 and 15 percent in 2020.

It is laudable that China hasn't shaken its determination to explore alternative energy sources even though oil and coal prices have already plummeted recently.

Meanwhile, Chinese energy investors have been encouraged to "become bold" in acquiring stakes in overseas enterprises. That's the message from Zheng Xinli, vice-director of the Policy Research Office of the Central Committee of Communist Party of China. He suggested recently that China should use its 2-trillion-dollar foreign exchange reserves to encourage overseas mergers and acquisitions (M&As), especially in those in the energy and resources sector.

He says the foreign exchange reserve should be invested in removing the energy and resource bottlenecks that have hindered the country's development for so long. Zheng says the Chinese government should cooperate with investors, if necessary, by offering preferential loans to improve the infrastructure of the destination countries.

As an advisor directly serving China's highest leadership, Zheng's suggestions are very likely to become the central government's policy to boost overseas investment and the priorities should be exploring overseas oil, gas and other mineral resources.

Amid a world recession, many resource-exporting countries have pinned their hopes on the manufacturing-led countries. This is a mutually beneficial solution for China and the rest of the world.

(China Daily December 29, 2008)