Red Dragon, Black Blood: Understanding Chinas Growing Oil Demand July 30th, 2006 By Winston Chow 434

East 120th St. Apt. 5F New York, NY 10027 (646) 339-2664 Rising at a neck-breaking 9% GDP annual growth rate, the Peoples Republic of China has established itself as a growing engine running twenty-four seven, guzzling its way up to the second largest consumer of oil in the world. The explosion of Chinas economy in the last thirty years since Premier Deng Xiaopings economic reforms has raised many issues concerning Chinas energy usage. Chinas liberalizing economy since 1978 has quickly advanced the Peoples Republic from a rapidly industrializing country to a rapidly modernizing one. The transition from Chinese/Soviet model of governance to market socialism has opened Chinese society to different innovations which, in turn, demand a reinterpretation of Chinas energy needs. Whether it is the increasing availability of automobiles to the Chinese population, a modernizing quality of life, or urban populations rising at geometric rates, the question of where China will pursue the resources to satisfy its new energy demands now occupies the top priorities of the Chinese leadership. This paper offers research and analysis into which energy sources China is currently utilizing and plans to utilize; as well as how this amalgam of energy demands affects the perspectives of Chinas top-tier decision makers in regard to international policy. The analysis will begin with an assessment and overview of Chinas current energy resources: Coal, oil, natural gas, hydro-electrics, and nuclear energy. From these data I will analyze how trends in these resources will influence the decisions made by top Communist officials and state owned corporation leaders concerning energy production,

conservation and acquisition on a domestic and international level. Invariably, the scope of this topic is vast so the final international analysis will be restricted to recent issues arising in regard to Chinas most primary energy partners. Chinas Resources Oil In 2006 the Peoples Republic of China has come to consume 6.5 million barrels of oil per day in its activities. Since 2000 it has been responsible for nearly two-fifths of the increase in global production and in 2004 alone Chinas oil consumption jumped 15%. Oil currently provides for roughly 20% of the rising economys energy needs. Few analysts disagree that the cause of these major oil demands arose from the doubling of car sales in the Peoples Republic over a period of two years, but electricity shortages and massive blackouts in the last few years have also prompted many industries to switch to diesel generators as well. (Oiloholics) Despite the majority of Chinas population using coal to provide the energy needed the increasing migration, exploding population density and rising income per capita of eastern cities such as Beijing, Dalian, Shanghai and Shenzhen has prompted China to begin scrambling for oil wells both domestically and internationally. On the domestic front, unfortunately, Chinas natural resources dont seem to be keeping up with the optimism about oil resources that the Communist Party paraded about during the 1960s. Daqing oil supplies in the Northeastern province of Heilongjiang (star-crossed in name with its relation to oil, as it translates into Black Dragon River) when first discovered in 1959 were lauded by the CCP to be able to last well into the twenty-first century. Unfortunately, a clear projection foretelling the very finite resources

in these wells (and their subsequent depletion in the near future) has also caused an unprecedented degree of worker dismissals from state-owned enterprises resulting in large worker protests in Daqing in early 2002. (Parts the bulldozers) Resources located in the northwestern province of Xinjiang may carry a greater burden than boon for the CCPs extraction of oil in the region. The first obstacle would have been the 4,000 km transport of the oil from the vast rural western regions to eastern metropolis, where it is needed most. This obstacle was overcome in 2004 with the completed natural gas pipeline from Xinjiangs Kela-II natural gas fields to Shanghai on the east coast. (Under the Thumb) Despite this achievement, this still leaves the central government with the second problem, that Xinjiangs underground oil fields are heavily fragmented making the cost of pumping oil not yet even worth the task. (Bininachvili 7/18/06) The establishment of the Kela-II pipeline deeply represents urgency with which the CCP is funneling energy supplies to the burgeoning consumer centers. In 2003 a state seizure of oil fields in Shaanxi province was also emblematic of Chinas scramble for oil to feed its rising demand. Before then, the introduction of the market economy had brought sudden unprecedented wealth to the residents of this remote and backward area of China. However, the sudden financial glory of local investors came to an abrupt end when the local government seized hundreds of privately controlled oil wells in July of that year. Rampant corruption, chaotic business practices and a substantial amounts of waste were the reasons given by the Central Government for the takeovers, however, national energy demand was also likely the primary impetus behind the CCPs active focus on this region. (Boom Town Blues)

Bordering Gansu, Tibet, Sichuan and Xinjiang is the Qinghai province, consisting of an immense plateau known in conjunction with Tibet as The Roof of the World. Qinghai has also been re-established as an oil interest of the central government. Since 2000, scores of workers have been sent to Qinghai in huge state-run efforts to rebuild the Beijing-to-Lhasa road and establish previously non-existent highways and railway systems. (Go West, Young Han) Tibets first railway system was completed and opened for transit on July 1st 2006 with an investment of five years and four billion dollars in its construction. (High Train) The Chinese have known about oil reserves in the region of Qinghai since the late 1800s. However, it hasnt been until recently that these reserves, located in high-altitude hinterlands previously considered too inaccessible, has the Chinese government rekindled an interest in them. Although transit systems have been and are being established from Qinghai to the modernized eastern coast, too little geological information exists about the oil wells to yield a consistent and lucrative supply. While further geological surveys being conducted by the CCP will likely make the fields more exploitable in the near future, the CCPs interest in Qinghai is further indicative of Chinas rising initiative towards fulfilling its energy needs with oil. Coal Coal has been providing the backbone for Chinas energy needs throughout its industrialization process following the revolution in 1949 through its current modernization process. Despite increasing usage of gas and oil in developed coastal cities, the vast majority of the PRCs population of around 800 million farmers still heat their homes with coal. In conjunction with much of the coal-powered heavy industry, this makes the contemporary use of coal 70% of Chinas energy consumption. In spite the

tremendous amount of coal being mined domestically, China uses so much energy in coal that its importation of the brittle fuel resulted in the PRC consuming 40% of the worlds coal production in 2003. (Hungry Dragon) Yet, rising energy needs, shortening domestic supply and an Industrial Revolutionesque degree of environmental damage is pointing towards Chinas slow but sure curbing of its reliance on coal. In 2003 Li Ronghong, a minister in the State Economic and Trade Commission of the Peoples Republic shared the perspectives of many state and industry representatives in their pessimistic projections of Chinas coal supply. (Tonnes of Problems) The minister stated concerns by the CCP that Chinas domestic coal supply would be depleted within the near to medium future. Of Chinas 390 mining townships, 68% were already in their autumn period, and only 20% of Chinas mines were considered retainable for long-term production potential. Asias largest strip coalmine at Xilutian in Liaoning province (located in Chinas Northeast) is due to close in 2007 pouring flames on the already volatile unemployment demonstrations of state industry workers that have been put out of jobs within recent years in the region. (Ibid.) While coal shortages are beginning to occur Chinas exploding economy is giving little time for the industry to catch its breath. As energy needs continue to rise at 3.5%, the effect of depleting coal supplies will be exacerbated, while a drop in coal exports will further damage the industry. Further complicating the problem is the perilous nature of digging for coal endured by the millions of miners employed by state and private enterprises. The heinous gas explosion occurring at one of Shaanxis mines in 2004 killing 166 miners was only a dramatic example of a widespread problem that the Chinese government has been taking

measures to stop. In the first nine months of that year the Chinese government had recorded 4,153 coal miner deaths a record that has caused enough domestic disturbances emanating from the miners families towards the government that they began taking measures to enforce laws closing mines that were in violation of safety standards. While China is the worlds largest producer of coal, it also stands as having the worlds highest coalmine death rate. (Down and Dangerous) This collision of two very valid interests has added another element influencing the number of coalmines being shut down. Accounting for the cumulative effects of both depleted mines and mines closed due to worker hazard, from 1997 to 2004 Chinas 82,000 coalmines had been reduced to 15,0001. (Pits of Death) The use of natural gas in the Peoples Republic has risen slightly in recent years but still remains a meager 2.5% (in 2000) of the countries total energy consumption. A constant trend regarding gas deposits in China is that they are usually found near large oil deposits, making the initial pipelines built from underdeveloped regions primarily gas lines. While the oil fields in Xinjiang are too fragmented to profitably drill and the oil deposits of Qinghai arent yet fully surveyed, the government has wasted little time in constructing gas lines from both provinces to Shanghai to relieve the citys rising energy demands. (Under the Thumb) Chinas domestic natural gas resources have also been a boon in context with energy security. While coal mines face major obstacles in China, current natural gas deposits in the Tarim basin of Xinjiang alone have been projected to

However, reliable official sources also indicate that despite popular warnings of coal depletion in China, plentiful resources in deep mines in provinces such as Shaanxi are still sufficient enough to keep official concerns about using coal power limited to environmental damage. 6

last roughly 70 120 years at the countries current rate of consumption. (Running out of steam) Hydro-Electrics While coal dominates energy usage in the chilly Chinese north it is commonly phrased in Chinese that water powers the south; that is, hydro-electrics. Hydro-electric energy is being exploited largely in china through the use of dam projects, the most famous (and infamous) of which is the Three Gorges Dam experiment. The Three Gorges Dam built on the Yangtze river has been projected by officials and experts to provide energy output at a rate colossal enough to help reduce the countrys reliance on coal by some 50 million tonnes. (A Terrible Beauty is Born ) On the negative side, its construction has displaced more than 1.13 million Chinese and wiped out various cultural and religious landmarks. On the positive side its existence provides abundant clean energy2, irrigation in the land around the river, improves navigation up the Yangtze, and importantly, stops the seasonal flooding that causes huge annual losses in agricultural product. (Ibid.) Nuclear Power The nuclear power capacity in China is growing rapidly, although final projections indicate that it will contribute weakly to rising energy consumption demands in the long run. At first sight though, development of nuclear resources is quite impressive. From 2002 to mid-2005 alone Chinas total installed capacity for nuclear generation increased from 2 Gigawatts to 15 Gigawatts. This is an accumulation of major nuclear generators erected in the provinces in Guangdong (Lingao) and Zhejiang
2

Some experts argue that the gases caused by the epic amount of organic detritus caught in the dams gargantuan banks may offset the environmental benefits the dam has to offer. 7

(Qinshan). China plans a total of 27 GW of additional nuclear generation by 2020, but even this large capacity would account for less than 5% of Chinas total energy usage according to EIA. (EIA) According to the International Energy Agency China has also announced the investment of some $50 billion dollars in constructing 30 more nuclear power plants by 2030. Yet, similar to the analysis above, this would still hardly account for more than 5% of the rising energy demand. (The shape of things) In comparison, electricity reliance on natural gas is expected to grow from 1% to 6% over the same period of time. (Ibid.) A preliminary analysis of these domestic Chinese resources suggests that Chinas oil demands will rise dramatically. The depletion of coal is parallel with the governments agenda to limit reliance on coal due to environmental damage and worker hazard; however, this puts more pressure on the PRCs usage of hydro-electrics and oil for industry and the rising rate of automobile ownership. According to projections made by the Goldman Sachs Global Economics Group study on the economic development of BRIC countries3, while the oil demand for China will eventually level out in the wake of the decrease in industrial energy usage, more oil requirements of Chinas industrialization still promise a stress on resources at least until it peaks in around 10-15 years. (GSERG 41) The key contention is in determining whether within that span of time the integrity of Chinas resources and environment will allow the PRC to limit its international pursuit of fuel to regions that do not violate the energy security of other nations. While coal, natural gases, hydro-electrics and nuclear power are all domestically sufficient, environmental

BRIC, being the internationally recognized rapidly developing economies of Brazil, Russia, India and China. 8

pollution, growing cities and a national industrial complex are forcing the CCP to find oil resources elsewhere. The Energy Leadership Since Deng Xiaoping introduced market reforms to the PRC in 1978 the leadership in China has underwent dramatic changes in governance methodology. Many political analysts have defined the change as a switching over from totalitarian to authoritarian government. That is, a distinct fading of the politicization of the population that occurred in most orthodox communist societies. Concerning the energy marketplace the Chinese leadership has come to adopt what is defined as the stance of Pragmatism. (Johnston) Essentially, the Pragmatist school means that the Chinese leadership governs under the premise of maintaining political dominance in the PRC over governance designed by ideological goals. Whether the methodologies implemented are Marxist or capitalist the Communist Partys ultimate priority is to maintain power, and the Party has conclusively determined that this means increasing the economy and quality of life for its citizens by allowing a limited amount of free-market capitalism into the Communist system. This new system, coined Market Socialism by the CCP accounts for the internationalist China that we witness today. In absence of free elections the leadership of the CCP operates under an informal consent of the populace otherwise deemed Performance Legitimacy. This is the crux behind the Pragmatist program. It also governs the way the Chinese leadership deals with domestic and international issues concerning energy security, environmental sustainability, and growth. On the international scope the CCP utilizes its state-run energy enterprises to conduct business abroad. However, unlike most SOEs (State-owned enterprises) in the

PRC, the energy corporations conducting the majority of the Chinese international energy trade are part of the thousand or so SOEs that have international shareholders which means the performance of these corporations are checked by more than politicallyminded masters, but are also endowed with business efficiencies that come with the responsibilities of shareholder capitalism. In conjunction with a healthy reliance on data provided by a large number of hired international think tanks and consultancies, the Chinese government and SOEs have become quite formidable on the international energy scene. The four most important Chinese energy corporations on the international theatre are: CNPC (China National Petroleum Corporation), CNOOC (China National Offshore Oil Corporation), PetroChina (Chinas biggest oil producer), CPCC (China Petroleum and Chemical Corporation) and China Huaneng Group. As environmental and industrial demands are pressing decision-makers in Beijing towards the international acquisition of oil, heavy reliance on these four corporations is paramount. In addition, on the international scene, an obvious advantage that Beijing is exploiting is maximizing good relations with just about every country it can allowing the PRC to sweep up the heavy losses in resource the US is suffering in President George W. Bushs continuous folly of fouling up relations with Latin American and Middle Eastern oil countries. Russia and Japan Trends in the energy trade with other countries suggest the following separation in trade attitudes when China conducts business: 1. Chinas key energy trade partners in the Middle East and South America are dependant on trade vacuums in absence of Western powers in the region; mainly due to geo-political conflicts. Key energy partners that fall

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into this category of interest include but are hardly limited to Iran, Venezuela, Peru, Angola, Sudan, Syria, and until recently, Iraq. 2. A second, and more complicated trade dynamic falls between China and adjacent fuel rich countries such as Russia, Azerbaijan, Kazakhstan and Uzbekistan. Trade with these countries is problematic in that most of them are post-Soviet states emerging from a large degree of political chaos and drastic economic transition resulting in inconsistencies in market practice. Although China does have other geographically close countries such as Indonesia from which a large degree of resources can come from, developing secure energy relationships with the aforementioned oil-rich countries is preferred as their landed geographical connection allows the stable transit of oil through pipelines. In addition, China is in competition with countries such as South Korea, and more notably, Japan, whose energy demands were only recently, in 2003, surpassed by China as having the second highest national energy demand in the world. (EIA) Pile on a long tradition of political and territorial conflicts between many of these countries and China and a convoluted web-work of relationships colorizes the lens that Chinese decision-makers must look through when strategizing their energy pursuits. Recent contention between the PRC and Japan in competition for resources from Russias Siberian border deeply illustrates the complicated dynamic existing between countries adjacent to China. Over the last four years China and Japan have been locked in competitive negotiations for a tentative Russian pipeline from one of Russias largest unexploited oil fields to be built towards strategic spots for both countries. For the Chinese, the pipeline route would fall over into Daqing, in the Heilongjiang province, which could bolster the flailing economy while also provide easy transport southwards to

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Beijing. From Beijings perspective, a sturdy relationship with Russia based on this pipeline would fortify Chinas energy security while circumvent the need to build a lengthy pipeline from the Xinjiang province all the way to Chinas eastern coast. From the Japanese side, the pipeline effort should be focused on building the pipeline from Angarsk to Nakhodka, a port that opens straight into the pacific and provides short passage straight to Japan and other markets. The negative aspect of this deal would be the harrowing length of pipeline that the Russians would have to build in order to reach Nakhodka an effort that would cost nearly twice the amount (approximately $5 billion) than the Daqing route. (In the pipeline) In 2003 the situation flared up with the arrest of Mikhail Khodorvsky, CEO of Yukos, a Russian energy giant in charge of negotiations. Initially, the flap caused negotiations between China and Russia to look pessimistic, yet a more general overlay of the Chinese-Japanese-Russian pipeline negotiations up through 2006 has painted a different picture. Provided below are maps illustrating the progression of negotiations between Russia, China and Japan. Despite momentary setbacks caused by events such as the arrest of Yukos Chairman, it is clear that negotiations remain highly reliant on concessions that can be afforded Russia by both China and Japan in addition to market advantages that the pipeline will provide. In 2003 analysts predicted that the details of the Yukos scandal would irritate Sino-Russian relations enough to prompt the handover of the pipeline to Japan. By 2006, this has not yet happened, and Putins public commitment of the Siberian pipeline has alternated between both countries a number of times.

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Proposed Siberian/Daqing pipeline plan, 2004 (Fig 1) Proposed Siberian-SinoJapanese pipeline plan, 2005 (Fig. 2) Figures 1, 2 and 3 illustrate various changes made to the Russian pipeline proposals due to negotiations suggesting concessions offered in exchange for minute changes in the geographical detail of the pipeline route.

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Proposed Siberian/Daqing pipeline plan, 2006 (Fig. 3) Russias tentative stance has remained uncommitted for the last four years of negotiation in hopes of yielding Japanese concessions over the contested Kuriles islands as well as Japanese promises to pay for the extended amount of pipeline required for its construction to, now, the port Perevoznaya. Currently, the pipeline deal has been captained by Russias energy giant Gazprom with the final concession amounting to finishing the pipeline in five years with CNPC picking up the tab of $400 million for construction materials. Unfortunately, the negotiation results being sealed by a handshake left the Chinese with little assurance. Putin failed to give any details of the construction or time-scale of the oil pipeline, with final conclusions dependant on a feasibility study conducted by Putins administration. (Pipeline Politics) In all likelihood, this could prompt another counter-proposal on the behalf of the Japanese that will re-open negotiations, although Chinas stake in the Siberian pipeline in regards to proximity and resource demands is crucial.

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Old rivalries have also flared up as Chinas increasing domestic oil demand has prompted the CCP to take a harder stance against its traditional opponent, Japan, in the East China Sea. Chinas refusal to recognize borders outlined between the PRC and Japans known as exclusive economic zones (EEZs) have prompted the dramatic deployment of PRC gunboats around the Chinese offshore oilrig in the Chunxiao field (known by the Japanese as Shirakaba). Although international law allows for multiple interpretations of which nation has sovereign rights to the oil field, Chinas military reassertion of their oil resources suggest a certain amount of desperation on behalf of the PRC in securing their oil reserves even at the risk of inflaming timelessly complicated territorial disputes. (Oil and gas) Recent confirmation that China has begun pumping gas from the disputed reason has heightened ill-feeling between the two governments. (A Giant Stirs)

Map of disputed Sino-Japanese disputed territory in East China Sea (Fig. 4)

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India While contention for oil resources has been running high with Japan, Chinas strategy for targeting energy market vacuums in anti-West countries has brought a new found alliance with fellow BRIC country, India. Cooperation agreements signed during Indias Petroleum Minister Manni Shankar Aiyars visit to China in January of 2006 signaled a partnership between the two countries that has deeply worried Western competitors. While India and China were once long-standing rivals, India being consistently edged out of deals in Ecuador, Kazakhstan, Angola and Indonesia by its richer neighbor, the two have decided to join suit in bidding for assets in Iran, Myanmar and other countries out of favor with the United States. (Take your partners) By entering this diplomatic understanding the two countries have been able to circumvent the expensive losses that competition was breeding in each target country. An instance of the problem rectified by the agreement was seen in the case of last years bidding war for PetroKazakhstan, a Canadian outfit with heavy oil assets in Central Asia, when the Chinese paid a premium of $500 million to best a rival Indian bid. (Ibid.) In December of 2005, the cooperation agreement was consummated by a joint bid securing oil resources in Syria, a long-standing country with which the United States has deep-seated political animosities. In regards to international policies from the Beijing perspective, the cooperation agreement is further indicative of Chinas Pragmatist stance in heavily prioritizing good international relations with even India, a long-time political ally of the United States. The risky willingness of entering a cooperation agreement with India, incidentally elbowing

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in on the USs nuclear ally4, in pursuit of cheaper oil also emphasizes Chinas conscientiousness of its rising domestic oil demands. Kazakhstan and Uzbekistan In 2006, the Shanghai Cooperation Organization (SCO), consisting of six member countries, Russia, China, Kazakhstan, Uzbekistan, Kirgistan and Tajikistan, celebrated its fifth birthday since its inception. The organization was first formed in 2001 for the purpose of establishing a just and rational new international political and economic order in regards to fostering and normalizing the energy trade between the six countries. Yet, it has come under fire by western critics as an institution propagating three primary agendas: Slaking Chinas thirst for energy, protecting member states as they tyrannize dissidents and curbing Americans influence in the region. (Suppression, China, Oil) Of all adjacent countries to China regarding the energy trade, Central Asian countries in the SCO (especially due to their proximity to the international oil nexus, the Caspian Sea) bring both huge resources and huge political liabilities to the PRC. A tasteful example of Western condemnation for the Shanghai Six (The SCOs nickname) came after PRC President Hu Jintao applauded the Andijan crackdown in May of 2005 when Uzbek President Islam Karimov massacred hundreds of Uzbeki citizens. (The Dragon and the Tyrant) That President Hu signed a $600 million joint energy exploration deal with Uzbekistan shortly afterwards further aggravated widespread criticism of the Shanghai Sixs ethical practices. Essentially, the region provides China

Much of recent US-Indian relations had been characterized by nuclear weapons technologies given by the US to India in relation to Indias hostile confrontation with Pakistan over the territory of Kashmir. 17

with increasing energy security while the PRC provides the SCOs Central Asian members with political security (more along the lines of support), ethical or not. In comparison with Chinas relationship with other countries adverse to dealing with Western powers, similarities in Beijings security-for-energy attitude has also been seen in deals struck between the PRC in Sudan and Iran where China sought to protect its investment by vowing to veto any action that the UN Security Council might take against them. (Ibid.) In 2006, Kazakhstan maintained its end of the energy security deal for the PRC by starting up the oil pipeline pumping from Atasu in northwestern Kazakhstan to Dushanzi in Chinas Xinjiang province. Although earlier analyses predicted that Russian energy transit company Transneft would stymie attempts to use the pipe for Russian oil, nevertheless, the pipeline was optimized to also help usher Russian oil into the PRC through the same route. (Where Business Meets Geopolitics) While bolstering resources to meet Chinas rising oil demands, positive political relations with Kazakhstan and Uzbekistan have also promoted the incidental boon of contributing a stabilizing element to the Uigher minority-culture population in Xinjiang via Kazakh and Uzbek influence. As Chinas most dissenting national population (save for the Taiwanese), any positive impact on the Uigher population only further fortifies Chinas interest in its Central Asian neighbors. In addition to oil lines, the PRC has also long been transporting natural gas resources from Kazakhstan and Uzbekistan through Xinjiang, although the oil pipeline signifies a new level of symbiosis in energy and security for the SCO nations. From Beijings political perspective, the fledgling national status of the Central Asian nations along with their new economies puts them far more reliant on relations

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with China than vice-versa. Nevertheless, in terms of energy security, China must also pay constant attention to competitors for Central Asian fuel coming from the Caspian side. However, the political resources that China is willing to devote to maintaining a secure energy relationship with the Central Asian countries still has its limit. Despite Chinas rising influence in the Central Asian theatre and the energy security offered by the post-Soviet countries in the region, Chinas Pragmatic program towards maintaining good international relations renders it highly doubtful that the PRC would militarily support any Central Asian governments in case of domestic uprisings. Although some similarities can be drawn between the authoritarian governance of Chinas CCP and the blatant dictatorships of some Central Asian countries like Uzbekistan, the similarities have much less to do with an international ideology and much more to do with domestic political dominance in each respective country. Even for the sake of energy security stemming from the Central Asian region, it can be determined with high confidence that the PRC would not trade in its own national legitimacy, as the US has done in Iraq, by risking the chance of drawing itself into a civil war. Any support the PRC will display through the Shanghai Six for Central Asian politics will remain at the level that weve thus far seen, strictly symbolic. Analysis Because of a number of factors Chinas rapidly growing consumption of energy is pushing towards a reliance on oil and hydro-electrics. Regarding environmental concerns, although the growing automobile population is contributing a significant amount to aggregate pollution along the eastern coast of the Peoples Republic, mostly due to cars that dont meet emission standards (in Shanghai alone this accounts for over 70% of the

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automobiles), this is still nothing compared to the amount of pollution caused by Chinas reliance on coal. Chinas development of cars meeting emission standards, along with the CCPs pursuit of cleaner energy technologies, will at least steer China in the right direction concerning urban pollution. Several factors already suggest that China is taking environmental sustainability into serious consideration on its road to modernization. Similar in potency to the edicts announced by Chinese Presidents of the past, President Hu Jintao and Prime Minister Wen Jiabao have jointly changed the modern rhetoric of the party line from all-out economic growth to balanced, economically and environmentally conscious development. In 1996, environmental spending had been boosted to 1.3% of the national GDP, while every year the pollution that causes dust clouds and farmland erosion costs the government anywhere between 8%-12% of Chinas GDP in damages. (A Great Wall of Waste) In the absence of powerful domestic interest groups, the CCP spends a significant amount of money hiring international think tanks in dealing with their national problems; in the area of environment, consultancies such as Environmental Defense and corporations like General Electric both have departments devoted to solving Chinas spooky pollution. However, cleaner technologies and emission standards do little to offset the true source of Chinas pollution, coal. The black rock that warms the homes of over 800 million farmers in China is still the most accessible fuel, although industry and government are both pushing towards wider spread use of the lesser but more efficient evil, oil.

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Unlike coal, Chinese oil supply is seen as ultimately finite and this is causing a heavy degree of speculation and pursuit in the international marketplace for resources that will give China a sense of energy security. What tempers the Chinese pursuit of oil is both the Pragmatist program that governs Beijing policy and worldwide economic projections that suggest that the epic amount of fuel consumption China will require during its development will taper off in about another decade and a half. With these two factors in mind, and with a long collective history warning the Chinese mentality about the ailments of international conflict caused by energy pursuits (with no shortage of contemporary examples) In addition, officials in the internal system have sensitivity to taking unnecessary international risks. There is a universal fear by governmental officials that something they do could be criticized for not upholding the countrys interests. (McGregor 150) Of course, drawing China into a hostile confrontation with any country other than their old nationalist enemy, Japan, is a responsibility no Chinese official wants to take. Beijing is apt to sticking to safer, less invasive routes of procuring oil. Despite the hype surrounding Chinas infamous $18.7 billion bid for American oil company Unocal (and the fiasco resulting in the US Congress disallowing the Chinese buyout and, controversially, giving Unocal over to Chevron for around a billion dollars less) it would be alarmist to let an attempted corporate takeover to erect illusions of an imminent Chinese empire. Ironically, the US Congress Unocal roadblock prompted press criticisms against the US government in discrediting its own practices of free trade. However, while invasive may misrepresent the international Chinese oil pursuit, aggressive rightly describes Chinas global business practices. Military buildup and rises in Chinas security perimeter would be far more indicative of Chinese

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expansionism, but instead, the PRC is threatening Western interests by building business and energy alliances in Central Asia, the Middle East, Africa and Latin America all telling of Chinas intent on fortifying energy security rather than national security. From Beijings perspective maintaining Party power is ultimately dependant on domestic popularity, and that goes hand in hand with modernization and economic development. With the tarnished international record of human rights violations and its generous contribution of pollution to worldwide environmental problems, the PRC is fully aware of the political ammunition that it could be assaulted with in the case of very few international missteps. For those intent on seeing China as a rising threat it should be clear that the traditional approach of viewing the PRC as a Communist adversary is an outdated notion. The top-tier of Chinese leadership is most concerned with modernizing China without turning the country of 1.3 billion into a biohazard, and for the time, this requires oil. If anything, the United States and other western countries should see the Peoples Republic as developing its mastery in becoming an opponent of a much more familiar variety - a capitalist one.

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Principle References The Oiloholics The Economist. 25 Feb. 2005 Parts the bulldozers have not yet reached The Economist. 8 Jan. 2004 Under the Thumb The Economist. 1 Dec. 2005 Bininachvili, Albert. Class on: Global Energy: Security and Geopolitics. Columbia University. 18 July. 2006 Boom Town Blues The Economist. 10 July 2003 High Train The Economist. 6 July 2006 Hungry Dragon The Economist. 30 Sept. 2004 Tonnes of Problems The Economist. 17 April 2003 Down and Dangerous The Economist. 2 Dec. 2004 Pits of Death The Economist. 15 Aug. 2002 Running out of steam The Economist. 23 Nov. 2000 A Terrible Beauty is Born The Economist. 25 May 2006 United States. Energy Information Administration. China Country Analysis Brief. 2 Aug. 2005. <http://www.eia.doe.gov/emeu/cabs/china.html> The shape of things to come? The Economist. 7 July 2005 Johnston, Ian. Panel on Nationalism and Chinese Foreign Policy. Harvard University. 19 Mar. 2005 Goldman Sachs Global Economics Group. The BRICS and Global Markets: Crude, Cars and Capital The World and the BRICs Dream. The Goldman Sachs Group. 2006 In the Pipeline The Economist. 29 April 2004 Pipeline Politics The Economist. 22 Mar. 2006 Take your Partners The Economist. 19 Jan. 2006

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Oil and Gas in Troubled Waters The Economist. 6 Oct. 2005 Suppression, China, Oil The Economist. 7 July 2005 The Dragon and the Tyrant The Economist. 2 June 2005 Where Business Meets Geopolitics The Economist. 25 May 2005 A Great Wall of Waste The Economist. 19 Aug. 2004 McGregor, James. One Billion Customers. Free Press. New York 2005

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