China's economy will continue to be hampered by inadequate supplies of energy, even though the government is stepping up efforts to construct energy and transportation facilities.

Why? Because it will take a lengthy amount of time to complete such projects.

China's energy demand and supply situation, including the inefficient use of energy, and fast-economic growth, are the major factors contributing to China's energy crisis.

Although China, on the whole, has large amounts of various sources of energy, the nation's per capita reserves of those resources are less than the global average. For example, China's arable land is about 40 per cent of the world's average, and its supply of water is about one-fifth of the global average.

China's fast-economic growth has been applying increasing pressure on the nation's already strapped supplies of energy and resources.

The demand for energy has grown much faster than gross domestic product (GDP) in recent years. For example, in 2000, China's power consumption grew 9.5 per cent, 1.5 percentage points faster than GDP. In 2001, 2002 and 2003, power consumption grew, respectively, 1.1, 3.3, and 7.2 percentage points faster than GDP.

That fast-economic growth has helped deplete already-strained supplies of power, coal and oil. Brownouts and blackouts have been common across China particularly in the economically advanced coastal regions in recent years.

Shortages of power, coal, oil and transportation last year created major bottlenecks in many sectors of the Chinese economy.

Last winter, the pressure on power, coal, oil and transportation increased. Last December, 20 provinces were limiting power supplies, four more than the previous month.

Pushed by the growth in demand for power, additional pressure was placed on coal the major source of generating power. By the end of December, stockpiles of coal in major power factories had decreased 1.12 million tons, from November, to 10.99 million tons.

Massive power cuts have been in place, nationwide, for more than two years. In 2003, 19 provinces acknowledged they lacked sufficient supplies of power. Last year, the number rose to 24 provinces.

China's power shortage reached 30 million kilowatts last year. The nation lost an estimated 0.5 percentage point of GDP growth due to its lack of power.

Meanwhile, Chinese residents have been using increasing amounts of energy. In 2002, residents consumed about 170.33 million tons of standard coal, which accounted for 10.4 per cent of the nation's energy consumption.

More specifically, the percentage of oil used by residents grew from 2.4 per cent in 1990 to 6 per cent in 2002. Power consumed by residents accounted for 7.7 per cent of the total in 1990, and 12.3 per cent in 2002.

As Chinese residents' incomes rise, demand for energy will grow.

The strain on energy sources will continue in China for the next several years.

This year, the nation's goal for economic growth is 8 per cent. The milder growth rate, compared with previous years, has eased, somewhat, the demand on energy.

In general, increased investment in China will push the output of energy. China's energy output is expected to reach 1.6 billion tons of standard coal this year. That would be up 10 per cent year-on-year.

However, energy supplies will remain tight, due to the fast development of heavy industries, which currently is a major feature of China's economy.

Although huge demand-supply gaps are expected to remain in coal and oil this year, fewer power shortages are likely.

Various factors will affect China's energy situation over the next several years.

First, continued growth of the global economy will increase demand for energy. High oil prices and interest rates might cause global economic growth to slow this year.

Estimates from the International Monetary Fund and the World Bank indicate global economic growth will be 3.5 per cent this year, down 0.4 percentage point from last year. However, global demand for energy will remain robust.

Second, China's GDP is expected to grow 8 per cent this year, down from 9.1 per cent last year. Although the growth rate is slowing, demand for energy remains hot.

Estimates indicate the annual growth rate of industrial oil consumption will be 5 per cent. Fortunately, given the development of science and technology and the higher percentage of high-tech industries, industrial oil consumption will taper off in future.

Third, China has been increasing investment in the energy sector. China's policy-makers have been paying greater attention to the nation's energy industry, given the increasing reliance on energy due to the nation's fast economic growth.

The major aim of the central government's macroeconomic adjustment last year was to curb the fast development of high energy-consuming industries and reduce pressure of energy industries.

In the coming years, facing the serious situation and rocketing oil prices, China's energy policy will focus on the development of new and alternative sources of energy. It will also focus on conserving energy, and on reforming energy production.

Fourth, residents' demand for energy will increase. Demand for water resources, for example, will increase in sync with rapid urbanization. If China's annual urbanization rate is 1 per cent, 12 million people will become urban residents a year.

As a result, water onsumption which includes residential and industrial will increase 1.5 billion tons. As living standards improve, water consumption will increase. By 2020, water consumption will rise about 4.5 billion tons.

Fifth, given China's advancing industrialization and urbanization, demand for energy will continue to increase. China currently is the world's second-biggest energy consumer, and third-biggest oil importer.

To sum up, China's energy situation will not be resolved in the immediate future, and pressure resulting from inefficient use of energy will continue to exist.

(China Daily 06/06/2005 page6)