The Importance of China’s Energy Demand

In the last four decades, the number of people in China with incomes below the international poverty line has fallen by almost 800 million.  That is almost 75% of the total decrease in the number of people worldwide who live in extreme poverty.  Over the same period, China’s GDP per capita increased more than sevenfold as it moved from an agrarian economy to a more industrialised one.

By any measure, China’s growth has been rapid and unprecedented. Not only has it eradicated extreme poverty, it has also made large improvements in access to healthcare and education. Its post-COVID fiscal policy is expected to remain expansionary. On the energy side, more than half of global demand growth in the last ten years can be attributed to China.

There are several factors that account for this growth in China’s energy demand: High-tech manufacturing in clean energy areas like photovoltaic systems and electric vehicles continues to grow. In 2022, revenue for listed manufacturers in these two sectors alone amounted to US$300 billion. China is also on track to add on the same amount of capacity as the combined capacity of all OECD countries in Europe and Asia so there continues to be a strong demand for petrochemical feedstock. Finally, hydroelectricity production has been inhibited by droughts which further contributes to its energy demand.

China continues to be one of the largest oil consumers globally. Its oil imports in this decade are correspondingly set to increase. It is also the world’s largest coal consumer, producer and importer and the world’s largest natural gas importer.  Around 70% of China’s electricity is still generated from fossil fuels fuels and China accounts for 27% of annual global carbon dioxide and a third of greenhouse gas emissions.

Despite China being the largest consumer of fossil fuels, it is also the leader, spending US$650 billion annually on several clean energy technologies. It dominates the solar panel supply chain and has brought down the price of solar components to the lowest it has ever been.

By the end of 2026, China is expected to have 1,000GW of solar power alone. Globally, 11,000GQ is needed to meet the 2030 targets of the Paris Agreement. Given China’s size, the world’s environmental problems cannot be resolved without its engagement. The future of energy is undoubtedly very much influenced by China’s growth and energy transition.

Sources:

World Bank and the Development Research Center of the State Council, the People’s Republic of China. 2022. Four Decades of Poverty Reduction in China: Drivers, Insights for the World, and the Way Ahead. Washington, DC: World Bank. doi:10.1596/978-1- 4648-1877-6. License: Creative Commons Attribution CC BY 3.0 IGO

International Energy Agency (2023), World Energy Outlook 2023, IEA, Paris https://www.iea.org/reports/world-energy-outlook-2023, License: CC BY 4.0 (report)

Howe, Colleen. “Explainer: The Numbers behind China’s Renewable Energy Boom.” Reuters, 16 Nov. 2023, www.reuters.com/sustainability/climate-energy/numbers-behind-chinas-renewable-energy-boom-2023-11-15/.