Mr. Zhang Guobao, Vice Chairman
National Development and Reform Commission
September 13, 2005
Ladies and Gentlemen:
Good morning. This year international oil price has been rising with fluctuations to a high level. Recently, oil price even exceeded 70 USD per barrel to reach a higher level after drilling and refinery facilities in the Gulf of Mexico were damaged by the hurricane. Although the price fell promptly after the United States and International Energy Agency (IEA) announced the release of oil reserves, it has been climbing up again and maintains at above 65 USD per barrel these days. Oil price has become a concern of the international community, and many countries have adopted countermeasures to prevent negative impacts of the price hike. Not long ago, Guangdong Province and some other areas suffered from the shortage of oil products. The government and oil companies adopted some measures to alleviate the tight supply, and oil products shortage has been somewhat eased. However, oil price can still have rebounds and the imbalance between oil products demand and supply still exist. Therefore, once again this situation draws the attention of the general public to energy issues.
Since the second half of 2002, China has overcome the impact of the Asian financial crisis, and the economy has maintained sustained and rapid growth. In the meantime, energy supply began to strain after temporary oversupply. In the first place tight power supply occurred in some provinces. To date, for nearly 40 month in a row power supply has been growing at a two-digit rate monthly over the same period of the previous year. In 2004, GDP grew by 9.5% while power supply increased by 15.3%. In the first half of this year, power supply increased by 13.2% over the same period of last year. The rapid growth of power demand has also stimulated the demand for coal. With prices rising, the coal industry has emerged out of the stagnant situation ever since 1997. In 2004, the output of coal reached 1.956 billon tons, 17.3% higher over 2003, and 980 million tons of coal were used to generate power, which in turn caused strains in railway transportation. Last year, 100,000 train wagons were dispatched every day, of which 50,000 were used to transport coal.
Energy issues have attracted broad attention in China. Against this background, the Central Committee of the CPC and the State Council attach great importance to and actively promote the Scientific Concept of Development and sustainable development, which is also a concept recognized by the general public. In 2004, China's primary energy production amounted to 1.845 billion tons of coal equivalent (TCE) and total consumption of energy reached 1.97 billion TCE, making China the second largest energy producer and energy consumer in the world. Last year China produced 175 million tons of crude oil, becoming the fifth largest crude oil producer, and China is expected to produce 180 million tons of crude oil this year. In 2004, China's net crude oil import was 117 million tons, accounting for 6.31% of the world trade volume. China also exported 80 million tons of coal. China's charcoal export accounted for 56% of the world trade. China's energy self-sufficiency rate is 94%, with an external dependency rate of 6%. The energy self-sufficiency rate of China is more than 20% higher than the average self-sufficiency rate of OECD countries, which stands at 70%.
By the end of 2004, China's installed power generation capacity reached 440 gigawatts, ranking the second in the world and generating 219 trillion watts hours power. In 2004, 50.5 gigawatts new power generation capacity came on stream, and it is estimated that newly added capacity will exceed 65 gigawatts this year, making a total power generation capacity of over 500 gigawatts. Total power generation grew by 12.4% on average between 2000 and 2004.
China's per capita primary energy consumption is 1.08 tons of oil equivalent, 66% of the world average (1.63 tons), 13.4% of the United States (8.02 tons), 26.7% of Japan (4.03 tons), 28.1% of United Kingdom (3.82 tons). China's per capita installed power generation capacity only amounts to 0.3 kilowatt, one-tenth of that of the United States (3 kilowatts). China's crude oil import accounts for 6.31 % of the world trade while the oil import of the United States takes up 29.6% of the world trade and that of Japan takes up 11.3%. Oil import volume of China is equivalent to 23% of the United States and 56% of Japan.
Some people attribute the crude oil price hike in 2004 to the growth of crude oil consumption in emerging countries such as China and India. But this view does not correctly reflect the situation of international energy markets. What all have seen is that although crude oil price is rising with fluctuations, situations such as supply interruption, supply shortage or unavailability of sale have not occurred. This means crude oil supply and demand are balanced globally. Multiple factors have contributed to the price hike, such as the continuous turbulence in some oil producing countries, under-capacity production of crude oil, and particularly the influx of a large mount of international floating capital into the crude oil trading market. Every slightest sign of disturbance could drive speculations on oil price. High oil price will prompt countries of the world to adopt counter measures, give incentives to the development of alternative energies, promote the development of energy-conserving and fuel-saving technologies and accelerate the pace of industrial restructuring, and correspondingly oil price will be adjusted to a reasonable level gradually.
China is a developing country. The fundamental principle of China's energy development is to rely on domestic supply, and top priority of energy policies is given to promoting energy conservation and improving energy efficiency. China promulgated the Energy Conservation Law in 1997. In 1978-2004 China's economy grew by 9.4% annually on average, underpinned by an average annual 4.8% growth of energy consumption. In 1990-2004, China's energy consumption per 10,000 RMB GDP was lowered by 45%. The Chinese government formulated the Medium and Long Term Development Plan for Energy Conservation. Last month, the Executive Meeting of the State Council endorsed Recent Priorities of Work for Building an Energy Conservation Society and Suggestions on Accelerating the Development of Cyclic Economy.
It is quite unnecessary for the world to over-react to the growth of China's energy consumption, since its dependence on the world is insignificant. The international community should also respect China's right of development and the inspiration of the Chinese people to get out of poverty and lead a decent, well-off life. China's economic growth and energy development will also create enormous business opportunities for the world and drive the growth of the global economy. In line with the formulation of the Eleventh National Plan for Economic and Social Development, we have drafted the Medium and Long Term Energy Development Plan, which can be summarized in the following words: on the basis of energy efficiency, give top priority to energy conservation; on the basis of coal, pursue diversified energy development; on the basis of domestic supply, expand overseas supply; balance urban and rural energy development and conduct layout rationally; reply on science and technology and make institutional innovation; protect the environment and safeguard energy security. The Plan emphasizes energy mix restructuring and the acceleration of nuclear power, renewable energy and hydropower.
The Standing Committee of the National People's Congress passed the Renewable Energy Law, which provides a legal framework for the development of renewable energy in China. Within the mix of primary energy consumption, the proportion of renewable energy will be increased from the present 7% to 15% in 2020, substituting the consumption of fossil energy by 400 million TCE, reducing the emission of carbon dioxide by one billion tons and sulfur dioxide by over seven million tons.
While developing energy and safeguarding energy supply, China will stick to the policy of opening up the outside world and continue to strengthen energy cooperation with other countries. Addressing China's energy issues depends on domestic resources and efforts, but we also need to expand exchanges and cooperation with other countries of the world. In line with the principle of equality, mutual benefits, win-win, business operation, government coordination, extensive cooperation, sincerity and enhanced communication, the Chinese government is willing to strengthen energy dialog and cooperation with other countries of the world, international organizations and transnational corporations.
Thank you all. Next, I would like to take questions from the floor.
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