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Strategies & Market Trends : Greater China Junior Stocks

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To: Julius Wong who started this subject11/5/2003 10:51:05 PM
From: Condor   of 1992
 
Survey: Is growth in China's energy consumption sustainable?

interfax.com

08.08.2003 08:23:00 GMT

08.08.2003 08:23:00 GMT
Survey: Is growth in China's energy consumption sustainable?

Shanghai. (Interfax-China) - China's economic growth since 1978 has been remarkable. It has
enabled the creation of a number of highly developed cities along the eastern coast, and has brought
millions of people above the poverty line, as the United Nations Development Program's Human
Development Report 2003 (UNDP HDR 2003), released in July, stated. However, the government's
ambitions do not stop there. Among its aims are the quadrupling of the national economy by 2020,
and the increase in the urbanization rate from about 35% to 65% by the same date. Using data from a
number of sources, Interfax tried to assess the impact of such a rate of growth.

China has already become the second biggest energy consumer in the world, according to
internationally recognized statistics, but per capita energy consumption is still low. The country is
already suffering severe shortages of electricity, as Interfax has been reporting, but electricity
consumption per person remains at a significantly lower level than developed countries. Can China
maintain rapid economic growth using current technologies and energy sources? If the burden on its
energy industry is already deeply problematic, how will those ambitious targets be met?

Increasing the urbanization rate (the proportion of the population living in towns and cities) by such a
massive proportion will also be a gargantuan task. The difference between energy consumption in
China's cities and China's countryside is profound, as Interfax noted last week following a tour of the
rural areas around the Three Gorges. Even if the golden figure of 65% is an overestimate, a more
conservative growth rate posited by the UNDP HDR 2003 suggests that just under half the population,
estimated to rise to 1.4 bln, will be living in towns and cities by 2015. Many more of them will have
houses filled with electric appliances, will work in factories that burn energy 24 hours a day, and may
even have reached a level of prosperity that allows them to have a family car. Such a life is taken for
granted in the West, but can the world cope with 700 mln Chinese urban residents?

Table 1: Top Ten Primary energy consuming countries, 2001-2002

Source: Consumption figures from BP Statistical Review of World Energy, June 2003; Population
figures from UNDP HDR 2003 *per capita calculations based on 2001 population and 2002
consumption levels

As we can see, in per capita terms, China - and particularly India - lag significantly behind energy
consumption levels in developed countries. The comparison is equally stark when electricity
consumption per head is considered. The US used 12,331 kWh per capita, while China used just 827
kWh. India was even lower, at 355 kWh.

If China is "to catch up with the west", one of the country's key aims at least since the days of Mao
Zedong, it is obvious that those per capita energy consumption levels have to rise. That, of course, is
where the problems arise.

Data from UNDP HDR 2000 also shows that although China is the second largest producer of carbon
dioxide emissions as a result of heavy coal consumption, the per capita emission rate is as much as
eight times bigger in the United States. If the per capita emission rate was allowed to become as high
as the one in the US, the effects - in terms of pollution, and perhaps global warming - could be
devastating. So how will China fulfil all those desires to become a "well-off society", discussed at
length during the recent Communist Party Congresses? Large-scale exploitation of the country's
hydropower resources might be an option, but as a recent report in the Guangzhou-based weekend
newspaper, Nanfang Zhoumo, reported, overexploitation of China's waterways might also cause more
trouble than it solves. Wang Jianguo, an environmental protection official quoted by the newspaper
said, "I reckon that if it continues like this, every river in the west of China will be covered in dams and
hydropower stations."

The serious question is whether or not the resources - energy included - exist to bring China up to the
level of economic prosperity enjoyed in the United States. According to government targets, China
aims to quadruple GDP by 2020. Impossible, said Klaus Toepfer, head of the United Nations
Environment Program (UNEP), unless developed nations like the United States radically change their
consumption habits. "Quadrupling the GDP of a country of 1.3 bln, can you imagine what are the
consequences if you go in the same structure as was done in the so-called developed countries?"
Toepfer said in Sydney, Australia on July 17. The same density of privately-owned cars as the West -
estimated to require a total of 650 mln vehicles in the whole of China - would be unsustainable using
current materials and fuels.
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