. International Journal of Energy Economics and Policy | Vol 10 • Issue 1 • 2020 331 International Journal of Energy Economics and Policy ISSN: 2146-4553 available at http: www.econjournals.com International Journal of Energy Economics and Policy, 2020, 10(1), 331-341. The Problems of China as a Major Consumer of Energy Resources Natalia Victorovna Kuznetsova1, Alla Anatolyevna Kravchenko2* 1Doctor of Economic Science, Professor, Department of World Economy, School of Economics and Management, Far Eastern Federal University, Suhanova St. 8., Vladivostok 690950, Russia, 2Candidate of Economic Sciences, Department of World Economics, School of Economics and Management, Far Eastern Federal University, Suhanova St. 8., Vladivostok 690950, Russia. *Email: kravchenko.aa@dvfu.ru Received: 26 July 2019 Accepted: 03 October 2019 DOI: https://doi.org/10.32479/ijeep.8478 ABSTRACT The high rates of development in China are increasingly indicated the insufficiency of their own energy resources to maintain the positive dynamics of the growth of the national economy. In the absence of structural changes in the Chinese energy industry, exacerbation of the environmental problem is likely to reduce the inflow of foreign direct investment, on which the PRC economy is also mainly dependent. It is justified that with the rapid growth of the Chinese economy, the problems are growing as the obstacle to the further economic development of the country; it is growing the interdependence of the Chinese and world economies, which is a hidden threat to the stability and well-being of the global economy represented by the PRC. Keywords: GDP Growth Rates, Export, Import, Living Standards, Energy Resources, Energy Consumption JEL Classifications: Q4, O3 1. INTRODUCTION China is one of the leaders of the modern world economy. Due to its competitive advantages and competent economic policy of the last decades, it managed to turn from a backward agrarian country into one of the most dynamically developing and having a huge influence of the economies of the world. We entered a new stage in the development of the world economic system, the success of which will be determined by the readiness to respond to the Great challenges of our time. Each national system will increasingly surpass from its development if it cannot anticipate and adapt to the qualitative changes dictated by the Great challenges. Modern challenges associated with global economic processes, global political risks and changes in the international security situation force resource-insufficient states to look for ways to stabilize their energy supplies. This task has reached one of the priority places in the PRC’s foreign policy during the past 10-15 years. Over the past 40 years, China has shown rapid and significant economic growth, passed the way from agrarian to industrial economy: Its GDP increased by an average of 9.8% per year, which represents dynamic economic growth, which is currently making China the second largest economy in the world for nominal GDP after the USA. The purpose of this research is to assess the achievements and problems of the energy sector of the PRC. In this research, we look at the energy problems of China. We prove that the depth of the problems with an increase in energy consumption, is determined by the extremely low rates of growth in the efficiency of Chinese energy, which involves a number of other economic and social problems. The high rates of development in China are increasingly indicated the insufficiency of their own energy resources to maintain the positive dynamics of the growth of the national economy. However, the high rates of the Chinese economy were not ensured by the corresponding development of the fuel and energy complex, which is a problem for the further development of China. The RPC This Journal is licensed under a Creative Commons Attribution 4.0 International License Kuznetsova and Kravchenko: The Problems of China as a Major Consumer of Energy Resources International Journal of Energy Economics and Policy | Vol 10 • Issue 1 • 2020332 is increasingly moving into the category of net energy importers. The structure of the Chinese energy entails negative consequences it is the real obstacles to the development of the Chinese economy. In the absence of structural changes in the Chinese energy industry, exacerbation of the environmental problem is likely to reduce the inflow of foreign direct investment, on which the PRC economy is also mainly dependent. 2. THE MAIN PROBLEMS OF CHINA ENERGY INDUSTRY 2.1. Problem 1: Insufficiency of Own Sources of Energy According to international estimates, in 2017, the explored sources of oil in the PRC are enough to satisfy the current level of consumption over 10 years, natural gas - 25, coal - 30 years (BP Statistical Review of World Energy, 2017). However, it should not be overestimated the role of the “Chinese factor” in the world oil market: this country’s share in world fuel imports is still relatively modest, as evidenced by the data in Table 1 on the PRC’s share in world fossil fuel reserves. Moreover, since 2009, China is the leader in terms of primary energy consumption in the world. In 2007, this indicator amounted to 23.2% of all primary energy consumed in the world economy. The main source of energy in China is coal, as can be seen from the dynamics of primary energy consumption in China (Figure 1). According to the data in Figure 2, the USA and the PRC are the world leaders in terms of energy consumption. However, the Chinese economy is characterized by fairly large volumes of oil and oil products imports, which is also one of the main signs of the high degree of dependence of the Chinese economy on the international energy market. It is not only a growing problem of the Chinese economy, but also a significant problem for the global economy. Figure 3 demonstrates that the total energy consumption in China is increasing, while in the USA it is decreasing. But this confirms that developed countries are on the path to reducing energy costs, and an increase in the rate of growth in energy consumption is not automatically a sign of a growing economy. According to Figure 4, over the past decade the energy production and energy consumption in the PRC has grown rapidly, however, energy consumption has also increased in excess of energy consumption. In this connection, the volumes of the energy balance of trade has increased. At the same time, it is important to note that during the analyzed time period (1990-2017) (Figure 5), there was a periodic decline in the share of energy imports in total energy consumption. The shortage of energy resources in China actualizes the problem of energy saving, both in everyday life and in production, which is very energy-intensive. Table 1: The PRC’s share of the world’s fossil fuel reserves Year Coal Oil Natural gas Stocks, billion tons Share, % Stocks, billion tons Share, % Stocks, trillion cc m Share, % 2000 114.5 11.6 3.3 2.3 1.4 0.9 2010 114.5 13.3 2.0 1.1 2.8 1.5 2016 114.5 12.8 2.5 1.1 3.8 2.1 Source: Calculated according to the National Statistical Office of China Figure 1: Dynamics of primary energy consumption in the PRC in 2000-2017, mln Source: Share of Renewable Energy in Power Generation, 2018 Source: Share of Renewable Energy in Power Generation, 2018; Global Energy Internet Development Cooperation, 2017 Figure 2: Total energy consumption by country (Total energy consumption (Mtoe) Kuznetsova and Kravchenko: The Problems of China as a Major Consumer of Energy Resources International Journal of Energy Economics and Policy | Vol 10 • Issue 1 • 2020 333 Thus, the volumes of energy production do not correspond to the growth rates of energy consumption. 2.2. Problem 2: Unbalanced Structure of Energy Supply and Energy Consumption According to Table 2, the main source of energy in China in 2017 is coal, its share in the country’s energy balance is 64%, oil takes the second place - 19%. Crude oil is also an important component of the country’s energy balance, and gradually its share increases. If in the 1950s it was considered that China has low level of oil reserves, and its share in energy production did not exceed 2%, then in the 1960-80s its share gradually grew and reached 23.8% in 1980. However, later, due to the rapid growth of energy consumption during the economic reform, the rate of oil exploration and oil production began to noticeably lag from the country’s requirements for crude oil and oil products. Since 1992, the energy balance in the PRC has become negative, and consumption has become significantly higher than production. Then, the energy deficit continued to grow, and in 2005 it has already amounted to 172.5 mln. During the 11th Five-Year Plan (2006-2010), the energy deficit continued to grow in the conditions of high GDP growth rates in general and in the manufacturing in particular. Since 2007, the volume of energy consumption exceeded the production volume by more than 300 million tons of equivalent fuel. The specific feature of China is a significant difference in the structure of energy consumption from other countries. The coal energy has historically developed in this country. The structure of energy consumption in the PRC is presented in Table 3. 2.3. Problem 3: Critical Level of Environmental Pollution The country, possessing large reserves of uranium and great potential in hydro, solar and wind power (Boqiang and Chunping, 2013), is gradually reducing the share of coal and intends to increase the share of alternative energy to 15% in the country’s total energy balance by 2020. Although it is justified from a resource point of view, many negative consequences of the preferential use of coal (primarily environmental) are becoming catastrophic: nowadays, China is on the verge of an ecological disaster. According to Figure 6, CO2 emissions from fossil fuels in China from 1978 to 2017 increased almost 6.5 times, and the average growth rate was 17%. In 2017, the growth rate of emissions in China was transferred to a positive growth zone (growth in CO2 volumes in 2017 was + 1.3% after - 0.5% in 2015 and 2016). Source: Share of Renewable Energy in Power Generation, 2018 Figure 3: The total energy consumption of China and the US Energy balance of trade (Mtoe) Source: Share of Renewable Energy in Power Generation, 2018 Figure 4: Comparison of energy production, energy consumption, energy trade balance, energy intensity and renewable energy sources Table 2: The structure of the modern energy balance of the PRC in 2012 and 2017 Types of resources Indicators Quantity Share of world (%) The structure of the energy balance, 2017 (%) 2012 2017 2012 2017 2012 2017 Total primary energy Consumption (million tons) 2613.55 3014.43 21.3 22.9 100 100 Oil Stocks (million tons) 2000 2500 0.9 1.1 17.67 18.58 Production (million tons) 203.6 215 5.1 4.9 Consumption (million tons) 461.8 560 11.4 12.9 Natural gas Stocks (billion cubic meters) 3100 3800 1.5 2.1 4.48 5.87 Production (billion cubic meters) 102.5 138.0 3.1 4.8 Consumption (billion cubic meters/million tonnes of oil equivalent) 131/117 197/177 4.0 4.7 Coal Stocks (million tons) 114500 114500 13.3 12.8 70.38 63.69 Production (million tons e.) 1956 1827 49.5 47.7 Nuclear energy Consumption (million tons e.) 1839.4 1920 49.4 50 Consumption (million tons e.) 19.5 38 3.3 6.6 0.75 1.26 Hydro-electric power Consumption (million tons e.) 157 255 19.8 28.5 6.00 8.46 Renewable energy Biofuels (million tons e.) 1.149 2.43 2.0 3.2 0.72 2.14 Other species (million tons e.) 17.7 62 9.1 17.2 Source: Calculated using ВР Statistical review of world energy 2012; 2017 Kuznetsova and Kravchenko: The Problems of China as a Major Consumer of Energy Resources International Journal of Energy Economics and Policy | Vol 10 • Issue 1 • 2020334 Since 2005, China has been the largest emitter of carbon dioxide in the world, in 2017, China produced 27.6% of its total emissions, but by the end of this year, China has reduced CO2 emissions per unit of GDP by 46% compared to 2005, fulfilling its commitment taken in the framework of the Paris Climate Agreement (2015), to reduce the intensity of CO2 emissions by 40-45% from the 2005 level by 2020 (Boqiang and Chunping, 2013). 2.4. Problem 4: Irregular Territorial Distribution of Energy Resources It should be noted another problem of the PRC. The macroregions of China differ significantly from each other in the provision of energy resources. The distribution of energy takes place according to the scheme - coal in the north, electricity in the south, oil in the east, gas in the west. If you allocate energy reserves in China to six major economic regions, then the North China will be most energy-secured - 43% of all energy reserves, the South-West China - 28.6% and the North-West China - 12.1%. The largest reserves of coal are concentrated in the North China (64%), hydro resources - in the South-West (70%), and oil and natural gas - in the North East China (48.3%) (Gao and Dong, 2007). Thus, almost all natural gas is produced in the western regions far from the main sources of consumption, which makes it extremely difficult to use as one of the main energy sources (Aristova, 2014). The absolute increase in its production in the 2000s was concentrated mainly in the east of the country (Table 4). Guangdong and Jiangsu provinces were also major consumers of domestic gas, and in total in China 170 million citizens had access to domestic natural gas in 2010. The most developed regions of the country use the clear energy. At the same time, the growth of natural gas consumption was fairly evenly distributed in almost all regions of China. In connection with the differentiation of the economies of the Chinese provinces, we calculated the integral indicator (province development ratio). The formula for calculating the development rate is following: CED SPI SSI STI = ∑( ; );1 3 1 2 100 (1) CED - Development rate; SPI - Share of extractive industry in GRP; SSI - Share of manufacturing in GRP; STI - Share of service sector in GRP. We received the following results. The most part of the Chinese provinces are characterized by a lower degree of development of the economy with a development coefficient in the range of 0.61-0.68. Eight provinces are characterized by a higher level of economic development, however, with a relatively low development rate in the range from 0.681 to 0.75. It is also noteworthy that most of the Chinese provinces of this group are located in the coastal zone or closer to the southern border of the PRC. The next range of development rates from 0.751 to 0.82 included only one territorial entity of China - Shanghai. This subject is located in the coastal zone of the PRC and, as noted before, it is characterized by a high share of the service sector in the GRP, which influenced the level of development coefficient (Table 5). The last range of the most developed provinces of China, characterized by a development rate in the range of 0.821-0.89, includes only two territorial subjects of the PRC - Beijing and Taiwan. Table 3: The structure of energy consumption in the PRC Year Total energy consumption (million tons of ne.) Coal (%) Oil (%) Natural gas (%) 1957 96.44 92.3 4.6 0.1 1962 165.4 89.2 6.6 0.9 1965 189.0 86.5 10.3 0.9 1970 292.9 80.9 14.7 0.9 1975 454.3 71.9 21.1 2.5 1980 602.8 72.2 20.7 3.1 1985 766.8 75.8 17.1 2.2 1990 987.0 76.2 16.6 2.1 1999 1220.0 67.1 23.4 2.8 2003 1204.2 69.3 22.1 2.4 2006 1729.8 70.2 20.4 2.9 2011 2432.2 70.5 17.6 4.0 2013 2735.2 68.5 17.7 4.7 2014 2903.9 67.3 17.7 5.1 2015 2970.3 65.6 17.7 5.7 2016 3014.0 63.7 18.6 5.9 Source: National Statistical Office of the People’s Republic of China, 2013-2017 Source: National Statistical Office of the People’s Republic of China, 2013-2017 Figure 6: CO2 emissions from fuel combustion (MtCO2) Figure 5: Energy intensity per unit of GDP at constant purchasing power parity (PPP) (GDP energy intensity at constant purchasing power parities (thous. USD/USD) (Energy intensity of GDP at constant purchasing power parities (koe/$2015p) Source: Share of renewable energy in power generation, 2018 Kuznetsova and Kravchenko: The Problems of China as a Major Consumer of Energy Resources International Journal of Energy Economics and Policy | Vol 10 • Issue 1 • 2020 335 Thereby, the territorial entities of China located in the coastal zone or closer to the southern border of the country are characterized by a higher level of economic development than other provinces. It is also important to note that the share of provinces with a relatively more developed economy is substantially small. 2.5. Problem 5: The High Level of Dependence on Hydrocarbon Imports, Especially Oil The largest share in the consumption of petroleum products accounts for industry and transport. The share of consumption of petroleum products in the transport sector is constantly growing. From 2013, the share of transport began to exceed the share of industry in the structure of consumption of petroleum products of China (in 2014, the share of industry - 35%, transport - 38%), while in 1990 the transport sector of the economy consumed 4 times less products oil refining than in the industrial sector (industry’s share - 64%, transport - 15%) (China Statistical Yearbook, 2016). According to the researches of B. Lin, GDP growth in China is directly dependent on the growth of oil consumption in the transport sector of the economy (Boqiang and Chunping, 2013). Whereas, motorization of China is at a relatively beginning stage of development, it can be assumed that oil imports will continue to increase (Figure 7). As a result of the analytical review, the main economic factors were identified, and the research hypothesis is that there is the influence between these factors and oil consumption in the PRC. To solve this problem, within the framework of the hypothesis Table 5: Data of the sectoral structure of the economy and the calculated coefficient of development of the provinces of the PRC Province of China Share of extractive industry in GRP (%) Share of manufacturing in GRP (%) Share of service sector in GRP (%) Development rate Henan 14.1 57.3 28.6 0.6195 Xinjiang Uygur 19.8 47.7 32.5 0.6295 Jiangxi 12.8 54.2 33 0.643667 Anhui 14 52.1 33.9 0.646167 Guangxi Zhuang 17.5 47.1 35.4 0.647833 Sichuan 14.4 50.5 35.1 0.6515 Hebei 12.8 52 35.2 0.654667 Qinghai 10 55.1 34.9 0.657833 Jilin 12.1 52 35.9 0.659333 Gansu 14.5 48.2 37.3 0.662333 Inner Mongolia 9.4 54.5 36.1 0.664833 Heilongjiang 12.6 50.2 37.2 0.665 Shaanxi 9.8 53.8 36.4 0.665667 Hubei 13.4 48.7 37.9 0.667167 Chongqing 8.6 55 36.4 0.667667 Shandong 9.2 54.2 36.6 0.667667 Yunnan 15.3 44.6 40 0.674 Hunan 14.5 45.8 39.7 0.674333 Shanxi 6 56.9 37.1 0.6755 Liaoning 9.3 52 38.7 0.678 Fujian 9.3 51 39.7 0.683 Hainan 26.2 27.7 46.2 0.687833 Ningxia Hui 9.4 49 41.6 0.692333 Jiangsu 6.1 52.5 41.4 0.696833 Zhejiang 4.9 51.6 43.5 0.709333 Guizhou 13.6 39.1 47.3 0.713833 Guangdong 5 50 45 0.716667 Tianjin 1.6 52.4 46 0.727333 Tibetan 13.5 32.3 54.2 0.7485 Shanghai 0.7 42.1 57.3 0.785833 Taiwan 1.6 31.1 67.2 0.832833 Beijin 0.9 24 75.1 0.874 Source: Calculated by China Provinces and Cities-HKTDC Table 4: Production and consumption of electricity in the regions of China, billion kWh Region/Year Production Consumption 2000 2011 2000 2011 North (Beijing, Tianjin, Hebei, ARM, Shanxi) 226 652 219 624 Northeast 139 243 150 269 West (Shanghai, Anhui, Jiangsu, Jiangxi, Fujian, Shandong, Zhejiang) 406 1184 423 1266 Center-South (Henan, Hubei, Hunan, Guangdong, Hainan, GCHAR) 323 873 333 929 Southwest (Sichuan, Yunnan, Guizhou, TAR, Chongqing) 138 462 142 354 Northwest (Shaanxi, Gansu, NHAR, XUAR, Qinghai) 98 301 102 280 Source: Calculated by Statistical Yearbook of China Energy, 2010 Kuznetsova and Kravchenko: The Problems of China as a Major Consumer of Energy Resources International Journal of Energy Economics and Policy | Vol 10 • Issue 1 • 2020336 on the composition of the causal block of influencing factors on oil consumption by the country, the econometric analysis of the statistical data set was carried out. To construct the regression equations, it was collected the annual data for 45 years (1971-2015) from statistical sources in accordance with the results of the analytical review. The oil consumption in the transportation industry indirectly characterizes factors X2 and X3; the oil consumption in the energy sector - factor X4; in production - factor X5. The main factors hypothetically affecting oil consumption in the country was listed below: Y - Oil consumption million barrels per day; x1 - Total population, million people; x2 - Energy consumption in the road sector, mln toe; x3 - Air transportation of passengers registered in the country, mln.; x4 - Electricity production on the basis of oil and petroleum products, billion kW/h.; x5 - GVA in “production,” in 2010 prices of 10 billion USD; x6 - Gross output, billion USD, 2010 prices. Calculations are made by (World Development Indicators, 2017; BP Statistical Review of World Energy, 2017). To solve the problems, associated with the occurrence of false correlation and heteroscedasticity, the regression equations were constructed for stationary series, for which the indicators were converted into growth rates. The econometric analysis was carried out in two successive stages. Firstly, the hypothesis about the effect of the dynamics of GDP (factor x6) on the growth rate of oil consumption was tested. The constructed regression equations allowed us to accept the hypothesis of a positive relationship between the dynamics of oil consumption and GDP. Moreover, for the PRC, as a result of its energy saving policy, in the absence of GDP growth, the rate of oil consumption will decline. The regression equation between the growth rate of oil consumption and the growth rate of GDP: yt=−0.001+0.65x7t+et (0.02)R2=14% At the second stage of calculations, in order to understand the impact of the causal complex, GDP was replaced with components and the share of influence of each factor on oil consumption in the country was revealed. To solve the problem of multicollinearity, the regression analysis was performed using the step-by-step method. Source: International Energy Data, 2018 Figure 7: Imports of electricity (billion kilowatt hours) Figure 8: Map of nuclear power plants in China Source: China statistical yearbook, 2016 Kuznetsova and Kravchenko: The Problems of China as a Major Consumer of Energy Resources International Journal of Energy Economics and Policy | Vol 10 • Issue 1 • 2020 337 To determine the degree of influence of each factor, the regression equations were based on the analysis of partial correlations. There is the construction of multiple regression equation: y=−0.04+0.34x2t+0.09x5t+et (0.003)(0.003) R2 = 35% As a result, for the PRC, priority factors were identified that affect oil consumption in the country. The calculations showed that the growth of oil consumption is associated with the growing needs of the national transport for energy resources, and with the growing demand for electricity. In modern technological and economic conditions, oil remains one of the key resources for energy supply. 3. DIRECTIONS OF CHINA ENERGY DEVELOPMENT 3.1. Direction 1: Creation a Single Unified Energy Grid The network complex of China is characterized by the fact that there is no single energy grid in the country. Six regional grid systems are in operation, which increases the risk of local power shortages: for example, the hydro potential of the western part cannot be used to its fullest to supply the southern coastal provinces, so an important task for the Chinese government is to create a unified energy grid. According to plans, by the end of 2020, China will build 15 large high-voltage transmission lines (800-1000 kV). Most of the technologies in the network complex of China are Western. Equipment is usually produced in local factories. The main suppliers of technological solutions in terms of high-voltage DC networks for China are the Swedish concern ABB and German Siemens. 3.2. Direction 2: Changes in Energy Sources China encourages the development of clean technologies for the development of deposits and the use of coal, stimulates the development of advanced technologies, coal gasification, for example, integrated gasification combined cycle - IGCC, continuous coking in the fluidized bed - CFB, nuclear reactors of the third generation with water - PWR and gas cooled high- temperature reactors - HTGR. At present, the consumption of such types of energy as nuclear power plants and renewable energy sources, as well as small hydroelectric power stations, hydrothermal energy, energy of tides and seas has significantly increased. However, for 20-30 years there are no obvious structural changes in the energy consumption of electricity. Coal dominates with about 85% and after the hydroelectric station in 5-7%. It can be observed that in China, since 2004, new segments have appeared in the production of electricity from alternative sources and fuels like the sun, wind, tides, biofuels. In the general structure, they are completely invisible, but there is significant growth. We don’t consider that it will somehow affect the energy balance in the next 10 years, because their growth is not comparable with the necessities of the economy and the net annual increment in energy production. Nowadays, the 35 nuclear power units are in operation in China and another 21 are under construction. Every year, the PRC plans to commission 6-8 power units, by 2030 its number will exceed 110 (Figure 8). CNNC and CGN are Chinese and French reactor technologies, but the American “denial” of the melt trap has moved into the “Dragon-1” project. And, since the projects of all three Chinese atomic energy companies use the same heat removal technology in case of alleged accidents, let’s look at the details of this solution. The purely subjective opinion is obvious: we do not see any logic in rejecting the trap, because this technology is not so complicated, but it is completely reliable. But decisions on this issue, of course, takes by the regulatory and supervisory authorities of the countries with which the Chinese experts are negotiating. Here is a brief description of the so-called “IVR strategy” - retention of damaged or molten fuel inside the reactor vessel; the melt trap is not provided for in the project. In recent years, China has remained the undisputed leader in the development of renewable energy in terms of the installed generating capacity of hydropower plants (352 GW), wind farms (184 GW) and SES (175 GW). Solar energy has long overtaken the goal set out in the five-year plan for 2020 at Table 6: Installed wind power capacity by country, 2016 (MW) Country Total installed power Growth in 2016 China 148000 32970 USA 74347 8598 Germany 45192 4919 India 24759 2294 Spain 22987 0 Great Britain 13614 1174 Source: World Wind Energy Association, 2016 Figure 9: Structure of installed generating capacity and power generation, 2018 Source: International Energy Data, 2018 Kuznetsova and Kravchenko: The Problems of China as a Major Consumer of Energy Resources International Journal of Energy Economics and Policy | Vol 10 • Issue 1 • 2020338 110 GW. In June 2018, in China it was decided to stop issuing subsidies for the construction of new SES, phased reduction of “green” tariffs and encouraging projects that do not require government subsidies. In order to reduce the share of coal-fired power plants in China, nuclear and renewable energy is actively developing. As of March 2019, there are 45 nuclear reactors with a capacity of 44.6 GW in China, about 15 units are under construction. By 2020, the installed capacity of nuclear power plants should increase to 58 GW, and by 2030 - to 150 GW. However, nowadays the situation is far from the forecast (Figure 9). The obvious disproportion is an extremely low proportion of a power plant that uses gas (about 2%) and nuclear power plants (no more than 3%). In the middle 1990s there were no gas stations in China at all, 10 years ago it began to appear. Since then, the growth is five or more times, but China’s energy intensity and energy demand is so great that this growth has little effect on the energy structure (REN21, 2015; Renewable Energy Policy Network for the 21st Century, 2018). Since 2008, the large-scale development of wind energy has begun. The report of the International Organization for the Support of Renewable Energy REN21, published on June 1, 2016, states that in 2015, China invested 102.9 billion USD (1/3 of the world) in the construction of renewable energy facilities) (Cautious Europe Cuts Renewable Energy Investments, 2018). Nowadays, in China, there are 12 thousand megawatts of capacity, generating electricity using wind (Table 6). For the most part these are 50- and 100-megawatt farms, as well as many medium-sized farms under construction. In addition, according to the Wind Base program, six megacomplexes are created, each with a capacity of at least 10 gigawatts. These complexes are located in the provinces of Gansu (15 gigawatts), western Inner Mongolia (20 gigawatts), eastern Inner Mongolia (30 gigawatts), Hebei (10 gigawatts), Xinjiang (20 gigawatts) and along the coast north of Shanghai in Jiangsu province (10 gigawatts). In Table 7, we can see insufficient development of renewable energy sources. 3.3. Direction 3: Reducing the Intensity of Energy Use China recorded a significant decrease in energy use intensity, although it was slower than in 2016, as energy consumption accelerated in 2017. China’s high energy intensity is mainly due to the predominance of energy-intensive industries, the export- oriented economy and low energy consumption. energy prices, which is not conducive to improving energy efficiency. In the next 15 years, China predicts a decrease in the average annual growth rate of energy consumption from 8% in 2000-2014 to 3% in 2015-2030, which is caused by a slowdown in economic growth, the development of the services sector and a course for improving energy efficiency. At the same time, the potential for growth in energy consumption depends on the growth of urbanization and infrastructure projects to stimulate the economy and maintain employment. 3.4. Direction 4: Energy Reform With the growth of the economy and the aggravation of the problems of shortage of energy resources, an energy reform is unfolding (Table 8). Only for 2008-2010 China is actively encroaching on world energy markets and it was quite successfully. The total amount of transactions in 2008 amounted to 24,530 million USD; in 2009 - 39,670 million USD; for 2010 - 25,110 million USD (Salijanova, 2011). The geography of transactions are Canada, Brazil, Indonesia, USA, Argentina, Ecuador, Russia, Venezuela, Syria, Argentina, Australia, Mongolia, Qatar, England, Australia, Cameroon, Singapore, Kazakhstan, Iraq, Switzerland, Iran, Yemen, France, England, Nigeria, Norway, Myanmar. From the second half of the XX century to the present, China has been actively developing its hydropower complex, it remains for several years the world leader in the production and consumption of hydropower. In November 2016, the Ministry of Energy of China announced the Plan for the development of the electric power industry in the “13 five-year period” and for the future until 2025. In perspective, the government of the PRC plans to increase the total capacity of all hydroelectric power plants to 350 GW by 2020 and to 510 GW by 2050 (Zakharov, 2016). According to the latest statistics from the National Energy Administration (NEA), China is currently the largest market for solar photovoltaic (PV) technologies in the world - with a total installed capacity of 43.2 GW (2016). China has the first place in the world in this indicator, got ahead of the former undisputed leader - Germany. It should also be noted that China’s photovoltaic solar power has increased about 13 times since 2011. In addition, most installed solar panels are not yet fully utilized. Thus, approximately 30% of installations in 2015 were not fully involved in Gansu province, and 26% in Xinjiang (according to NEA) (Lindon, 2016). Table 7: Dynamics of production of renewable energy sources (billion kilowat) Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Net generation of traditional thermal power 2560 2623 3132.67 3132.67 3589.98 3648.24 3956.68 3984.92 4008.18 4157.28 Net geothermal power generation 0.12 0.14 0.15 0.16 0.13 0.13 0.13 0.13 0.13 0.13 Net nuclear power generation 59.3 65.33 65.71 70.96 82.57 92.65 110.71 123.81 161.2 197.83 Net hydropower generation 480.41 579.34 609.48 704.27 681.17 854.17 900.52 1 040.63 1103.33 1150.95 Net wind power generation 5.71 14.8 26.9 44.62 70.33 95.98 141.2 156.08 185.77 237.07 Net power generation 3108.03 3297.47 3527.34 3984.02 4461.71 4735.54 5170.66 5387.91 5562.48 5882.94 Source: Statistical Review of World Energy, 2012-2017 Kuznetsova and Kravchenko: The Problems of China as a Major Consumer of Energy Resources International Journal of Energy Economics and Policy | Vol 10 • Issue 1 • 2020 339 Table 8: The main stages of the energy reform in China Year Directions of reform Purpose 1997 It was established state power corporation, SPC To separate commercial activity from the sphere of administrative regulation 2001 Strategy “go beyond boundary” Opening the way to Chinese investment companies in overseas oil projects 2002 It was launched Electricity reform It was established State Energy Administration The State Energy Corporation has been reorganized, dividing into seven generating companies and two grid companies (State Grid Corporation of China, China Southern Power Grid) These companies currently produce more than 50% of electricity and own the entire network infrastructure 2004 The State Council of China adopted a program for the development of alternative energy for the medium and long term (2004-2020) Investment in the industry for a total of 2 trillion Yuan (about 300 billion USD) Pilot projects of electricity markets launched in the west and north-west of China 2005 It was adopted a law on renewable energy A legal framework has been created for the development of alternative energy in the country, sources of financing have been identified, and relations between renewable energy producers and owners of power grids in China have been regulated. 2006 The State Committee for the Development of Reform of the People’s Republic of China has decided to liberalize the price of coal since 2007 A coal market has been created, based on the All-China Coal Stock Exchange with regional stock markets. 2007 “China Energy Development Report 2007” (the so-called Blue Book) and “White Paper on China’s Energy Situation and Policy” It is declared that the energy policy is an integral part of the long-term comprehensive program of modernization of the PRC. 2008 The law “On energy saving” 2010 The law “On renewable energy” 2014 The decree, in which it was noticed that in China it is necessary to increase the share of renewable energy by 2030 in the structure of energy consumption to 30% To do this, it is necessary to increase the production of electricity from renewable energy sources by 800 GW (Zakharov, 2016) 2015 Document No. 9 of the State Council on the Further Strengthening of the Institutional Reform of the Electric Power Industry and Six Documents Implementing the Provisions of the Document The pricing mechanism on the wholesale electricity market, electricity trading, load distribution schemes, electricity distribution, retail market liberalization, management of coal-fired thermal power plants for own needs were painted 2016 Geothermal Energy Development Plan (Prospects and Problems of Geothermal Energy, 2015) Introduced into the program of the 13th five-year plan (2016-2020) 2017 “Plan for the development of the gas industry in the period of the 13th five-year plan” (2016-2020) In this plan, as a “indicative” indicator of gas supplies to the Chinese market in 2020, a value of 360 billion cubic meters is given About 79% of companies, located in Tibet, work on solar energy. In the area of Mount Chomolungma at the altitude of 5200, 5820 and 6500 meters above sea level, China Mobile’s solar energy bases also operate, which cover the climbing routes with a signal, which makes them more convenient and safe for tourists. Despite the fact that China has reached the first position in the world in terms of the development of solar energy, there are still a number of important problems in the country. According to opinion of the head of the Solar Energy Division of the China Electromechanical Production and Commercial Company Sun Guangbin, there are many problems that impede the development of China’s solar power. He says: “At present, the core technologies and equipment, market demand and the main raw materials necessary for the full development of solar energy in the country still rely on foreign countries, which is a significant barrier to the further development of the solar industry in China. Nowadays, almost all core technologies and equipment are borrowed from abroad, more than 90% of raw materials are imported and 98% of sales go to meet the demand of foreign consumers”. Thus, Sun Guangbin noted that China’s solar power industry has not yet developed a system for self-development and implementation of new products (Shaw, 2010; Jian, 2018). Environmental specialist from Beijing, Zhang Junfeng, is confident that hydroelectric power plants adversely affect the country’s environment. In his opinion, the new power plants will in fact not help China, except for the official figure of GDP. He notes that “hydroelectric power sources are mainly located in mountainous areas, which in China are the weakest from a geological point of view. The construction will undoubtedly entail a change in the local geosystem. It can be a cause of earthquakes, landslides, soil and water conservation, as well as a cause of other problems. However, China has grand plans to build new hydropower plants and increase the energy capacity of the country (Yukun, 2016). The problem of renewable resources is in its unpredictability and uncontrollability. You get electricity not when you need it, but when the appropriate environmental conditions come together. It is an obvious disadvantage compared to the traditional generation. And here we wisely will not touch the extremely large-scale issue of maneuvering of capacities. At the beginning of 2017, Germany was already confronted with large-scale outages due to cloudy, windless weather. And yet they are not the only ones who have suffered from such misfortune. The state of South Australia in the second half of 2016 abandoned from Kuznetsova and Kravchenko: The Problems of China as a Major Consumer of Energy Resources International Journal of Energy Economics and Policy | Vol 10 • Issue 1 • 2020340 the coal. And if on average in Australia, according to Fortune, the share of renewable energy is 7%, then South Australia has brought it to 45.6% (31.2% is wind energy, 14.4% is solar energy). Natural gas in this region provides 49.1% of electricity generation. With the transition to renewable energy sources, South Australia has experienced a twofold increase in wholesale electricity prices and frequent outages. So far, all renewable energy relies on traditional energy storage technologies, which have reached the threshold of its development. Germany, Australia or any other region – it does not matter. If this region decides to create drives to support renewable energy, then the first thing it does is to load the mining industry. Then - the chemical production. And at the end of the operating cycle, there will be a necessity for safety and extremely costly disposal. Although, renewable energy has become a mass phenomenon on a global scale; but it cannot function completely without the support of traditional generation. At the same time, nowadays, with the current level of technology development, it would be a fatal mistake to thoughtlessly and uncontrollably expand the renewable energy sector. 4. CONCLUSION As a conclusion, for China, as an economic leader not only in regional scale, but also in global scale, energy problems become extremely urgent and even strategically important. The following energy problems remain in China: low energy consumption per capita; lack of own energy reserves; low quality of existing deposits; low energy efficiency of the economy; uneven territorial distribution of energy resources; unbalanced structure of energy supply and energy consumption; high dependence on imported hydrocarbons, especially oil. At the same time achieving new economic goals, China moved to a leading position in the field of environmental pollution. Energy issues are of interest to all Asian countries, but for China the energy problem has become a big challenge. China will base its strategy of resolving the issue of tension with energy supply, based on its own resources, while certain imports will be saved to meet the growing demand for energy. Nowadays, the Chinese government pays great attention to the development of an effective domestic energy strategy. The relevant departments are taking active measures to optimize the fuel and energy complex, to introduce new technologies for the production of electricity, to develop technologies for “clean” coal, to increase the share of the usage of natural gas, hydroelectric power plants, nuclear power plants, wind energy and other alternative sources of energy. 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