Chinese Energy Security

by Ali Siddiqui

According to Yao and Chang (2015), China’s energy security has not improved over 30 years of reform. The authors aimed to understand why in a qualitative fashion, finding a critical component is China’s macroeconomic reform. By analyzing China’s energy security in this fashion, these researchers hope to broaden the perspective on the way developing economies in transition conduct research on their energy security.

The researchers have defined energy security as availability of energy resources, applicability of technology, acceptability by society, and affordability of energy prices. They demonstrate how, after the Third Plenary Session of the 11th Chinese Communist Party Central Committee session, the focus shifted to decentralizing and distributing economic power to the lower levels of the economy, which allowed for reform in the microeconomic level of the economy. Incentives for farmers to produce more led to better efficiency in the agricultural sector of China’s economy, which led to a surplus of labor from that sector that shifted into the coal mining sector that was also then beginning to be supplemented by the state. When these same incentive policies were put to the urban area, China began to move in a direction that reflected a market economy. This continued pro-local autonomy eventually led to the financial constraint in China’s power industry to be removed and the electric supply to increase. This relaxed economic environment of the 1990’s led China to speed up reform in order to legitimize the “socialist market economy” including government structure, national fiscal and financial systems, and state-owned enterprise reforms.

These reforms also led to the decentralization of leadership and thus ability to regulate in any administrative setting the energy sector of the economy. Therefore, macroeconomic reforms that resulted as a reaction to the increased growth and production that in turn resulted from microeconomic reform led to a mismanagement of energy policy that hindered China’s ability to manage its energy security. The view of these researchers is that new investment into the sector by private firms, favorable tax policies for saving energy, and introducing foreign competition could alleviate China’s issues.

Yao, L., Chang, Y. 2015. “Shaping China’s energy security: The impact of domestic reforms.” Energy Policy 77. 131-139.

http://www.sciencedirect.com/science/article/pii/S030142151400679X#

 

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