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Energy and Chinese aggression
Paul Lin

China's power shortage problem is much more serious this year than last. Most provinces and cities have put limitations on power usage, and even Beijing and Shanghai, the showcases of "socialism with Chinese characteristics," are losing some of their luster.

The power shortages are also affecting foreign investment. Most of China's thermal power plants are fuelled by coal, not oil. But there are production and distribution problems, and coal reserves have already fallen below normal levels.

Taking a long-term perspective, however, the oil crisis poses a more serious threat, because oil has more applications that are closely related to China's future economy and national defense as well as the Chinese people's livelihood.

China is now the world's second largest oil consumer after the US, and imports this year will exceed 100 million tonnes, or about 35 percent of domestic oil consumption. Because state-run enterprises make up the bulk of the Chinese economy, it is pervaded by waste and corruption, which together with China's traditional fondness for grandiose projects and short-term profits leads to a massive waste of resources.

During the annual meetings of the National People's Congress and the Chinese People's Political Consultative Conference this year, Niu Yuanwen, head of a group researching sustainable development strategies at China's Academy of Sciences, said a large part of China's GDP has been achieved by using methods that sacrifice the welfare of future generations.

As an example, he said that resources used for the creation of US$1 of GDP are 4.3 times higher than in the US, 7.7 times higher than in Germany, and 11.5 times higher than in Japan.

He also said that China consumes 31 percent of global coal resources, 30 percent of iron ore, 27 percent of steel and 40 percent of cement, but that the resulting GDP is less than four percent of global GDP. China's economic growth will therefore consume a frightening amount of oil. If China builds a prosperous society for its 1.4 billion citizens, this will demand a huge proportion of global oil reserves.

China has also talked about the necessity of a war in the Taiwan Strait and is preparing for military conflict with the US. Furthermore, China's strategic oil reserves are currently set at 20 days' oil consumption, while reserves in the US and Japan cover 150 days' consumption. China needs to import substantial volumes of oil, and is probably one of the major players behind the soaring oil prices this year, which have now reach US$47 per barrel.

What's more, 60 percent of China's crude oil is imported from the Middle East, which means security over the long shipping routes is a major strategic issue. China is therefore actively developing "oil diplomacy" to find new sources of crude oil.

First, China has set its sights on its former "comrade," Russia, which possesses abundant oil deposits and is geographically convenient for the creation of an oil pipeline between the two countries. China's former leader Jiang Zemin ceded some Chinese territory to Russia in exchange for advanced military equipment and oil.

Russia, however, has been very cautious and clearly also has its own agenda. As a result, it has hindered China's efforts to buy Russian oil companies and rejected the construction of the Angarsk-Daquing oil pipeline. This has left China with no choice other than to change partners and look instead to the Republic of Kazakhstan for oil acquisition.

Second, China is also looking to expand its oil imports. In January, President Hu Jintao signed oil agreements while visiting three oil exporting African nations -- Egypt, Gabon and Algeria -- which reveals Beijing's eagerness to resolve its oil crisis.

Third, in order to ensure a safe channel and reduce transportation costs for Middle Eastern oil, China is interested in opening a canal across the Isthmus of Kra in southern Thailand. If a war broke out, the US could easily blockade the Strait of Malacca. And transporting oil through the Isthmus of Kra would reduce shipping distance by more than 1,000km -- which also sparks Japan and South Korea's interest in the new route.

Completing a canal across Thailand will require multilateral negotiations, and it will be difficult to achieve a consensus. As the route would impinge directly on Singapore's and Malaysia's economic interests, they are likely to object.

Then there is the issue of oil exploration. The South China Sea, East China Sea and Yellow Sea are thought to be abundant in oil deposits. In order to explore and develop these oil fields, China has embroiled itself in territorial conflicts regarding the division of economic maritime areas with Japan, South Korea, Vietnam, the Philippines, Indonesia and other countries. Relations with Japan have become more tense, with occasional maritime standoffs that are also related to the cross-strait military standoff.

When dealing with these diplomatic issues, China initially adopted an attitude of uniting Asian countries against "US imperialism." But now, with its soaring economic development, China is gradually showing the impatience of a nascent superpower. This has reduced the anti-imperialism of some Asian countries, who now increasingly "conspire" with the US, and even hope the US can deploy its military in Asia.

This has brought China new diplomatic challenges. This diplomacy is intimately connected with China's economic interests and is a huge challenge for Hu and Premier Wen Jiabao. Their task is made even more difficult by Jiang, chairman of the Central Military Commission, whose words and actions have rendered less credible the idea of China's "peaceful rising."

Paul Lin is a commentator based in New York.

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