Energy sources and the economic development of China

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Energy sources and the economic development of
China

• Current economic development      1) Where it's
  been      2) Where it's at      3) Where it's
  expected to goRequirements for resources     
  1) What is needed to support infrastructure     
  2) What is being procured      3) Long term
  impact of the used resources            a)
  Financial           b) Environmental          
  c) Social                 i) Employment         
        ii) Gini index              iii) Quality
  of life

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• Current Economic Development     1) Where it has
  been the last 30 years       Since 1978 the
  People's Republic of China (PRC) government has
  been reforming its economy from a Soviet-style
  centrally planned economy to a more
  market-oriented economy but still within the
  political framework, provided by the Communist
  Party of China. This system has been called
  "Socialism with Chinese characteristics" and is
  one type of mixed economy. These reforms started
  since 1978 has helped lift millions of people out
  of poverty, bringing the poverty rate down from
  53 of population in 1981 to 8 by 2001.     
  Fighting Poverty Findings and Lessons from
  China's Success (World Bank).  Retrieved August
  10, 2006.

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• 2) Where it is now The economy turned in another
  sparkling performance last year, with gross
  domestic product (GDP) growing at the fastest
  clip in 11 years and inflation moving below 2
  percent. "In 2006, the economy was in good
  condition," NBS Director Xie Fuzhan told a press
  conference organized by the State Council
  Information Office.The economy, which overtook
  Britain in 2005 to become the world's fourth
  biggest, is moving closer to that of Germany,
  which is estimated to have grown by 2.2 percent
  last year to 2.86 trillion.That means the
  nation has a good chance to become the third
  biggest economic power by 2008 but Xie would only
  say that he believed "the economy will maintain a
  momentum of rapid, steady growth this year". In
  2006, the economy grew on the back of strong
  growth in investment, exports and consumption.
  http//www.chinadaily.com.cn/china/2007-01/26/con
  tent_793128.htm In recent years conservative
  factions within the Party have expressed concern
  that the increasing influence of the private
  sector in mainland society would threaten the
  Party's monopoly on political power and dilute
  the country's socialist character. At the same
  time, private business people have complained
  that their inability to enter the Party had been
  hampering further economic growth, and had
  repeatedly called for amendments to the mainland
  constitution to give them greater political and
  economic protection.     http//www.hartford-hwp.
  com/archives/55/211.html

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• 3) Where it is expected to go     Although the
  reported profits of China's largest industrial
  enterprises climbed 28 in the first half of 2006
  over the same period in 2005, companies in some
  sectors have seen profits squeezed, sometimes to
  the vanishing point. According to government
  numbers, 80 of the profits in the Chinese
  economy went to companies in the oil, power, coal
  and nonferrous metals sectors. The other 30
  sectors of the economy shared just 20 of
  corporate profits.      The iron and steel
  sector is the current poster child for the
  problem -- and a worrying sign of things to come
  in other sectors. Profits in the sector dropped
  by 20 in the first half of the year. The problem
  is overcapacity. Too many steel companies have
  added too much capacity, driving down the price
  they can charge for their product....   ....So
  China is rolling the dice. Cheap money creates
  jobs today. Tomorrow? Well, maybe somehow things
  will work out. http//articles.moneycentral.msn.c
  om/Investing/JubaksJournal/ChinasEconomyIsOutOfCon
  trol.aspx?Key points    a) China needs 20
  million new jobs per year to keep it's employment
  rate. (40 are still under or unemployed) This
  requires a gdp growth of 7 per year to sustain
  the required job growth. To reduce the
  unemployment rate, even faster growth will be
  needed.     b) Due to a government policy
  designed to counter a projected glut in the steel
  industry, there has been a lot of excess
  borrowing from the Peoples Bank which is
  reluctant to raise interest rates to counter the 
  over development of the industrial sector. This
  leaves the real interest of a loan around 3
  which encourages even more borrowing for
  industrial development.     c) Short term, this
  creates jobs, long term growth via this method is
  looking unsustainable.

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• What is needed to support infrastructure
• 1) Money
• 2) More Money
• 3) oil, steel, energy
• Many economists have discovered that a large
  part of China's economic growth is driven by the
  input of resources. This conclusion indicates
  that China is at the stage of industrialization
  rather than post-industrialization.
•  China's industry-propelled growth is largely
  attributable to a continuous growth of young
  labour forces, which is a key factor in
  understanding the fast growth record in not only
  China but also economies in East Asia.
•      In the eyes of economists, economic growth
  is a phenomenon about population. First, the
  accumulation of capital needed to support growth
  comes from citizens' saving tendencies. A
  labour-intensive economy has more deposit
  capacity than an ageing society. Secondly,
  economic growth relies on the growth of labour
  forces, especially young labourers. Sustained
  growth also depends on education standards.
•      In China, labour forces are mainly
  outsourced from rural areas. In the past 25
  years, some 160 million rural labourers have quit
  traditional farming and found employment in
  cities or non-farming sectors.
•   Although agriculture still employs more than
  60 per cent of China's population, its share in
  the country's financial revenue has declined to
  less than 15 per cent, dropping from 40 per cent
  or so in late 1970s. This also shows that China's
  growth is mainly based on an industrialization
  course featuring expansion of the manufacturing
  sector.
• Continuous supply of labour forces has
  improved China's private saving capability
  substantially, which means surplus income that
  can be reinvested to fuel economic growth.

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• What is being procured
• The overwhelming gap between the nation's
  energy production and consumption is forcing
  China to depend more on imports. Though China is
  rich in energy resources especially in coal,
  which amounts to 70 percent of the nation's
  demand, it is still not sufficient to satisfy the
  demand. As a result of the lack in supply of
  energy resources, China is forced to depend on
  imports to satisfy its energy demand.
• http//www.frost.com/prod/servlet/cif-econ-i
  nsight.pag?docid76385988
• Steel is the lifeblood of China's booming
  industrial economy, from bridges to ships to
  cars. Plans by General Motors and Volkswagen to
  double their output of Chinese cars by 2007 only
  mean ever greater demand for steel.To meet this
  demand, China's steel production is to nearly
  double during the rest of this decade.But
  China's iron ore production is forecast to remain
  basically flat. To close this yawning gap, China
  is signing long-term multibillion-dollar supply
  contracts with Australian and Brazilian mining
  companies.In March, BHP Billiton, the world's
  largest mining company, signed a 9 billion deal
  to supply 12 million tons of ore to four Chinese
  steel mills for 25 years.But it is far cheaper
  to melt existing metal than to process ore.
  Consequently, China's scrap imports have almost
  doubled since 2000. Even with Beijing's efforts
  to cool economic growth, imports of scrap steel
  may double again by the end of 2005.
• American scrap steel exports to China have
  tripled since 2002, hitting 3.5 million tons, or
  1 billion in 2003. With China now the largest
  importer of American scrap, Chinese demand caused
  international spot prices to hit 340 in spring
  2004, almost triple the levels of one year
  earlier.http//www.energybulletin.net/593.html
• Additional resources that are essential for
  Chinas development are oil and natural gas.
  China purchases oil from Saudi Arabia, Iran,
  Iraq, Venezuela, and Sudan. China and Russia have
  been developing a long term plan to supply China
  with natural gas which is expected to increase
  the trade between the countries by 50-80 billion
  by the year 2010. While China is primarily
  dependent on importing sources of energy, it also
  has its own projects drilling for natural gas in
  the East China Sea. (Japan is not too happy about
  this.)

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Chinas Energy ConsumptionFrom The Annual Report
to Congress 2005
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• Long term impact of the used resources
             a) Financial           b)
  Environmental           c) Social
                  i) Employment               ii)
  Gini index              iii) Quality of life