China, like the rest of the world, has deep concerns about energy security. Externally, the shock to global energy markets from Russia’s invasion of Ukraine continues to roil commodity markets. At home, the heat waves and droughts affecting China’s key water sources are taking out normally predictable hydropower sources, which account for roughly 16 percent of electricity production. China has resources to become self-sufficient in domestic thermal coal (still around 60 percent of electricity production), hydropower and renewable sources. But this will take years – especially in renewables - because capacities need to be increased. China is heavily reliant on imports of natural gas and crude oil – just under half of China’s 2021 natural gas was imported, while reliance on imported crude is even higher, at 72 percent of total consumption in 2021. Beijing has directed diplomatic efforts to establish energy ties with countries in the neighborhood, especially with Russia.
The 14th Five-Year Plan (2021-2025) lays out ambitious plans to drive decarbonization and indigenous tech innovation. China is striving for global leadership in green technologies and sustainable solutions, where it is building on past successes (e.g., in wind, solar and e-mobility).
Drivers and dynamics
In October 2021, Xi himself called for greater efforts to develop energy self-reliance, particularly in the oil and gas industry. As he put it, “The rice-bowl of energy must be in our own hands”. Since then, China’s three main oil and gas champions have drastically increased their capital investment in projects at home and abroad. China is seen as the main beneficiary of Russia’s declining exports to European countries and is pushing Moscow to build more pipelines to China.
Beijing has put a strategic bet on reaching a sustainable future through technological breakthroughs that are state-guided and funded. It seeks a green transformation at home and global tech leadership across the board, from renewables to environmental protection equipment. Cooperation on climate change and green technologies remains one of the few areas where partnerships between China and Western countries continue to thrive. Yet, competition for green tech and manufacturing processes is intense.