China embarked upon its remarkable GDP growth under the leadership of Deng Xioaping, Mao’s successor. Deng’s message to his comrades: “To get rich is glorious.” China responded by creating a middle class which is now nearly the same size as the entire population of North America. By meeting the country’s energy demands to feed such rapid growth, China has engendered a worldwide race, most notably with neighboring India but also with others, to accumulate sufficient energy sources and raw commodities. Yet on the horizon, China has a serious energy crisis which could reduce this amazing GDP growth.
By the late 1990s, northeastern China’s vast Daqing oil fields passed their peak, and no new oil fields of that magnitude were discovered. A net oil exporter until 1993, China’s growing appetite for energy sources and other commodities has created what some call a ‘super cycle’ bull market in commodities. Now the world’s second largest oil importer behind the United States, China’s dependence on foreign oil jumped by 10 percent during the first six months of 2006, compared to the same period a year earlier. Oil imports during the first half-year grew to 47.3 percent.
In the context of previous years, the growth of oil imports clearly illustrates China’s astonishing escalation of imported oil. According to the Xinhua news agency, the country’s percentage of imported oil stood, in 2001, at slightly less than 27 percent of total consumption. As of 2004, this percentage had soared above 41 percent. By that year, China was driven to diversify its country-mix of energy sources. The Middle East supplies about 45 percent and Africa exports some 29 percent to China.
Having about 20 percent of the world’s population, China only consumes four percent of what the world’s oil fields produce. But, a growing middle class will simply consume more petroleum products as the decade comes to a close. Presently importing three million barrels of crude oil every day to fuel the growing number of automobiles, where will China find the oil to produce gasoline in 2020, when the country could have as many as 140 million cars on its roads?
Because of China’s Industrial Revolution, Beijing’s streets, once overflowing with bicycles, are now jammed with nearly three million automobiles. The Chinese middle class want more energy to accompany their new wealth, but where will it come from? Since 2001, China has acquired more than 100 oil fields and companies to sustain its heavy flow of imported oil for this demand. Chinese state-owned oil companies have spent $15 billion over the past five years to build up their oil reserves.
The country’s state-owned media arm refers to China’s russia ukraine news exploration and acquisition expeditions for new oil fields beyond its borders as developing “new silk roads.” These roads have led to Central Asia, South America and Africa in China’s quest to establish more and more energy sources. Is this strategy working fast enough or not?
Are China’s New Silk Roads Filled with Pot Holes?
China’s creation of new silk roads of energy sources has been challenging. Emerging in the mid 1990s as an economic powerhouse to be taken seriously, in the wake of Japan’s economic slowdown and the collapse of the Soviet Union, China has all but dictated world commodity prices in a frustrating drive to continue fueling the country’s rapid growth. Unfortunately, both Russia’s resolve to monopolize energy assets in Central Asia and U.S. political paranoia about China’s global ambitions have led to a number of disappointments and setbacks.
Remember China’s failed attempt to takeover of UNOCAL? Had China National Offshore Oil Corporation (CNOOC) bought UNOCAL, the acquisition would have impaired U.S. economic influence in both Thailand and Burma. Despite this setback, China continued investing heavily in Burma. The Chinese hope to someday export their neighbor’s hydroelectric power, by helping the Burmese build a dam across the Salween River.