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Title: Current issues in China’s oil and energy policy

Contents

Introduction. 2

Literature review.. 3

Current issues in China’s energy policy. 6

Governance problems. 7

Alignment with national development agenda. 13

Current issues in China’s oil policy. 14

Relationship between China’s oil policy and its overall energy policy. 16

Alignment of oil and energy policy with the country’s strategic management and development objectives. 18

Conclusion. 20

References. 21

Introduction

Energy is a critical factor in the development of every country. It is a major driving force of all economic activities in today’s industrialized world. This means that efforts should always be made to ensure that energy is produced, distributed, and managed in an efficient and effective manner. Governments are faced with the arduous task of ensuring that all energy resources are properly utilized for the benefits of all citizens. To address this need, they are compelled to come up with strategic policies whose aim is to facilitate continuous and consistent access to energy resources to ensure that disruptions of economic activities do not occur.

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Today, a global economy is taking shape, such that competition for energy is increasingly transcending national boundaries. Therefore, it is common to find national oil companies pursuing energy-related investments in foreign countries. It has also become common for companies operating in the energy sector to compete for key resources in foreign countries.

One of the emerging economies that face an uphill task of addressing the issue of energy security is China (Luft &Korin, 2009). A major concern for the Chinese government is whether the country is energy-secure enough to facilitate and sustain its rapid rate of economic development. For a huge economy such as China that depends on coal as the main source of energy, there are serious concerns that the energy needs of the country will soon become impossible to meet (Goldthau & Witte, 2010).

The aim of this paper is to investigate current issues in China’s oil and energy supply with a view to create a better understanding of the prevailing energy condition in the country. Focus is on how the oil policy differs from, crashes with, is similar to, or complements the overall country’s energy policy. Moreover, the paper addresses the issue of how the overall energy policy is aligned to the country’s strategic development . Finally, the paper examines the relationship between the existing oil and energy issues and the current development policies in China. To meet these objectives, two hypotheses are tested. The first one is that the existing oil and energy issues are as a result of the existing oil and energy policies in the country. The second hypothesis is that the oil and energy policy in China is not aligned to the strategic management and development of the country.

Literature review

No country can function well in the modern world without relying on energy as the primary driver of the economy. Zemin (2009) points out that the contemporary society faces a high risk of an energy crisis primarily because of the numerous processes that are entirely energy-dependent such as industrialization, urbanization, and mechanization. Whenever an energy crisis occurs, a myriad of socio-economic problems are likely to occur. These problems are likely to affect the quality of life, standards of living, and the overall growth of a national economy. At the international level, energy crises may have far-reaching security and diplomatic consequences. Cheng (2008) points out that an energy crisis can even precipitate into a global economic recession. To reduce the likelihood of a crisis, many countries put in place policies and strategies at the national level while seeking to replicate the same approaches in the international business environment (Cheng, 2008).

Zemin (2009) points out that for the last two decades, China’s energy needs have been growing rapidly. This growth mirrors the rapid pace of China’s recent rise to the position of a global economic power. More people in China are moving to urban areas while most towns are becoming industrialized. This combination of urbanization and industrialization has led to a rapid increase in the country’s energy needs. Zemin (2009) observes that the per capita resources of China are below the world average. As the country seeks to correct this anomaly, the perception created around the world is that China has an insatiable desire for energy resources (Andrews-Speed, 2004).

According to Andrews-Speed (2004) China’s energy strategy embraces both the use of traditional sources of energy as well as the gradual transition to “clean” fuels. This is an acceptable strategy given China’s continent-size economy and growing need for energy efficiency. Indeed, the problem of lack of energy efficiency poses a major obstacle in efforts by China to come up with a sustainable energy strategy. Nevertheless, the immediate problem is on how to supply sufficient energy to an economy that expanded eight-fold between 1997 and 2012 (Zhou, 2012).

China is already under intense criticism for its reliance of coal primarily because of the strain that this resource puts on the ecosystem (Zemin, 2009). At the same time, the country is grappling with a phenomenon where demand for energy is expected to continue outstripping supply in the foreseeable future. For this reason, there is a need for energy issues to be incorporated into the country’s development strategy in order to ensure a steady supply of energy in the long run.

According to the International Energy Agency (2012), China’s biggest concern is on the need to attain energy security. This view is reflected in the 2011 report on China’s Energy Development. It also forms the basis of the 12th five-year plan whose aim is to promote energy efficiency. Oil production at the domestic level has dramatically increased during the past few years. However, the country’s oil needs have continued to exceed its available domestic resources. To off-set this deficit, the country has sought to invest heavily in off-shore oil exploration and production. This goal is being pursued mainly by state-owned corporations, which have embarked on an aggressive strategy of channeling huge investments in foreign countries.

During the last decade, China has found itself in an unfamiliar territory where it has to maintain a delicate balance between energy demand and supply. This task has been made extremely difficult by the country’s high-speed economic development. In 2009, China became the world’s largest consumer of energy as well as emitter of carbon dioxide (Liu, 2011). According to Liu (2011), this is an indication that the country must put in place urgent measures to change its energy consumption structure to make it more appropriate to its present circumstances. For a long-term solution to be found, the country must look for a suitable infrastructure on which to implement its renewable energy strategy. Liu (2011) observes that the renewable energy sources accessible domestically in China are abundant and can cover future energy demand for the country if properly managed.  

Despite possessing massive renewable energy sources, China is among the leading oil importers (it is in the second position after the United States). The main challenge in this case is that the country is still unable to achieve a sustainable growth in terms of energy use, thereby leading to energy insecurity (Shaofeng, 2008). The paradox of this whole scenario is that although energy production has continued to rise, the per capita power consumption is far below the world’s average (Shaofeng, 2008). This phenomenon is mainly attributed to the fact that a large proportion of Chinese citizens still live in rural areas where there is no access to electricity. This means that energy use is likely to rise sharply in the future as more people in rural areas demand reliable energy (Sinton & Fridley, 2000).

Current issues in China’s energy policy

            The main problem with China’s energy policy is that it has not yet succeeded in dealing with the lack of energy security in the country. Today, China is a net energy importer; a decade ago, it was a net energy exporter (Almeida, 2010). Many things have happened during the past decade, the most important one being drastic changes in the energy supply and demand. During the past decade, China’s energy infrastructure has expanded rapidly as a way of providing fuel for the country’s rapid economic growth. The resultant growth in purchasing power has led to a rapid increase in the number of Chinese citizens in urgent need of power connectivity.

            Over the years, the central government has been putting in place policies aimed at enhancing the country’s energy security. Unfortunately, most of the changes introduced have not addressed the major issues that continue to weaken the country’s ability to achieve sustainable energy growth (Almeida, 2010). According to Almeida (2010) the main problems with China’s energy policy include policy fragmentation, pricing problems, dependence on heavy industry, and conflicting interests relating to the development goals at the provincial level.

            China is yet to come up with an energy strategy that provides a replacement for coal-fired plants, which have been blamed for contributing significantly to carbon dioxide emissions (Hang, 2007). In 2006, 39 percent of the world’s coal-fired electricity was generated in China (Liu, 2011). At the same time, the country has become highly dependent on imported crude oil. For example, diesel generators being used in China consume 10 percent of the country’s total oil supply. This is an indication of the extent to which the country economy depends on heavy industry.

            The central government should expect to face more challenges relating to energy consumption. In the near future, a huge section of the country’s population will have achieved higher standards of living because of the rapid economic growth being experienced today. Therefore, they will be demanding access to reliable energy. This means that the government should have already established an energy policy that facilitates the entry and smooth functioning of a diverse network of energy suppliers. Presently, significant efforts have been made but no such policy has been put in place.

For any energy strategy that China establishes, the most crucial thing is the ability to promote sustainable energy growth. To achieve this goal, the energy strategy must be aligned with the development goals of the country. The development incentives that are provided at the provincial level must not be in with those of the national level.

Governance problems

Governance problems pose a major challenge in China’s efforts to come up with a clear energy policy. Lack of coherence in energy policy at the national level poses a unique challenge for the country. The central government is compelled to maintain a balance in the way it coordinates the interests of various stakeholders (Calder, 2006). Given that different agencies handle different aspects of the national energy policy, poor coordination poses a major challenge. This fragmentation of tasks is greatly contributed to by China’s bureaucratic system. Political leaders are unable to resist the urge to make compromises with different departments in the process of reforming the energy sector. In many ways, this bureaucratic apparatus becomes an integral component of the country’s political infrastructure.

One of the causes of inefficiency is the lack of sufficient authority by institutions to come up with a national energy policy. For instance, both the National Energy Administration (NEA) and National Energy Commission (NEC) lack the full mandate to undertake administration work relating to energy issues. This is simply because the functions of these two agencies have not been delineated. When the NEA and NEC were established, many people were hopeful that at last China was committed to the task of undertaking far-reaching measures to address the governance problems affecting her energy policy. Unfortunately, the country has so far failed to manage the agencies in the right manner (Peidong, 2009).

The role of the NEA is to come up with energy plans, strategies and policies. It is also responsible for negotiating with various international energy agencies as well as approve energy investments in foreign countries. Different departments within NEA address different sub-sectors, including coal, electricity, oil, alternative sources of energy, and nuclear power. However, without sufficient power and autonomy, NEA is unable to accomplish its functions. Moreover, China’s energy policy has in recent years become the subject of a protracted power struggle among different stakeholders. NEA is unable to deal with these struggles. In some cases, the struggles pit the NEA against the NEC.

To understand the governance problems that continue to plague China’s energy policy, some background analysis is necessary. In any efforts to formulate an energy policy, focus should be on the current trends and projected future trends. In this case, aspects of international trade, supply and demand, and pricing become important. However, it has also become increasingly important for focus to be on political ideology of the national government and the procedures being used in the policy-making process.

In China, the issue of energy policy should not be viewed in isolation (Pun-Lee,2005). It must be looked at in the context of numerous socio-economic and political forces. Specific policies in the country have been found to have an impact on the overall energy policy. Moreover, policymakers are compelled to put into consideration other national imperatives such as social stability, national security, and the dominant position of the Communist Party (Pun-Lee,2005). These “external” pressures have a far-reaching impact on the policy-formulation process (Pun-Lee,2005).

The economic policy in China is based on fragmented authoritarianism (Almeida, 2010). When China started opening up to foreign investment during the mid-1980s, the level of authoritarianism in the country’s one-party structure was very high. Nevertheless, the power of the elite to exercise overwhelming control over economic policy had started declining substantially. Unlike during the 1960s, the country’s policies were no longer being made by a small group of top leaders. At the height of the authoritarian rule, a “rational” approach was being used in which a small group of leaders would adopt a rational perspective in their analysis of a problem before evaluating alternative solutions (International Energy Agency, 2013). The leaders would  endeavor to suppress self-interest in order to prioritize on the national interest (International Energy Agency, 2013). Although an elitist approach to decision-making was being adopted, it was based on a powerful ideology that was being authenticated by aspects of rationality.

Today, China continues to operate as a unitary state. However, practically, the principle of federalism seems to have been emerging for last two decades. The central government has been delegating many policy-making powers to the respective provinces. Consequently, county levels of government have been exerting a lot of influence over the way policies are implemented. This has necessitated the establishment of a system of continuous negotiation and bargaining. In this process, the central government relies a lot on state companies, ministries, as well as other major government commissions and agencies to leverage power and to impose it on all other levels of government. It is often expected that leaders of various agencies and commissions will struggle to take care of the interests of their respective institutions.

This fragmented governance structure has an impact on the way energy policies are made (Lee, 2008). It also has an impact on the extent to which energy policies are aligned with the overall development agenda of the country. An important thing to note is that these governance structures are not formally outlined. No clear statements of procedure and practice have been laid down. No descriptions are provided regarding how institutions should relate with each other (Zhao, 2010). Another important thing is that the institutions operate in a highly personalized manner, such that personal relations with leaders greatly influence the adoption of certain policies. A lot of emphasis is on informal connections, which also happen to constitute an integral aspect of China’s entrepreneurial culture.

Policymaking at the national level is also influence significantly by the relative power of various parties (Peidong, 2009). The way power is distributed varies from one policy to the other. Nevertheless, major state industries have continued to wield a lot of power at the national level. Moreover, provincial governments have continued to suffer from lack of representation in various decision-making organs of the central government. During the era of the planned economy, state industries used to operate as ministries (Peidong, 2009). Today, the remaining state-owned enterprises have retained a lot of influence at the highest echelons of government (Peidong, 2009). Conversely, provincial governments have continued to be denied the right to participate in decision-making at the national level. They are not represented in the State Council.

One of the implications of this governance structure is that energy policymaking has become a political process (Cai, 2009). In such a phenomenon, inevitable conflicting aims between energy policy and the overall development policy tend to occur. In some cases, conflicting views tend to affect objectives within the country’s energy policy. One reason why energy policy has become highly political is that political ideology inevitably determines how conflicting objectives are reconciled. Another reason is that great economic are always at stake whenever issues relating to the country’s energy sector are being discussed. Whenever a shift in energy occurs, some parties stand to benefit while others stand to lose.

Although the command and control structure that traditionally existed in China has weakened, the existing legal system is yet to undergo major developments to make it efficient in the task of supporting policy implementation. In the energy sector, non-implementation and in some cases partial implementation poses a major challenge for policymakers. For instance, when a national campaign aimed at closing coal mines at village and township levels was launched, implementation turned out to be a major obstacle. One of the causes of non-implementation is that the policy was established and implemented within only a few months. The implementers did not create a sufficient timeline for consultations at every level of government. This resulted to incomplete implementation. Some county government even ended up providing false reports to the central government as a way of explaining the progress they had realized in the implementation process.

Today, China is struggling to achieve the policy successes that occurred during the 1980s and early 1990s. During this time, success was realized mainly because the administrative measures that were in place fitted in with the national economy in which one of the most important features was planning. However, with time, market forces started permeating all sectors of the economy. Consequently, there was a need to replace the existing policy instruments with market-based incentives to influence energy users’ behavior positively.

During the 1990s, mixed success was realized with regard to policies aimed at encouraging investment in power generation and the petroleum industry. Nevertheless, foreign direct investment continued flowing into the country’s offshore petroleum industry. In contrast, the bureaucratic bottlenecks at CNPC seemed to have been playing a critical role in stifling progress in the onshore petroleum industry.

In the power sector, foreign investment seems to have stall because of paralysis in government policy regarding sector reform. This is primarily because investors are worried about lack of contract sanctity. At the same time, the legal system is yet to mature while the existing regulatory structures are too complex. These factors impose severe constraints on China’s energy sector. This phenomenon is not helped at all by the poor safety record in village and township coal mines.

These governance problems and regulatory constraints are not restricted to the energy sector. They exemplify the challenges that the government faces in determining how the country’s natural resources are shared as well as how the development agenda in general is being outlined. Nevertheless, however, these challenges are most noticeable in the energy sector since this is where the most far-reaching detrimental effects on the economy are likely to be felt. Moreover, it is the responsibility of government to ensure that energy and natural resources are properly managed regardless of how well or badly the economy may be performing.

At the same time, China has become notorious for inefficient use of energy. The country’s heavy industry has in recent years been putting a lot of strain on available energy resources. In fact, many researchers argue that this overdependence on heavy industry for economic growth is responsible for the country’s newly acquired status of a net importer of energy resources (Wu, 2013; Sioshansi, 2011; Shoichi, 2008).

Alignment with national development agenda

The energy sector of any country cannot be formulated in isolation; it must be mapped onto the overall development agenda of that country. Today, China is in the process of transitioning from a planned economy to a market economy. In this scenario, there is a need to reform the energy sector, and the best place to start is the reformulation of the country’s energy policy at the national level.

Traditionally, China’s energy policy has consisted of different targets for different components of the industry such as oil, coal, electric power, and gas. In some cases, the goals set have been achieved on time; in other cases, lack of coherence has been a major barrier. Even with the existence of five-year plans, sudden changes have tended to throw the country off-course as far as the implementation of its energy policy is concerned.

A key objective in the energy policy that is in place today is to ensure that domestic energy resources are optimally exploited. State petroleum companies are under immense pressure to develop new oil resources. Huge investments are being directed towards the development of new sources of oil resources at the domestic level. At the same time, China has had to deal with transportation problems given that most of its natural resources are in the northern and western parts of the country.

Current issues in China’s oil policy

Reliance on oil imports is arguably the biggest issue that China faces today in its oil policy. The country relies too much on international oil markets to drive its economy. To address this problem, efforts are being made to increase oil production both domestically and overseas. In this case, four core strategic goals relating to oil imports have been identified (Liu, 2011). The first goal is to diversity the number of countries from which oil is being sourced. Secondly, China is seeking to increase the amount of oil products being derived from the imported crude oil. The objective is to ensure that country’s refining industry is sustained. Thirdly, China is keen to ensure that the pricing mechanism being used at the domestic level is in line with trends in international markets. Lastly, China intends to enter into long-term oil sales arrangements as well as establish political ties with the main suppliers in order to avoid reliance on the spot markets (Liu, 2011).

The strategic shift being pursued today with regard to oil imports started occurring during the 1990s. During this time, more than 50 percent of its oil trade came from Asia-Pacific countries such as Malaysia and Indonesia. As the economy started growing more dramatically and China turned into a net oil importer, it started diversifying into other countries in the Middle East, Latin America, and Africa.

Today, China continues to pursue this diversification strategy. In Africa, for instance, China is aggressively engaging in efforts to build strong political ties with oil-rich countries. The term “oil diplomacy” is sometimes used to refer to these efforts in the context of the African continent (Zhao, 2007). In efforts to achieve the goals enshrined in this diversification strategy, China continues to rely heavily on state-owned oil companies.

According to Liu (2011), the aggressive and purposeful quest for energy security by China today may be said to be targeted at not just the Middle East, Africa, and Latin America but all parts of the world. State oil companies are at the center of this global quest for this energy security. These national oil corporations are what the world has come to view as the face of China’s growing ambition for a share of oil business in different parts of the world. The corporations are able to define their own interests by making various strategic decisions. They are a reflection of a changing international business environment characterized by China’s integration into the global economy.

Owing to the fragmentation of China’s energy policy, some stakeholders in the national oil corporations get opportunities to promote their vested interests. These stakeholders may in some cases happen to be foreign board members, international institutional investors, and foreign investment banking communities. Whereas the oil companies are not puppets of the state in the strictest sense of the world, they do not fit perfectly fit into the realm of shareholder-driven corporate governance either. Even if China’s central government had already put in place a coherent oil strategy at the national level, it would not have adequate capacity to monitor it. This means that many actions of state-owned oil companies are not a reflection of government policy in Beijing. Unfortunately, many people understand these policies to be a reflection of China’s oil policy.

In essence, the actions of the state-owned oil companies such as China National Petroleum Corporation (CNPC) and China National Offshore Oil Corporation (CNOOC) reflect the fragmentation that has dogged China’s oil energy policy formulation processes at the national level for many years. The companies are yet to overcome the influence of ad hoc decisions that are being made by local power producers, local governments, as well as local industrial concerns. Most of these decision-makers may not have national interest at heart in their efforts to influence policy formulation and implementation in one way or the other. In fact, some of them seem to be attempting to fill the void left by the lack of a clear oil strategy at the national level. This situation leaves many central government officials playing catch-up to stay abreast of changes both domestically and internationally.

Relationship between China’s oil policy and its overall energy policy

            China’s oil policy is related in many to the country’s overall energy policy. The issues of fragmented governance that are prevalent in the country’s energy policy also feature prominently in discussions on oil policy. According to Li (2011), this fragmentation is expected to have a major bearing on very crucial aspects of China’s future development. In some way, one may expect the fragmentation that exists in the energy sector to be replicated in all aspects of the country’s development. If this happens to be the case, the current rapid rate of economic development is likely to be negatively affected.

            In a bid to maintain the present rate of economic development China has been making concerted efforts to evaluating the relative roles of oil and natural gas vis-à-vis that of coal. Demand for energy resources in the country is rapidly growing, meaning that the country cannot afford to rely on one source of energy. Like the United States, China is faced with no other option but to operate with a mix of different fossil fuels as it endeavors to look for cleaner sources of energy (Li, 2011). In the foreseeable future, fossil fuels are expected to dominate as far as the supply side is concerned.

            China also has ambitions to develop nuclear power. It is estimated that over the next two years, China will build more nuclear plans than all the other countries of the world combined. However, this type of energy will meet only 4 percent of the country’s electricity needs; the rest will be accounted for by fossil-fired plants. This percentage is very small given that many rural areas will have opened up and many people will be expecting to be connected to the national power grid.

            The fact that China will inevitably continue to drive her economy using fossil fuels is bad news for global climate activists. It is also bad news for China because of the fragmented nature of the country’s energy policy. Meanwhile, one may argue that the severity of this problem will depend a lot on the proportions of coal, oil and gas in the country’s energy mix in the future. No one can predict with certainty the future dynamics of these proportions. Nevertheless, the reality is that any changes that occur in this mix are going to have an impact on the country’s rate of economic development.

            Based on an assessment of countries that have experienced rapid economic development similar to that of China, it is evident that reliance on oil vis-à-vis tends to increase. At the same time, gas tends to play an increasingly critical role not only in electric power generation but also in residential and industrial heating. As China braces for a rapid increase in demand for oil, the problem of high oil prices make the option of a coal-intensive strategy more plausible than it used to be two decades ago. This means that China is faced with two options: a coal-intensive scenario and an oil-intensive scenario.

            The economy is expected to continue relying on heavy industry, which is a major contributing factor to the country’s present energy problems. If the central government settles for the oil-intensive option, it will have to confront pricing-related problems. These problems are partly attributed to the liberalization of the international oil markets. At the same time, tight regulation of energy prices at the “end-use” level has greatly contributed to supply and demand challenges across China. Repercussions of these problems are being seen not just in China but also in the international community.

            At the domestic level, energy prices have been partially liberalized. This has led to the creation of high price differentials between retailers and suppliers, thereby creating inter-sector conflict. This creates the impression that the policy fragmentation that is being experienced in China’s energy policy today will continue being experienced in the foreseeable future. At the international level, China’s energy markets tend to have a far-reaching impact on volatility in the global energy markets. For example, the country experienced major blackouts in 2004, which lead to a rapid increase in the amount of oil being purchased by industries to generate backup power (Li, 2013). According to (Li, 2013), this led to a 16 percent growth in oil demand in the country, which was much higher compared to that of 11 percent increase the previous year. The following, China’s oil demand growth grew by only 3 percent because of increased the increased capacity of newly established coal-fired power-generating plants (Li, 2013).

Alignment of oil and energy policy with the country’s strategic management and development objectives

The fragmented nature of China’s oil and energy policy makes it extremely difficult to align it with the country’s strategic management and development objectives. Consequently, an incentive structure that emphasizes on short-term projects that are driven primarily by profitability has emerged. This structure, which is mostly promoted at county and provincial levels, does not focus at all on energy efficiency or regulation. Ultimately, the incentive structure has been replicated at the national level, thereby making it difficult for the central government to come up with a coherent energy policy.

In the economic incentive structure, government officials at the county level are appraised on the basis of both the amount of energy that they supply to their respective provinces as well as by economic growth in gross domestic product (GDP). This performance appraisal mechanism creates an incentive for cheap projects that are implemented on a short-term basis. Unfortunately, cleaner and more efficient energy projects tend to take much longer to construct. Therefore, they are not preferred by leaders at provincial and county levels. The International Energy Agency (2012) gives the example of a situation in 2004 where 110 GW out of 440 GW of electricity in China was illegally constructed and no monitoring was done to ensure compliance with safety measures or standards. 

The lack of alignment between energy policy and development imperatives is also evident in the way energy projects are financed. Energy projects in the country are mostly financed through either equity investments by municipal and provincial corporations or in the form of loans accessible through state banks. These two sources of finance tend to be at odds because of differences in terms of their incentives and motivations. The energy development corporations operating at the provincial level focus primarily on local policy, which calls for the execution of short-term projects. In most cases, these projects tend not to fit into the standards stipulated by the central government. In contrast, state banks tend to be more aligned to the long-term policy of the central government, which calls for higher standards and emphasis on cleaner, more efficient sources of energy.

Conclusion

In conclusion, China’s oil and energy policy is highly fragmented, and this poses a serious challenge in the country’s quest to meet its rising demand for energy. In the past, China has continued to depend on her vast coal resources to drive the national economy. However, as the country enters a new phase of rapid economic development that has turned it into a net importer of energy resources, the demand for oil will increase. Like most countries that have entered this phase in the phase, China is going to experience a sharp increase in its reliance on oil. This will force this Asian country to continue with its current policy of aggressively developing new sources of oil in the international markets through strategic political alliances.

The main problem with China’s energy policy is that it has not yet succeeded in dealing with the lack of energy security in the country. A decade ago, China was a net energy exporter; today, the country has become a net energy importer. In efforts to arrest this situation, the central government in China has had to address issues of drastic changes in the energy supply and demand as well as an expanding energy infrastructure. These changes are mainly attributed to the current rapid rate of economic development. These challenges are expected to continue during the next decade as more Chinese citizens seek to be connected to the national power grid.

Governance problems are to blame for most of the problems affecting China’s oil end energy policy. A clear energy policy is lacking while the central government seems overwhelmed by the task of navigating numerous bureaucratic structures and vested interests in both local and international energy investments. These problems have also contributed to inefficiency in energy use. Therefore, it is not surprising that the country’s energy policy issues being address by national energy corporations at both local and international levels are not properly aligned with the national development agenda.

Finally, China’s oil policy has been given a prominent position in recent years. This is primarily because of the unique set of opportunities and challenges that come with this energy resource. At the same time, the country is keen to reduce the high level of vulnerability that comes with reliance on oil imports by investing heavily in vast coal resources at the local level. In summary, therefore, the existing oil and energy issues are largely as a result of the existing oil and energy policies in the country. Moreover, it is evident that the oil and energy policy in China is not aligned to the strategic management and development of the country.

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