By Li Zuojun

Research Report No 231, 2005

I. A Fairly Severe Problem of Restricted Resources Exists in China’s Industrialization

Industrialization is inseparable from resource consumption, but China faces a severe problem with restricted resources. The problem is mainly reflected by the following facts.

1. Scarce per-capita resources

The total amount of many varieties of resources in China is ranked among the top in the world, but the per-capita share of resources is generally low. In China, per-capita farmland is only 1.43 mu, less than 40% of the average level in the world or 12% that of the United States. In more than 600 counties in Guangdong, Fujian, Zhejiang and Shanghai, per-capita farmland is less than 0.6 mu, even lower than the warning level of 0.8 mu set by the United Nations. Per-capita water resources are merely 2,220 cubic meters, or about one-fourth of the average world level. According to estimates, the Chinese population will peak at about 1.5 billion people around 2030, and by then per-capita water resources will be merely 1,750 cubic meters, and the country will become one of the countries facing the most serious water shortages. Per-capita forest areas are 0.128 hectares, or about one-fifth of the average world level; per-capita forest reserves amount to 9.048 cubic meters, merely one-eighth of the average world level. Per-capita mineral resources amount to only 58% of the average world level, making China rank 53rd in the world. Per-capita reserves of petroleum, natural gas and coal stand at 11%, 4.5% and 79% respectively of global per-capita levels.

2. Low efficiency in resource utilization

In the more than 50 years since the founding of the People’s Republic of China, the country’s GDP expanded more than 10 times, but growth in mineral resources consumption increased more than 40 times. In 2003, China’s GDP was valued at 1.4 trillion USD, accounting for 4% of the world total, but 5 billion tons of various resources were consumed. Of these resources, the consumption of petroleum accounted for 7.4% of the world’s total (one-third was imported), the consumption of coal accounted for 31%, the consumption of iron ores accounted for 30% (half was imported), the consumption of steel accounted for 27%, the consumption of aluminum oxide accounted for 25% (half was imported), and the consumption of cement accounted for 40%. Energy consumption was much higher than that of the developed countries and much higher than the global average level, at about three times that of the United States and 7.2 times that of Japan. If computed at current exchange rates, China’s output value of unit energy is equivalent to one-tenth of that of the United States, one-twentieth of that of Japan and one-sixth of that of Germany. The GDP output value per kilogram of coal equivalent (kgce) in China is only 0.36 USD, but the average output value in the world is 1.86 USD. In China, the unit output value in the broad sense of energy consumption is 5-6 times higher than that in developed countries, and the consumption of water resources is 8-10 times higher. The energy consumption for every 10,000 yuan of GDP is 9.7 times that of Japan, and 3.4 times that of the world average, and the unit energy consumption of 33 major kinds of products is 46% higher than the world average. In China, water consumption for every 10,000 yuan of GDP value is five times higher than that of the international average level. The energy consumed by China’s construction sector exceeds that of the developed countries by 2-3 times. The average energy consumption efficiency of China’s industrial furnaces is 60%, 20 percentage points lower than developed countries. The coal consumption for power supply by thermal power plants is 404 grams of coal equivalent per kilowatt-hour, but the advanced international level is only 317 grams of standard coal, so China’s consumption of coal by thermal power plants is 27.4% higher than the international level. The amount of recycled water used by industries is equivalent to only 0.4% of the total amount of water supplied, the amount of seawater and salt water used by industries is about 25.6 billion cubic meters, equivalent to 21.3% that of Japan and 12.8% that of the United States.

3. Resource demand grows too fast

In recent years, influenced by growing demand, the growth rate of energy consumption exceeded the GDP growth rate. In 2000 and 2001, the growth rate of electricity consumption in China was 1.5 and 1.1 percentage points higher respectively than the GDP growth rate, in 2002, energy consumption and electricity consumption were 1.6 and 3.3 percentage points higher than the GDP growth rate respectively, and in 2003, the energy consumption and electricity consumption were 3.9 and 7.2 percentage points faster than the GDP growth rate respectively. Cambridge Energy Research Associates of the UK pointed out that the growth in Chinese demands for energy between 2000 and 2004 would account for 40% of the world’s total growth. The "BP Statistical Review of World Energy 2005" indicates that China’s energy consumption now accounts for 13.6% of total global consumption. At present, China is the top consuming country in terms of coal, steel and copper, and is the second largest consuming country in the world in terms of oil and electricity, only after the United States, and its demands for energy and some major metal ores have become the key factors affecting the world market. An important evidence of the fast growth in energy demands is the occurrence of a supply shortage in electricity, coal and oil in some regions. In 2003, the number of provinces short of electricity supply rose to 19, and the first massive power shortage occurred in China since 1996. In 2004, the number of provinces with a short supply of electricity rose further to 24, and the biggest power shortage was as high as 30 million kilowatts. If computed according to the energy consumption mode of the traditional industrialization road of the developed countries, when China’s GDP quadruples between 2000 and 2020, its primary energy consumption will increase from 1.3 billion tons of coal equivalent to at least 5.2 billion tons of coal equivalent; and if energy consumption maintains a parallel pace with the economic growth rate, China’s total demands for primary energy in 2020 will amount to about 6 billion tons of coal equivalent.

4. The degree of dependence on imported energy is high

In comparison to China’s fast economic development, the level of resources guaranteed is very worrisome. According to research and forecasts made in 2001 by the Chinese Academy of Geological Science, the remaining proven reserves of oil and gas can only support consumption for about 10 years, and ultimate reserves that could be exploited could sustain consumption for about 30 years; existing reserves cannot meet demands for the coming 20 years; existing reserves of copper ore plus basic reserves are not enough to satisfy the demands for the coming 10 years; existing reserves of aluminum ore plus basic reserves are virtually insufficient to meet the demands for the coming 20 years. A report by the Ministry of Land and Resources in 2003 pointed out that by 2010, domestic output of iron ore might only satisfy 38% of demand and importing 131 million tons of iron ore will be needed (about 81 million tons of steel will also have to be imported); the domestic production of copper, plus recycled copper (calculated at 200,000 tons of recycled copper) will only meet 20% of the demand and there will be a shortage of 3.01 million tons; the domestic production of aluminum plus recycled aluminum (calculated at 440,000 tons of recycled aluminum) could satisfy 36% of the demand and there will be a shortage of 6.32 million tons. There are also different shortages of mineral resources such as potassium, phosphorus, sulphur, lead and zinc. In 2003, 47% of Chinese iron ores, more than 60% of copper output and 48% of aluminum output were realized through imported materials, 34% of crude oil was imported, more than 50% of the raw materials needed for domestic electrolytic aluminum production relied on imports. Imported timber products accounted for more than 40% of domestic consumption. In 2004, China’s imports of crude oil amounted to 120 million tons, an increase of 34.8% over the previous year, and China’s degree of dependence on oil imports was about 40%.

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