Free Custom «Energy Consumption in China» Essay Paper

China’s economic growth has averaged a phenomenal 9.8% since 1980 and it hit 11% in 2006, becoming the world’s second largest economy. This has greatly improved living standards by raising personal incomes. China has moved from a minor to being the world’s largest energy consumer. Over the years, China was able to meet its growing demand for energy, so its impact on the world market was minimal. However, this has changed due to growing concerns over the increased emission of greenhouse gases to the environment thus making China rethink its strategy of energy use.

Coal is the number one energy provider in China, supplying over 60% of the total energy needed for industries, commercial businesses and households. Oil also provides 19% of the total energy used. Rural households continue to use fuel wood and crop wastes for cooking, thus biomass contributes a significant percentage of energy. Natural gas and hydropower constitute 2% each while nuclear power contributes only 1%. In the 1980s and 1990s, energy demand grew more slowly than GDP while between 2004 to 2005, energy demand grew faster than GDP, thus increasing energy intensity. However, from 2005, energy intensity has started to decrease due to strong government effort to restrict energy demand growth. Although China is the sixth largest oil producer, it is also the third largest importer of oil. This shows that China is a major consumer of oil.

According to the International Energy Agency, the importance of China and India in world energy will continue to grow over the coming years thus bringing about increased economic development, urbanization, and infrastructural development thus improving the quality of life. China and India prospects of growth are very high and it is expected that by 2030, they will account for 45% of increased energy demand in the world (Palai, 2007). The two countries also account for 82% of the world’s coal demand over the projection period. Currently, the two countries account for 20% of the world’s energy use.

 

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Figure 2: Shares of India and China in the increase in world energy demand by fuel in the Reference Scenario, 2005-2030.

Over the projection period, all primary fuels except biomass see an increased growth in demand. Both countries will continue to be heavily dependent on coal, with the demand rising from 57% in 2005 to 59% by the end of the projection period. The demand for oil also grows rapidly in both countries as their combined oil use increases from 3.7% per year to 42%. Output of coal in both China and India continues to rise but not fast enough to keep up with demand rate. Coal imports rise in both India and China, while oil production falls in both countries between 2005 and 2030, thus leading to increased import of oil (Palai, 2007).

In the scenario of alternative policy, energy demand in both India and China grows more slowly as the government enforces new policies to curb the demand for oil. In both countries, demand for coal goes down due to more efficient coal burning technology and use of less carbon emitting fuels and some zero carbon technologies such as nuclear energy.

Infrastructure development is vital to promote economic growth in Chindia. Logistical infrastructure improvement from road, railway, and air network to water ways is the back bone upon which Chindia will forge a head.

Economic growth accompanied by urbanization has led to huge improvement of China’s infrastructure. The key infrastructure sectors worth noting in China are sea ports, electric power, railways, and water and inland waterways. However, there is a large disparity in infrastructure in China’s cities and in the rural areas. The infrastructure in rural areas is poorly developed while that in the cities resembles that of third world countries. Despite that, China’s infrastructure is one of the most developed in the world. This has made China the largest exporter of heavy building equipment such as crawler excavators. The amount of money spent on infrastructure in China increases by about 25% per year in recent years and this shows just how committed China is to improving its infrastructure (Kim, 2008). China’s transport system well developed thus it is a promoter of economic growth. There is a Chinese saying which states, “To get rich, build roads first.”

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India’s infrastructure on the other hand is still backward, thus restricting rapid economic growth. Nearly ninety percent of India’s households do not have access to electricity and most of the roads have only two lanes. According to the Asian Development Bank (ADB), India will have to invest over 1000 billion Euros over the next ten years so as to completely rebuild its infrastructure. Thus, India’s transport system needs improvement as it is an inhibitor to economic growth. For India to achieve rapid economic growth over the next ten years, it needs to invest heavily in building ports, airports, roads, railways, etc.

It is evident that China has an edge over India when it comes to infrastructure and this could be the reason why China is slightly ahead of India in terms of development. However, both countries are highly improving their Infrastructure which will lead to more growth of GDP in the next 50 years in Chindia making it the next economic power.

India depends mainly on roads accounting for 37% of freight transport compared to China which depend mainly Rail transport, accounts for 47% of freight transport. India is projected to allocate more finance to rail transport in the future. Current trajectory, suggest that India will spend around USD 500 billion on development of logistic infrastructure in the next decade.

According to The maritime sector in China is expected to increase movement of tonnage for all cargo by about 3% per year so as to reach 5 billion tones in the next century. Railway transport will continue to play an important role in China and India (Kim, 2008). Generally, transport system in both countries will have to be improved because it’s extremely reliable for Chindia to sustain the level of economic growth it currently has.

Economic integration between China and the rest of the world has been mainly through trade, like that of South Korea and Japan. India’s economic integration in a global scoop is mainly through substantial acquisitions of mature industries of developed economies. These attainments are majorly for future development of Indian enterprises and they will therefore regenerate mature firms and industries of developed economies. They will also change Indian industries from export oriented ethnocentric companies to big transnational corporations with global source of talent and capital.

Chindia’s economy greatly relies on trade with the developed nations. Both China and India preserve a good relationship with other nations particularly the developed world. Developed economies for instance the US are in constant contact with the two countries in an effort to maintain good ties. With the current trend in growth in Chindia, most of the developed nations are keen to make trade deals and investment policies in China and India as returns are almost guaranteed with the large consumption due to the huge population. China and India foreign relationsreflect a conventional guiding principle of nonalignment. This ensures a “professional” relation with all parties without special treatments or discrimination.

On the other hand, developing economies are constantly on move triggered by the upcoming economic rush led by Chindia. There is a back to the future scenario that seems to have a global dominance in the 21^stcentury. Emergence of Chindia will benefit other developing economies in Southeast Asia, Caribbean, Africa, Central Asia, Eastern Europe, Latin America and practically the rest of the world (Ministry of economic affairs, 2011). African economies have established close links with China and India in separate ways. Through investments and trade, Chindia will accelerate rapid growth of developing countries mainly through economic relationships and less on geopolitical principles. Chindia is in need of more agricultural and industrial resources from these countries as they need professional and technical expertise from Chindia.

There have been dramatic overtures between Chindia and African countries. In 2006, there was a spectacular China-Africa summit that was held in Beijing. Amidst a rare occurrence and pomp, China welcomed 51 of African leaders into the summit and created a historic partnership among the upcoming economies (Ministry of economic affairs, 2011). Preferential loans, aid, infrastructural technical and financial support, education and debt relief treaties were signed with individual states. Similarly, India held the New Delhi plans beneath the auspices of the African Union, where 14 African leaders were hosted to create and put forward its panoply of development affiliations on economic issues such as, investment, education, trade, agriculture, infrastructure and mining.

With exclusion of the troubled Angola program, China has currently invested commitments of approximately $8 billion in Africa, whilst India’s African investments measures to about $2 billion. In 2007, trade between Africa and China amounted to about $32billion while between it and India was about $20 billion. Chindia regard itself as providing win-win bargains for countries in Africa: concessional financing, development expertise, and markets as commodity supplies are secured in return. The fact that China’s economy relies heavily on manufacturing exports, Africa have emerged as a potential partner in the market, while India has accessed a productive field to invest its expertise especially in resource exploration. This interaction provides Africa with a unique opportunity to propel its own growth given that Chindia is emerging as the future global economy.

Rise of Chindia broadly represents rise of developing nations and this will in turn strengthen and restore confidence of developing countries. Third world and developing nations will redefine their economic co-operation or cut off their economic reliance on developed nations like the U.S and Germany by developing more business and diplomatic relation with India and China which will be a main driver of Chindia to be the next economic power.

China and India demonstrates an applicable verification of their predictive rise as contemporary economic forces, and the occurrences following ‘Chindia Rising’ publication within the past four years have revealed that the rise may occur sooner than projected. There is a high degree of credibility on this issue, but despite the effect of the speed at which change will occur, emergence of a new triad power (U.S., India, and China) will be harmless and will result to global benefits. Nonetheless, it may display fascinating experiences in geo-political situation.

Claiming “Chindia will be the next economic power is not groundless or exaggerated”. First, both China and India continue to achieve annual GDP growth rate of about 9% and 6% respectively making them the main engine of the world economy. Secondly, with annual real growth forecasted at 8-10% for China and 5-6% for India, Chindia will be the next economic power by 2050 with a GDP of 102, 655 billion US dollars at purchasing power parity, bigger than the US by 64779 billion US dollars at purchasing power parity rankings.

Thirdly, the continued economic co-operation between the two countries mainly in terms of trade and economic transfer drives them towards being the next economic giants in of the world. China has huge advantages in terms of cheap labor due to its large population, vast numbers of domestic consumers, and extremely enormous markets. India on the other hand has long term immense advantages in terms of age distribution, social structure, political flexibility, and diplomatic relationships with countries from the west. Furthermore, if India combines its main driver of economy IT software and services technology with China’s hard ware technology, Chindia will become the global leader in the IT industry and then develop a new system of globalization that will shift economic power and wealth from the west to the east; Asia. Fourth, given the immense economic potential of China and India and their big demand for energy and other renewable and non renewable resources, prospects of more co-operations between these two nations will have a significant global impact with other nation seeking markets for their export in Chindia and Chindia seeking raw materials in these nations. Lastly, Chindia co-operation with south-south coalition (third world and still developing countries) will promote new international economic order with China and India as the leading developing nations and greatly redefine international decision making in terms of economic trade and development. Main economic factors indicate Chindia will shape world economy by 2050.