U.S.-China Economic & Security Review Commission
Hearing on
“China's Energy Needs and Strategies”
October 30, 2003
Today the Commission will be examining the increasingly important issue of China’s growing energy needs, its strategies for meeting those demands, and the implications for the U.S. economy and our national security. This is an important component of our legislative mandate from Congress and one that China analysts, both inside and outside the government, likely will be devoting increasing attention to over the next decade.
The world’s developed and developing economies increasingly rely on oil imports for their economic growth. Global energy demand is rapidly increasing due to the growing numbers of countries, including China and India, which have joined the ranks of oil dependent economies. China became a net oil importer in 1993 and currently imports nearly two million barrels per day, with that level projected to increase greatly in the next twenty years.
Our mandate from Congress directs the Commission to “evaluate and assess how’s China’s large and growing economy will impact upon world energy supplies and the role the United States can play, including joint R&D efforts and technological assistance, in influencing China’s energy policy.” The Commission’s mandate further directs it to examine China’s economic and strategic relations with its regional neighbors and others countries, of which China’s energy policies are an important component. How China addresses its escalating energy needs over the next decade likely will have significant implications for both U.S. economic and security interests as well as on the world’s environment.
The Commission will address several issues today. We will first examine China’s current trajectory of energy consumption and production. China’s stated energy policy goals are to reduce reliance on imports by further diversifying the types of energy used, diversifying the countries of origin of its energy imports, and raising the level of technological sophistication in its energy production. We will explore whether China is pursuing these stated goals in practice. We also will examine the impact of China’s energy demand on world supply and pricing. China currently pursues a far more bilateral approach towards its oil imports than does the larger oil-consuming nation community. We will investigate whether this impacts the supply availability and pricing situation for the U.S. and its allies. We will also discuss the impact of fluctuating energy prices on China’s GDP and export output. We will further examine the effectiveness of current Sino-US bilateral energy cooperation programs – whether such programs are furthering U.S. interests – and what other ways the U.S. can act to favorably affect China’s energy policy.
Beyond the energy market and economic issues, we will explore the geopolitical dynamics at work. How does China’s growing energy needs drive its diplomacy in Asia and beyond? Where is China investing money and resources to secure energy supplies and how do these relationships enhance or diminish the prospects for conflict? Of particular concerns is whether China engages with any terrorist-sponsoring and other rogue nations in pursuit of energy supplies and whether non-monetary considerations – including arms sales – are part of such arrangements.
I will chair the morning session of the hearing and my hearing co-chair Michael Ledeen will chair the afternoon session. We will begin by hearing from Guy Caruso, Administrator of the Energy Information Administration, who will provide the Commission with an overview of China’s current energy situation and the forecasted trends over the next two decades. Administrator Caruso will also discuss the U.S. Government’s bilateral energy programs with China.
The next panel will focus on the economic and energy market implications of China’s current and future energy demands. We will hear from Amy Myers Jaffe, Dr. Kang Wu, and Dean Girdis. Ms. Jaffe is the Wallace Wilson Fellow for Energy Studies at the James A. Baker Institute for Public Policy and Associate Director of the Rice University Energy Program. She is the principal author and research director for eight energy studies published by the Baker Institute, which include topics such as Chinese Energy Policy and Global Oil Geopolitics. Dr. Wu comes to us from the East-West Center in Hawaii where he is head of the China Energy Project. His work includes energy modeling and Asia-Pacific energy demand forecasting. Dean Girdis, Director of the Gas and Power Group of PFC Energy has had extensive experience consulting on energy development and reform and energy security in China.
During the afternoon session we will turn our attention to the geopolitical dimensions of China’s energy strategies. We will hear first from the Hon. R. James Woolsey, former Director of the Central Intelligence Agency, followed by Robert Ebel, project director for the Center for Strategic & International Studies’ Strategic Energy Initiative, Constantine Menges of the Hudson Institute, and Prof. Kent Calder of the Johns Hopkins School for Advanced International Studies. My co-chair Michael Ledeen will expand further on this panel after lunch.
The Commission welcomes these distinguished panelists and we look forward to dialoguing with them on the important issues before us.
The normal approach of the Commission is to ask each of our panelists to present their views in approximately 10 minutes or less so that there is enough time for the Commissioners to ask questions. Any prepared comments and/or written materials of the panelists will be made part of the record, at their request.
Commissioners will be limited to 5 minutes of questions – that includes both the questions and the answers. We want to have time for everyone to participate in today’s hearing.
With that, we will begin with Mr. Caruso.