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Chinese Energy Market Entry Essay

4349 words - 18 pages

Chinese Energy Market

Michael Alexander
Landon Bunn
Thomas Burrus
Benjamin Duva
Marcela Horan

Table of Contents:

Executive Summary…………………………………………Page 3
Demand for Energy…………………………………………Page 4
Coal and China…………………………………………………Page 6
Solar Energy in China………………………………Page 8
Competition…………………………………………………………Page 9
U.S./China Relations………………………………Page 10
Recommendations……………………………………………Page 14
Joint Ventures………………………………………………Page 15
References…………………………………………………………Page 17

Executive summary
As the nation with the world’s largest population moves towards an industry focused on consumer products, the need for an abundant supply of energy becomes essential. While coal and ...view middle of the document...

The increased investment allowed the government to offer economic incentives. These incentives in turn shifted the focus of companies to energy expenses. At the same time, trade barriers were falling and exposing China to energy efficient competition. By 2000, Chinese economic activity required 2/3 less energy per unit of output than in 1978.
Current Energy Demand
In the early 2000s, China joined the World Trade Organization. This decision only highlighted the importance of comparative advantage in the global markets. Based on past developments of China towards an energy-efficient industry, energy forecasters expected a 4% increase in energy demand from 2000 to 2010. China, however, surprised everyone by growing faster than anyone could have anticipated. With this rapid growth, China also moved back towards an energy intensive industry, growing at 4 times the expected rate. In 2006, China accounted for 15% of the world’s energy demand.  

What is driving the energy consumption?
The main source of growth is the energy-intensive production of “heavy” industry, or major construction projects. Although, industrial energy efficiency has, in fact, been improving (New steel mills are more efficient than their predecessors). But no matter how efficient the steel mill is compared to other steel mills, it still consumes a massive amount of energy in comparison to a garment factory.
This heavy industry consumption is driving energy consumption at the moment. Investors may be concerned with validity of predictions for the sustainability of consumption. It may seem that China will run out of major Figure [ 2 ]
projects and will not reach the projected total of consumption by 2030. However, consumption-driven demand is another factor in driving energy consumption, and its importance is expected to increase in the coming years. More and more Chinese households are reaching income levels at which energy-intensive consumer goods, like air conditioners and automobiles, are more accessible. The new emerging middle class is more likely to work in an office than in a factory. They will be able to provide a home and food for themselves and their families, and still have money left over. Additionally, for every building the heavy industry focus is producing, they will need to focus on heating and cooling those buildings in the future. With the building of new roads, comes the promotion of purchasing more cars. 
It seems that as China’s wealth increases, a larger part of the country’s energy demand will be from consumers. It will take the form of heating, cooling, lighting, and transportation rather than construction and infrastructure improvement. 
The Big Concern
China’s potential for growth is frightening. China uses about two barrels a year of oil per person. In the United States, citizens use 23 barrels of oil per person. If China’s usage grew to match that of the United States, more than 85 million barrels of oil would be used per day. This would...

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