The Role of Nuclear Energy in China’s Geopolitical Ascent

China’s astounding economic growth has been followed by an equally astounding energy demand to fuel that growth. According to BP Energy Outlook, China will become the world’s largest energy importer, with its imports set to rise to 23% up from 15% in [year]. In addition, 25% of global energy consumption will also come from China.[1] However, the energy supply is lagging behind already. Despite slowing economic growth, Beijing continues to demand more and more energy. China’s energy production rose by 40% in [year], but its consumption grew by 48%.[2] Naturally energy security is a major concern for China. It is already actively working on diversifying its energy supply resources, making sure it is covered from every direction and that it does not overly rely on any single supplier in particular. Currently its primary energy demand is coal (64%), followed by oil and hydro (19% and 8% respectively), gas (6%), renewables (2%), and nuclear (1%). According to the Mid- to Long-Term Nuclear Development Plan (2011-2020), China plans to raise the proportion of nuclear power to 4% from 1%, while decreasing the share of oil and coal to 56%, and increasing gas up to 28%. Thus, China will account for 31% of global nuclear generation by 2035. [3] Taking a quick look at its energy diversification issues will help understand the urge with which China pursues the development of its nuclear power plan.

The desire to cut oil and coal can be attributed to two main reasons: energy security and environmental issues. Currently 83% of energy consumption is comprised by fossil fuels such as coal and oil. China already announced its plan to reduce coal consumption, as many cities choke on the air pollution caused by it. According to a 2012 Asian Development Bank study, China’s 500 biggest cities failed to meet air-quality standards developed by the World Health Organization.[4]  Moreover, around 1.2 million people in East Asia died prematurely because of air pollution in 2010.[5] As China becomes more concerned about environmental issues, it has started assuming more responsibility and become more proactive; in the 2015 Paris climate change summit, China declared that it would cut power industry pollution emission by 60% by 2020. [6]

Such a turn to a more sustainable development does not only increase economic welfare of the country and the global society on the whole, but it also allows China to play a greater political role and improves its image as one of the key players fighting the climate change war. Moreover, taking into account Trump’s rhetoric regarding climate change, his plans to abandon the Paris Climate Agreement and resume oil and gas drilling in previously prohibited areas will certainly make China appear as a responsible rising power, adding even more to its favorable image.

As for oil imports, China’s main suppliers are the Middle East, Africa and Russia. With three quarters of China’s oil travelling by sea, particularly sailing through the narrow Malacca Straits, China has reason to worry about possible blockades. [7]

On the other hand, another big share of oil comes from Russia, primarily through the ESPO pipeline. But as the only provider of oil in the north, Russia could be seen as a potential risk as well. For instance, China was not able to receive its scheduled volume of oil in 2013-2015 as planned, because it lacked capacity on its side of pipeline. Consequently, Russia had to find ways to transport the rest of the demanded oil through rail and trans-shipment with Kazakhstan.[8]

Although China might consider a cross-border pipeline as a security risk, this risk is greatly mitigated by China’s much stronger negotiating position and Russia’s weaker geopolitical position. Furthermore, low oil prices allow China to leverage its advantages and renegotiate prices if it wishes to.

There are doubts about China’s plans to increase import of natural gas up to 28% by 2020. Until recently, China was able to meet gas demand mainly through domestic supply. [9] Currently China has access to Central Asian gas through pipelines in Turkmenistan (the biggest single supplier), Uzbekistan and Kazakhstan, as well as Myanmar. Another 48% of natural gas is imported as LNG from four more or less equally distributed sources: Australia, Qatar, Malaysia, Indonesia.[10] Constant insurgencies and general political instability in Myanmar make it the least reliable source for China. Turkmenistan, Kazakhstan and Uzbekistan seem to have stable political regimes at a first glance. However, these authoritative regimes rest on a cult of their leaders, all of whom are not getting any younger. It is hard to predict any changes in their energy policies after the inevitable political transition. It is clear that their economic growth is firmly tied to the natural resources trade, but these countries may grow more and more concerned about China’s constantly increasing economic presence in the region. In an unfavorable economic situation the local population may respond negatively to such a close relationship with China, blaming its governments for overreliance on China. That kind of political risk also cannot be underestimated.

China’s ambitious plans to boost the role of renewables looks very promising but questionable at this moment. Solar and wind energy generators are still technologically imperfect. The biggest problem is transportation of that energy to regions where it is mostly needed.  This transportation can be unreliable, as it often depends on weather conditions.

To sum up, energy supply diversification allows Beijing to alleviate risks of energy security in a short term, and its reliance on nuclear energy is more than justified in the long term. It will reduce its dependency on external sources of energy and switch to a more autonomous domestic market. Moreover, development of nuclear energy directly addresses environmental problems and pushes Beijing to meet its goals in carbon emissions reduction. The development of nuclear power not only meets the domestic needs in terms of economic growth, but also follows the similar path of a world community striving for sustainable development and clean energy.

As China is getting ready to assume the role of a new global economic leader, it is revisiting its plans of establishing and deepening trade partnerships. Not only does it plan to produce nuclear energy for its own needs, but it also has certain plans of exporting its newly acquired technologies by building nuclear plants abroad. This strategy actually belongs to China’s goal of becoming the innovative super power by 2050, which means that it is aiming at exporting its high-tech brands, of which nuclear power is one of many. To become a global innovative leader China needs to focus on its indigenous innovation rather than just reverse engineering. And at least with regards to nuclear reactors it has made certain progress by absorbing, localizing, and re-innovating AP1000 reactors from Westinghouse. As the result of this re-innovation, CAP1400, the third generation nuclear power reactor was created. Possessing its own technologies also reduces the risks stemming from dependence on foreign technology suppliers.

Along with Hualong-1 and high-temperature gas-cooled reactor (HTR), Chinese designed CAP1400 are projected to be exported. Two are already operating in Pakistan, and two more are under construction. [11] While CAP1400 has already been tested at home, Hualong-1 projects are still in early stages of construction in Fujian and Guangxi province. Keeping this in mind, China has made deals with Great Britain, Argentina, Romania, Sudan, and Turkey about building Western design nuclear reactors, but with Chinese finance and Chinese construction expertise. [12]And although international customers have legitimate concerns over safety and reputation, it is hard to resist signing a deal with Chinese contractors, as they beat the majority of offers on the market by providing an all-inclusive package with massive financing, high-end technologies and installation services. After building trust during this first stage China plans to proceed with promoting its own reactors. And that will be the moment when Chinese expertise and technologies will be actually put to the test. Although there are certain doubts of quality and safety of Chinese nuclear reactors, the stakes for China are too high to risk its reputation and future role as a global civil nuclear energy supplier.

There is no doubt that China’s nuclear power exports are gaining momentum, while countries around the world seek energy security and greenhouse gas emissions reduction. This is a unique opportunity for China, with developed countries stepping away from nuclear industries in the Fukushima aftermath, Beijing can enjoy unprecedented low entry barriers.

By defining the nuclear industry as a core strategic industry receiving special attention from the central government, China will be better able to meet its goal of developing nuclear energy plans and becoming one of the key players on the global nuclear energy market. These goals address both domestic and international challenges that China must face, in order to simultaneously assume a new role as a leading global nuclear energy producer and exporter.

[1] http://www.bp.com/content/dam/bp/pdf/energy-economics/energy-outlook-2016/bp-energy-outlook-2016-country-insights-china.pdf

[2] Ibid.

[3] Ibid.

[4] https://www.adb.org/sites/default/files/publication/29943/toward-environmentally-sustainable-future-prc.pdf

[5] Mochizuki, Mike and Ollapally M. Deepa, Nuclear Debates in Asia, 2016

[6] https://www.theguardian.com/environment/2015/dec/02/china-says-it-will-cut-power-sector-emissions-60-by-2020

[7] Henderson, Mitrova, China-Russia Energy Trade, OIES 2016

[8] Ibid

[9] Ibid

[10] Ibid

[11] http://thediplomat.com/2016/02/chinas-nuclear-industry-goes-global/

[12] Ibid.