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I. Introduction
As the People’s Republic of China nears a 2012 leadership transition, it is appropriate to ask how China’s new leadership will face the country’s energy and economic development challenges. China, the world’s second largest economy, has become the world’s second largest consumer of hydrocarbons. While it was never a Soviet–style, centrally planned economy with a comprehensive planning bureaucracy in Beijing, China’s economy operated through a strong regional economic planning economy in the first three decades after liberation in 1949. For the past three decades, China has embraced profound trade liberalization, privatization, and decentralization of governance, making it increasingly dependent on global institutions supporting a world market economy. As part of this trend, China has become increasingly reliant on imported coal, oil, and natural gas and its state-run energy enterprises have become more global in their operations. But it remains unclear whether China desires to continue this trend of cooperating and integrating with other market economies. It is also possible that as it experiences its newfound economic clout, trade surpluses, and foreign accounts, China’s leaders will want to establish a more centrally planned economy for which its Communist leadership was originally designed. The Chinese central government’s reaction to the global economic recession of the last few years has bolstered the case for centralized control. Beijing has aided local government investment in infrastructure and industrial capacity, and made large strategic investments in sunrise industries. Since energy development has such strategic and wide-ranging economic impact, the inclination to centralize China’s energy policy and investment strategy is a strong one. In this paper, we investigate whether emerging policies strengthening central planning will continue in the 12th Five Year Plan (2011-2015), and whether a trend toward a centralized strategy can be applied to energy and environmental policy in China.
China’s hydrocarbon economy has received a central planning “upgrade” in recent years with the establishment of the National Energy Commission (NEC), a national energy policymaking body formally on par with the body that has managed economic planning across all sectors for decades, the National Development Reform Commission (NDRC). This paper discusses the role of the National Energy Commission and analyzes whether it can bring strong, cohesive coordination and leadership among the three actors developing China’s hydrocarbon economy: the central government, the local governments, and the state-owned energy companies.
To start to answer this question, this paper first presents a formal bureaucratic roadmap of energy policy decision-making in China, discussing the history behind the establishment of the new regulatory agency, the National Energy Administration (NEA), and the creation in 2010 of the policy body guiding planning and harmonization in the hydrocarbon sector, the comprehensive National Energy Commission (NEC). This discussion describes in detail the various institutional actors and bureaucratic processes that have effected change in government hydrocarbon and energy institutions since reforms began in 1978.
The second section of this paper outlines the history of privatization of state enterprises in China, including their effects on the growth and adaptation of energy state enterprises. It focuses on the case of the national oil companies (NOCs) and their relative autonomy from central government control over the last few decades in comparison with other enterprises in the energy sector. I argue that despite various reorganizations, there does not seem to have been significant changes in the way the Chinese Communist Party informally controls the national oil companies, thus preserving their opportunities for autonomy. In fact, an analysis of political processes and relationships within various levels of Chinese government, the national oil companies, and the Communist Party suggests that the new NEC will have difficulty asserting its authority through either formal or informal channels.
The third section explores the actions of China’s provincial governments, province-level municipalities, and the autonomous regions over the last few decades in order to ensure the development of their hydrocarbon industries. Their strategies of creating their own energy policies—with locally-financed strategic investments in hydrocarbons, especially coal—and their own energy administration organizations have produced a local-level bureaucratic roadmap that is varied and complex, with a diminished potential for any kind of coordination either across localities at their own initiative or by the initiative of the newly minted NEC.
Finally, the third section examines the backgrounds of China’s top party and government leaders, discussing their potential for using their knowledge, experience, and network connections to assert strong central policy control over China’s hydrocarbon industries. I argue that the stated goal of creating the National Energy Commission in order to prioritize energy policy and energy security by separating it from the traditional governmental and party economic policy bodies has not created a highly effective, comprehensive central energy bureaucracy that can achieve strong control over future energy policy. Rather, it seems more likely that members of the Politburo of the Central Committee of the Chinese Communist Party, or the senior ranks of the Communist Party with energy backgrounds, will seek to maintain the current status quo system of mainly informal control over state energy companies and local government-led energy policy formation. China’s energy policy formation therefore most likely remains directly in the hands of the Politburo, a body of officials with strong individual ties to energy companies and the majority of local governments. Thus, China’s national oil companies are still likely to be able to tap potential patrons in the Communist Party to protect their interests in the coming years, and it will be difficult for China to develop a strong comprehensive national energy policy that would impose high costs on China’s national industries or localities.
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