China and her energy and defense strategy

China and her energy and defense strategy

Extracted from http://www.defenselink.mil/pubs/pdfs/China_Military_Power_Report_2009.pdf

Although China is expected to continue to rely on coal as its primary fuel source, consumption of petroleum and other liquid fuels will likely grow significantly, due in large part to growth in the transportation sector. China plans to increase natural gas utilization from three percent to eight percent of total consumption by 2010. Similarly, China plans to build some 40 1,000-megawatt nuclear power reactors by 2020, increasing nuclear power from two to six percent of total electricity output.
China currently consumes approximately 7.85 million barrels of oil per day. By 2015, China’s oil consumption could rise to 10-12 million barrels per day. In May 2008, China became the world’s second-largest importer of crude oil, surpassing Japan. China currently imports over 53 percent of its oil (around 4.04 million barrels per day in 2007). China imports about 46 percent of its imports from the Middle East, 32 percent from Africa, and 5 percent from East Asia. In 2008, Saudi Arabia was China’s largest supplier at about 725,000 barrels of oil per day. Saudi Arabia is followed by Angola at about 596,000 barrels of oil per day, and Iran at about 425,000 barrels of oil per day. The vast majority of its imported oil is carried on ships transiting through the Malacca or Lombok/Makkasar Straits.



Figure 1. China’s Critical Sea Lanes. Like many other industrialized East Asian countries, China is heavily dependent upon critical sea lanes for its energy imports. Over 80 percent of China’s crude oil imports transit the Strait of Malacca.

In 2006, China’s top three suppliers were: Angola (16 percent), Saudi Arabia (16 percent), and Iran (12 percent). In 2007, six percent of China’s crude oil imports came from Sudan. Currently, slightly over half of China’s imported oil comes from the Middle East and almost a quarter is imported from Africa. China’s national oil companies have invested in oil ventures (oilfield development, and pipeline and refinery projects) in Kazakhstan, Turkmenistan, Nigeria, Sudan, and in over 20 other countries in North Africa, Central Asia, Southeast Asia, Latin America, and North America.

Territorial dispute:

While China and India have improved bilateral relations, tensions remain along their shared 4,057 km border, most notably over Arunachal Pradesh. In June 2008, PRC troops entered more than a kilometer into the northernmost point of India’s Sikkim state. PRC soldiers, in May, had threatened to demolish stone structures in the area. In May 2008, India’s Minister of External Affairs Pranab Mukherjee visited the PRC and signed a Memorandum of Understanding to expand bilateral military cooperation. Following local elections in November 2008, Mukherjee stated that Arunachal Pradesh is “an integral part of India.” A spokesman for the PRC Ministry of Foreign Affairs rejected the statement.
India. China has deepened its ties with India through increased trade, high-level dialogues, and an improved military-to-military relationship. China and India agreed to boost trade from $11.4 billion in 2007 to $40 billion in 2010, and they have held several rounds of dialogue over disputed territorial claims. Sino-Indian defense ties were institutionalized in 2007 with the establishment of an Annual Defense Dialogue and by conducting three bilateral defense exercises since 2007. However, the PLA remains concerned with persistent disputes along China’s shared border with India and the strategic ramifications of India’s rising economic, political, and military power. The PLA has replaced older liquid-fueled nuclear-capable CSS-3 IRBMs with more advanced solid-fueled CSS-5 MRBMs in Western China, and may possibly be developing contingency plans to move airborne troops into the region.

Demographic pressure:
Between 2000 and 2030, over 400 million people – a population greater than the entire United States – will transition from the countryside into urban areas. As a result of this shift, China’s leaders will face challenges in terms of job creation as well as satisfying housing and infrastructure needs. Some estimates suggest that China is expected to account for half of global building construction during that period. China’s population is also aging rapidly; China’s population of 146 million senior citizens will increase to an estimated 290 million by 2025. Accommodating the needs of a large senior citizen population will present challenges to the CCP’s ability to maintain economic growth, growing defense budgets, and perhaps domestic stability.

Defense priorities:
On March 4, 2008, Beijing announced a 17.6 percent increase in its military budget to approximately $60 billion. China’s military budget doubled between 1989 and 1994, and almost doubled again between 1994 and 1999. The 2005 military budget was almost ten times the 1989 military budget. If these trends continue, China’s military budget for 2009 will nearly double the 2005 figure.
China continues a two-decade trend of double digit percentage annual increases in its military budget. These increases surpass the percentage increases of its overall economic growth. Analysis of 1996-2008 data indicates that China’s officially disclosed defense budget grew at an average of 12.9 percent in real terms over the period, while GDP grew at 9.6 percent.
The Department of Defense estimates China’s total military-related spending for 2008 to be between $105 billion and $150 billion, using 2007 prices and exchange rates.

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