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Print Edition> Business
UPDATED: March 19, 2007 NO.12 MAR.22, 2007
Eating Up Less Energy
Using too much energy in China is taboo, but stronger discouragement is needed

Energy consumption reduction is working, but too slowly. China's energy consumption per unit of the GDP dropped by 1.23 percent in 2006 from the previous year, according to a report released by the National Bureau of Statistics on February 28. It is the first decline since 2003.

However, the decrease didn't meet the requirements by the Chinese Government, which aims to cut the energy consumption per unit of the GDP in 2010 by 20 percent in comparison with that of 2005 and to reduce that of 2006 by 4 percent year on year.

Chinese Premier Wen Jiabao also confirmed in his government work report to the recent Fifth Session of the 10th National People's Congress that China missed the target of reducing the energy consumption per unit of the GDP by around 4 percent and cutting the total discharge of major pollutants by 2 percent, which was set at the beginning of 2006.

Given the current situation, it poses a heavy task for China to fulfill the expected target of consumption reduction over the short term.

Major problems

Premier Wen Jiabao attributed the setback in his work report to the insufficient industrial restructuring, over-growing of the heavy industry (especially sectors with high energy consumption and high pollution), outdated productivity capacity, and the failure of some local governments to enforce environmental regulations and standards. The premier noted it takes time for relevant policies and measures to take effect.

Other causes for last year's setbacks include the lack of awareness of the difficulty of the task, loose supervision and implementation, and a deficiency in investment in environmental protection, said Zhou Shengxian, Vice Minister of the State Environmental Protection Administration, in reviewing last year's task.

Illegal discharge and lax law enforcement let environmental protection remain serious problems, which are also contributors to the failure of last year, Zhou pointed out.

Xu Huaqing, Director of the Energy Research Institute of the State Development and Reform Commission, identified the rough transformation of China's mode of economic growth as the fundamental reason. Xu said currently, the Chinese economy is mainly driven by industries, over 60 percent of which is made up by the chemical industry with high energy consumption.

The total energy consumption in 2006 rose by 9.3 percent year on year, and coal consumption was up 9.6 percent. Crude oil was up 7.1 percent and natural gas was up 19.9 percent, according to a report of the National Bureau of Statistics.

"Excessive reliance on consumption of energy and resources is a feature of the Chinese economy," Xu said.

China had increased investment in industries featuring high energy consumption and heavy pollution, which has been driven by domestic demand since the end of 2002.

Among China's industrial sectors with investment exceeding 5 million yuan in 2003, the steel industry saw an investment rise of 96.6 percent, the electrolyte-aluminum industry an increase of 92.9 percent and the cement industry a surge of 121.9 percent. Macro-control measures enforced in 2004 cut the respective growth rates to 32.3 percent, 43.3 percent and 91.1 percent.

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