China needs plan to meet energy targets

China needs plan to meet energy targets
31 March 2006

China’s government must produce firm plans to curb energy demand growth and pollution emissions before oil markets can judge how serious the country is about meeting its targets, Credit Suisse said in a report on Wednesday. In a text of its conference call on China, CS said China’s target to cut the energy intensity of the economy by 20 per cent over five years and pollution emissions by 10 per cent, represented a 4 per cent-plus annual reduction in energy demand growth versus Gross National Product growth.

"What makes this intensity target difficult to analyze is that China has put forward a high profile target number without backing this up with any detailed policy initiatives," CS said in the text of the call. Surging energy demand in China and other developing economies has been cited as a major factor pushing oil prices higher and pinching spare global production capacity. But CS cautioned that skeptics of China’s ability to hit its targets should note that the country’s government often puts its intentions in the arena before it releases concrete plans to meet targets.

CS expects the Chinese government to try and shift the focus of economic growth away from continued high investment in heavy industries like steel, cement, aluminum, autos and construction and onto a more consumer-led model of expansion. The heavy industries have been using 70 per cent of China’s electrical power, CS said, leading the GDP growth, "but at the cost of declining energy efficiency and increasing energy intensity."
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