REGULATORY: International Trade: China Issues Guidelines for the Development of Energy Sector

by King & Spalding

To ensure a healthy development of its economy, on January 23, 2013, the State Council of the People’s Republic of China announced a long-awaited Energy Development 12th Five Year Plan, one of 18 national-level key sector-specific plans for the “12th Five Year” period (i.e., 2011 to 2015). The Energy Development 12th Five Year Plan, as a program of action for China’s energy sector over the “12th Five Year” period, clarifies the guidelines, principles, goals, targets, key tasks, and policy measures for the sector’s development.

A product of the planned economy, China’s five year plans have a long history and play an important role in the country’s economic development. The plans are issued every five years, and each five year plan is a set of plans which can be sorted into three groups: 1) the framework of the national five year plan set, 2) sector-specific plans issued by relevant authorities of the central government, and 3) regional plans issued by local governments. The Energy Development 12th Five Year Plan is of the second category, a sector-specific plan issued by the central government.

Recognizing the increasing demand, tightening supply, and rising prices in the world energy market; the ongoing changes in the world energy production, supply, and profit sharing; and the significance of the clean energy and high technologies, the Energy Development 12th Five Year Plan calls for strengthening energy production and supply capacities, and aims to control China’s dependence on foreign oil to below 61 percent and to have a primary energy supply capacity of 4.3 billion MT standard coal with 3.66 billion MT supplied by domestic producers, by 2015. Other targets in the plan include reducing unit GDP energy consumption by 16 percent, raising the energy comprehensive utilization rate to 38 percent, raising the consumption of non-fossil energy to 11.4 percent, speeding up the construction of five energy bases, enhancing environmental protection, improving energy-related public services, and promoting the institutional reform of the energy sector.

In particular, the plan sets forth nine major tasks to achieve its targets:

  1. accelerating the exploitation and development of oil and natural gas, efficiently and safely promoting the development of coal and nuclear power, actively developing hydro power, and accelerating the development of renewable energy;
  2. promoting the development of clean energy;
  3. promoting the change of energy supply means, strongly developing distributed energy, enhancing the construction of smart grids, and strengthening the construction of energy supply facilities for new-energy cars;
  4. accelerating construction of energy storage and transportation facilities and strengthening the country’s energy reserve capacity and the emergency response capabilities;
  5. undertaking public projects and strengthening energy-related public services in rural areas;
  6. controlling energy consumption, promoting energy savings, and raising energy utilization efficiency;
  7. accelerating construction of a modern energy market system, promoting institutional reforms in electricity, coal, oil, natural gas, renewable energy, and distributed energy areas, and improving energy pricing mechanisms;
  8. strengthening technological innovation, enhancing the domestic supply of energy equipment, and carrying out major technological projects; and
  9. deepening international cooperation, actively participating in the development of overseas energy resources, and expanding foreign trade and technological cooperation.

To ensure implementation, the plan calls on the government to continue providing funds to encouraged areas and projects, improve energy-related tax policies, and strengthen its support of credit loans and expand other financing channels for energy enterprises. The plan also calls for maintaining the leading role of the state-owned economy in key energy areas crucial to national security and the economy, deepening institutional reforms in the energy sector, and strengthening the guiding and coordinating functions of industrial plans and policies on investments.

In addition, the plan loosens access restrictions on investment and financing in the energy sector, encourages private capital to enter areas not prohibited by laws or regulations; encourages foreign capital to invest in areas permitted by laws or regulations; promotes diversity of investments in energy infrastructure projects; allows qualified non-state-owned capital to participate in the development of coal-bed gas, shale gas, and shale oil; and promotes the opening of the oil distribution market.

According to an official from China’s National Energy Administration, total investments in China’s energy sector are expected to reach 13.5 trillion RMB in the “12th Five Year” period, of which 8.5 trillion RMB will be invested in the construction of energy production capacity, and the remaining 5 trillion RMB will be used in the construction of energy storage and transportation facilities and public service projects.

  Lingna Yan
  Washington, D.C.
  +1 202 626 5615



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