National Bureau of Asian Research

Don’t Panic! China and the Second Energy Revolution Llewelyn Hughes (bio) Elizabeth C. Economy and Michael Levi’s By All Means Necessary: How China’s Resource Quest Is Changing the World New York: Oxford University Press, 2014 ISBN: 978-0-19-992178-2 (hardcover) Understanding the implications of China’s rising demand for natural resources requires an appreciation of scale. If we focus on fossil fuels, Chinese oil consumption increased from 216,000 to over 10.7 million barrels per day in the almost five decades between 1965 and 2013, rising from less than 1% to more than 12% of aggregate global demand. Demand for natural gas, on the other hand, increased from 1.1 to almost 161 billion cubic meters. Most impressively, Chinese consumers’ demand for coal grew from 114 to 1,925 million tonnes of oil equivalent (mtoe). By comparison, aggregate annual coal consumption in the next 50 countries—including the United States and India—stood at 1,802 mtoe.1 The rise of the United States, Europe, Japan, and Russia to current levels of wealth was matched by a similarly extraordinary growth in the use of natural resources, an increase that economic downturns, wars, and revolutions did little to halt. History thus suggests that while the rate of increase in China’s demand may slow, it will not stop. BP’s business-as-usual case for future growth in energy demand reflects this, projecting that China’s demand for all energy sources will be double that of the United States by 2035 and almost four times that of India.2 If the United States is a military superpower—investing more in military hardware than the next ten countries combined—then China is surely the emerging superconsumer in natural resource markets. Elizabeth Economy and Michael Levi’s By All Means Necessary: How China’s Resource Quest Is Changing the World thus does us a service by examining an important aspect of the ongoing transformation of the structure of global resource demand: the implications of China’s rising consumption of natural resources for its external behavior. The book is structured around chapters describing the emergence of China as a large [End Page 162] resource consumer and those analyzing the implications of this change for developing countries, developed countries, and the U.S. military and its allies. By All Means Necessary has many strengths. Most importantly, it avoids simple conclusions about the implications of the rise in Chinese consumer demand for energy products. The authors rightly note that the structure of markets governing supply and demand differs markedly across natural resources, with important implications for the external impact of growth in Chinese demand. While China imports the bulk of the oil consumed domestically, for example, the authors show that the oil supply chain is more resilient than it was in the prewar decades when U.S. and European firms and governments sparred for control over the right to manage reserves and production outside the United States. Economy and Levi convincingly argue that this difference makes the market better able to accommodate the emergence of new demand centers and the firms headquartered in them. In contrast, they note that natural gas markets are regionalized, which implies less flexibility, but they also suggest that China’s influence on these markets is constrained by the limits of infrastructure and the continued dominance of coal. Economy and Levi are also careful to note the areas where problems remain. Chief among these is in maritime transport. They argue that while pipelines meet some of China’s demand for oil and gas, shipping makes up the bulk of Chinese supply. U.S. military dominance of the sea and airspace—something that will not change in the near to medium term—means that there will be continued tension with the United States as Chinese officials look to enhance security along the supply chain. The authors also offer a nuanced account of Chinese firms’ behavior. They note that the behavior of firms such as Sinopec and the China National Offshore Oil Corporation (CNOOC) often does not differ substantially from that of other international firms. Chinese firms seek to secure access to more lucrative acreage internationally and are...

Not only is China’s environment in decline, but China’s contribution to global environmental deterioration is significant. Because of the global implications of China’s environmental pollution, international action is needed. Foreign trade and investment should be encouraged to incorporate environmental concerns and technology transfer, especially in the area of energy efficiency. Continued and enhanced international cooperation as well as loans and investment through international and regional organizations should also contribute to improving China’s and the global environment. Finally, China should assist in this process by continuing domestic economic reform and the open door policy. Environmental and economic benefits will result from efforts in these three areas.