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China's institution-driven energy strategy and oil security
Yao, Yuanming Alvin
Teng, Chung Cheng
Yao, Yuanming Alvin
|Issue Date:||2009-09-14 10:37:22 (UTC+8)|
The new facet of global oil politics and China’s surging oil demand have forced the Chinese government and state-owned enterprises to secure foreign oil supplies and to implement energy efficiency. However, systemic level or state-centered theories have provided limited theoretic orientation to explain China’s state behaviors and foreign behavior. It is essential to explore China’s energy institution and energy strategy behind its quest for oil security. That is, China’s foreign strategy should be put into broader context of China’s institutional evolution and domestic/foreign energy policy-making process. This research applies historical institutionalism to look at history evolution of China’s energy institution and energy strategy (especially oil strategy).
Chinese energy institution has experienced four main stages of institutional evolution since 1980s. The main themes of four stages have emphasized different administrative, institutional, and energy goals. Meanwhile, institutional critical junctures and feedbacks (formation and reproduction) also have existed in every stage. The first phrase (1980-1992) emphasized how to integrate market forces into China’s bureaucratic institution with socialist characteristics and the market oriented reforms faced several institutional challenges due to necessity of central planning; the second phrase (1993-1997) was characterized by slight and limited institutional restructuring within the energy sector because market force did not gain political support from the leadership. The Chinese government established both the State Energy Commission (SEC) (1980-82) and the Ministry of Energy (MOE) (1988-93) in the wake of acute energy shortages to re-centralize authority over the energy sector. However, neither institution could effectively coordinate and implement energy policy, partly because they could not overcome the vested interests in sectional industries. The third phrase (1998-2002) was characterized by radical institutional reforms on conglomerating SOEs and delimiting administrative power. The National Development and Reform Commission (NDRC) along with the Energy Bureau within it have taken over full governmental regulatory and public sector responsibility from SOEs. However, NDRC functions not as powerful as SOEs do. Therefore, the fourth phrase (2003 until now) then put attention on the establishment of a super-ministerial interagency, revivification of administrative power, and emphasis of foreign competitiveness. The establishment of State Energy Leading Group (SELG) aims at regaining strong central authority and to correcting turbulent oil strategies made on a base of institutional constraints.
Above all, China’s institutional evolution is characteristic of state-regulated marketization, limited property right reforms, strategic preference, and departmentalism in China’s energy sector since 1980s. The institutional evolution has constrained China’s energy institution from planning a long-term national energy strategy. China’s energy sector continuously confirms institutional formation by the support of highest leadership and mainstream ideology, and confirms institutional reproduction between the directive and liberal forces, between the government and market forces.
Meanwhile, international responses to China’s hunting behaviors are to play either a conductive role in impelling China’s institutional reforms and in adjusting its foreign behaviors. To prevent serious energy competition and to enhance international cooperation, China has shown its willingness to communicate with other nations on oil issues. However, China also needs to show its determination to implement domestic demand-side measures and a market approach instead of implementing protectionist “welcome-in” and aggressive “going out” policies.
Ongoing institutional reforms still determines whether the China’s energy institution will ensure the country’s energy security. In the short term, the establishment of the central authority in the energy sector will improve departmental coordination and policy persistance. However, in the long term, China’s ongoing institional reforms need to integrate more market forces, proceed property right reforms, and reshape relationship between the government and market. Without deeper institutional reforms, energy bureaucrats and SOEs would be dragged into institutional process of formation and reproduction but gain limited results in meeting China’s oil security.
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