VZCZCXRO0531
OO RUEHCN RUEHGH RUEHVC
DE RUEHBJ #6814/01 2270957
ZNR UUUUU ZZH
O 150957Z AUG 06
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3945
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RHEHNSC/NSC WASHDC
RUEKJCS/SECDEF WASHINGTON DC

UNCLAS SECTION 01 OF 03 BEIJING 016814 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
SENSITIVE BUT UNCLASSIFIED. PLEASE PROTECT 
ACCORDINGLY. 
 
E.O. 12958: N/A 
TAGS: PREL ENGR KNNP TRGY CH
SUBJECT: CODEL STEVENS DISCUSSES ENERGY POLICY WITH  NDRC 
VICE CHAIRMAN CHEN DEMING 
 
 
SENSITIVE BUT UNCLASSIFIED.  PLEASE PROTECT 
ACCORDINGLY. 
 
Summary 
------- 
 
¶1. (SBU) CODEL Stevens, accompanied by the Ambassador, 
discussed energy policy with new National Development 
and Reform Commission (NDRC) Vice Chairman Chen 
Deming.  Chen emphasized that China intends to 
maintain 90 percent energy self-sufficiency by relying 
on domestic coal resources and development of hydro, 
nuclear and alternative power sources.  He outlined 
projections for future oil imports and described 
policies to limit increases in production and increase 
efficiency and cleanliness of passenger cars.  The 
Senators and Chen discussed areas of potential 
bilateral cooperation and Chen noted plans for 
upcoming bilateral discussions with USG officials on 
energy development.  End Summary. 
 
¶2. (SBU) Over breakfast hosted by NPC Vice Chairman 
Sheng Huaren on August 12, incoming NDRC Vice Chairman 
Chen Deming made a surprise appearance to outline 
China's energy policies and challenges for CODEL 
Stevens.  Chen, who was appointed to the NDRC in May 
after serving as Governor of China's western Shaanxi 
Province, described his current portfolio at NDRC as 
including strategic planning, system reform and energy 
issues.  (Note: China does not have an Energy Ministry 
and NDRC is charged with coordinating energy policy. 
End note.) 
 
¶3.  (SBU) Chen led off the discussion by describing 
China's current energy usage and production capacity. 
China produces 2.1 billion tons coal equivalent (tce) 
of energy and consumes about 2.2 billion tce per year, 
exports 45 million metric tons of coal per year and 
imports about 130 million metric tons of crude oil on 
an annual basis.  China is 82 percent reliant on coal 
for its current power generation capacity, 14 percent 
on hydropower and 4 percent on nuclear power. 
Alternative and renewable energy sources such as 
solar, wind and geothermal currently total less than 
one percent of China's productive capacity.  Total 
installed power generation capacity is about 500 
gigawatts, Chen stated. 
 
¶4.  (SBU) Regarding future energy needs, China's 
reliance on coal will remain at about 80 percent, Chen 
said.  China plans to update equipment in one-half of 
current coal-fired power plants to improve efficiency 
and reduce pollutants by 2020.  China plans to 
increase hydro and nuclear productive capacity by 40 
gigawatts by 2010.  The contribution of renewable 
energy sources should increase to 1.5 percent by 2020. 
Imports of crude oil will increase slightly in the 
coming years, Chen acknowledged, but oil imports will 
mainly be directed to strategic reserves and coastal 
areas.  China will import some LNG for use in coastal 
areas, as well, although at current high fuel prices, 
crude oil and LNG imports will be delayed until prices 
come down. 
 
¶5.  (SBU) China is working to put new technologies to 
use in its search for energy supplies, Chen noted. 
Chinese companies are cooperating with several 
international firms to convert coal to oil through CTL 
(coal to liquid) processes.  Several Chinese companies 
have developed their own CTL technology and are 
producing domestically.  Chinese companies are 
collaborating with foreign firms, among them Dow 
Chemical, to transform coal into MTO (methanol to 
olefin) or MTP (methanol to polypropylene).  Chinese 
have successfully developed a domestic technology to 
produce MTO. 
 
¶6.  (SBU) Chen described increasing interest on the 
part of Chinese farmers and localities in biogas and 
ethanol production.  Because of safety concerns, China 
has not taken full advantage of mixing ethanol with 
 
BEIJING 00016814  002 OF 003 
 
 
gasoline.  Chen said it would take 20 years of trials 
to determine whether there are "harmful effects." 
These trials are ongoing and subsidized by the 
Government.  Current trials mix 10 percent ethanol 
with gasoline.  In China's North, sweet potatoes and 
corn are used to produce ethanol, while sugar cane is 
used in the South. 
 
¶7.  (SBU) Chen said he had recently returned from 
Inner Mongolia where he inspected a major wind farm. 
Wind turbines currently in use are the product of 
cooperation with Denmark and Spain, but have small 
capacity.  China hopes to increase cooperation with 
the United States in this area.  Another area for 
potential increased cooperation is in development of 
solar technology.  China is planning to discuss this 
with the U.S. Department of Energy in upcoming 
consultations, Chen said. 
 
¶8.  (SBU) Asked by Senator Stevens about estimated oil 
import costs, Chen said China's current oil imports 
stand at 130 million metric tons per year.  Projected 
increases in oil imports over the next five years will 
nevertheless not see China exceed 150 million metric 
tons of crude oil imports per year.  Sheng Huaren, who 
spent much of his career in China's oil industry, 
interjected that China's total crude oil imports eight 
years ago were 60 million tons per year.  With world 
oil imports rising from 3.2 billion metric tons per 
year eight years ago to 4.3 billion metric tons today, 
China's contribution to increased oil imports over the 
past eight years is around eight percent, Sheng 
stated. 
 
¶9.  (SBU) Senator Murray asked Chen about development 
of nuclear power and China's capacity to handle spent 
fuel.  Because China's current nuclear power 
production is so limited, China hires a company to 
handle its nuclear waste.  After storage, the waste is 
buried deep in a remote area.  In the future, as China 
increases its nuclear power capacity, this method of 
waste disposal will no longer be viable, Chen said. 
Regarding nuclear power development, China's current 
plan is to introduce third generation (3G) nuclear 
technology.  The United States and Japan are competing 
against France to win the contract.  Beijing's 
requirement is that the provider be willing to 
transfer technology to China. 
 
¶10.  (SBU) Senator Coleman asked about increasing 
passenger auto transport and its implications for 
energy usage, pollution and transportation 
infrastructure.  Chen said China currently has over 20 
million cars and acknowledged that the number is 
increasing rapidly.  However, he said that the Central 
Government has recently enacted measures to limit 
private car purchases and develop public 
transportation.  By the 2008 Beijing Olympics, all 
auto manufacturers will be obliged to comply with EU3 
or EU4 emissions standards.  The Government has 
eliminated subsidized loans for automobile 
manufacturers and is promoting the development of 
railroads and public transportation.  Special 
incentives are being provided to cities with 
populations of over one million to develop public 
transportation infrastructure. 
 
¶11.  (SBU) Production of automobiles decreased in 
2005, according to Chen, who stated that growth of 
approximately ten percent per year in automobile 
production would be desirable.  The Government is 
encouraging auto manufacturers to develop new, cleaner 
technologies.  Some of these involve switching to 
natural gas at low speeds, solar powered cars and 
hybrids.  Two Chinese companies have developed hybrid 
technology, but the technology is still in the 
experimental stage. 
 
¶12.  (SBU) Senator Stevens asked about China's 
commitment to hydro power in the wake of Three Gorges 
Dam construction and attendant problems.  Chen said 
 
BEIJING 00016814  003 OF 003 
 
 
that China is committed to further developing its rich 
hydropower resources, but must take adequate care to 
provide for environmental protection.  Chen said he 
noted that the United States had made extensive 
efforts to eliminate dams in a number of areas.  He 
understands, however, that now new dams are being 
constructed in the United States.  He said he hopes to 
learn more about the U.S. experience with hydropower 
in upcoming consultations with USG officials. 
 
PARTICIPANTS 
------------ 
 
¶13. (U) U.S. Participants: 
Senator Ted Stevens 
Ambassador Clark T. Randt, Jr. 
Senator Patty Murray 
Senator Thad Cochran 
Senator Arlen Specter 
Senator Mark Dayton 
Senator Lamar Alexander 
Senator Norm Coleman 
Senator Richard Burr 
Senate Staff 
Embassy notetaker 
Interpreter 
 
Chinese Participants: 
NPC Vice Chairman Sheng Huaren 
NDRC Vice Chairman Chen Deming 
NPC Foreign Affairs Committee Vice Chairman Lu Congmin 
NPC Deputy Secretary General Wang Wanbing 
NPC Foreign Affairs Committee Director Peng Fang 
Chinese Embassy in Washington Counselor Chen Guomin 
Notetakers 
Interpreter 
 
¶14.  (U) CODEL Stevens did not have the opportunity to 
clear this message. 
RANDT