CHINA/ENERGY: SENATOR CANTWELL, NDRC VICE-CHAIRMAN ZHANG

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E.O. 12958: N/A
TAGS: ENRG PREL ETRD SENV TRGY CH
SUBJECT: CHINA/ENERGY: SENATOR CANTWELL, NDRC VICE-CHAIRMAN ZHANG
GUOBAO MEET TO DISCUSS BILATERAL ENERGY ISSUES

SUMMARY
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1. (SBU) United States Senator Maria Cantwell (WA) and National
Development and Reform Commission (NDRC) Vice-Chairman Zhang Guobao
met to discuss a broad range of bilateral energy issues on Monday
November 13, 2006. Senator Cantwell invited Zhang to travel to
Washington State for bilateral energy talks. Washington's rich
energy and environmental protection history coupled with its leading
edge technology and business resources make the state a good venue
to explore solutions the energy challenges facing China and the
United States, said Senator Cantwell. Vice-Chairman Zhang stated he
is pleased with the invitation and will pass it along for
consideration. President Hu Jintao's "new energy security concept"
is guiding China's energy policies. Recent internatioal energy
price increases have been unfairly lamed on China's rising energy
demand. Chinaonly accounts for six percent of international oil
trade and is largely self-sufficient in energy supply, according to
Zhang. End Summary.

Senator Meets Chinese Energy Leader, Issues Invite
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2. (SBU) Senator Cantwell and NDRC Vice-Chairman Zhang Guobao met
to discuss a broad range of bilateral energy issues on Monday
November 13, 2006. Senator Cantwell began the meeting by inviting
Zhang and members of his staff to Washington State for bilateral
energy meetings. Washington has a rich energy history that would
provide a good backdrop for United States-China energy policy
discussions. Senator Cantwell noted that 72 percent of Washington
State's electrical power is generated by hydroelectric means.
Additionally, Washington is one of the few states offers cost-based
power pricing, making electricity very affordable for residents and
businesses.


3. (SBU) Vice-Chairman Zhang expressed surprise that hydroelectric
power is so prominent in Washington State's electric power mix.
China has the largest untapped hydroelectric power resources in the
world and should study Washington's experiences. China has 11.7
gigawatts of hydroelectric power generation capacity, but has only
developed about 25 percent of its available resources, said Zhang.
Senator Cantwell stated that Washington has significant experience
managing the environmental impact of its heavy use of hydroelectric
power. This also may be of interest to Chinese energy officials
when considering the merits of the energy meeting invitation.


4. (SBU) Senator Cantwell further noted that the nexus of Washington
State's computer science industry and resident national laboratories
is making the State a leader in energy research. Washington-based
researchers are developing wind, solar, and wave power generation
technologies. Additionally, researchers in partnership with the
power sector are achieving significant results in making the state's
electric power grid more efficient. Senator Cantwell stated that
Washington is home to what will be the largest bio-diesel facility
in the United States when it becomes operational in June 2007. The
facility is expected to be capable of generating 100 million tons of
soybean-based fuel a year when fully operational. Relatedly,
university and national laboratory experts are conducting
cutting-edge research on ethanol fuels derived from wheat straw,
according to Senator Cantwell.

Zhang: Want to Set China's Energy Record Straight
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5. (SBU) Vice-Chairman Zhang said that he is inclined to accept
Senator Cantwell's invitation, but he must first pass it along to
his staff and other senior NDRC leaders for consideration. Zhang
then stated that it is important for him to set the record straight
on China's impact upon the international energy market. China has
been unfairly criticized for international energy price increases
during the past several years. Coal accounts for 74 percent of
China's total energy consumption. This figure dwarfs that of most
developed countries, including the United States. Zhang said that
in 2005 China imported 130 million tons of oil, accounting for only
six percent of total international oil trade. China ranked behind
the United States and Japan in oil imports, said Zhang.


6. (SBU) Vice-Chairman Zhang said that observers who blame rising

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international energy prices on China only consider the country's oil
import ranking when analyzing international energy market
developments. Zhang acknowledged that Chinese oil imports account
for forty percent of its total oil consumption; however, imported
energy resources, including natural gas and oil, account for only
six percent of the country's total energy mix. Beijing has a very
ambitious energy conservation goal during the next five years and
has room to expand other energy resources-such as wind, solar, and
nuclear power-in its energy mix. These developments should help
China manage its international energy market footprint, according to
Zhang.

Zhang: Hu's New Energy Security Concept is Guide
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7. (SBU) Vice-Chairman Zhang stated China's future energy policy
will be guided by Chinese President Hu Jintao's "new energy security
concept." The concept is based upon self-reliance for meeting most
of China's energy needs, and the prioritization of domestic energy
conservation. Zhang said that Hu's guidance has resulted in
significant improvements in China's energy situation. For example,
1,000 counties have benefited from Central Government efforts during
the past six months to bring electric power to rural areas. This
still leaves 10 million Chinese citizens without access to power,
but the Central Government recognizes the problem and will address
it.


8. (SBU) Vice-Chairman Zhang said that the most significant goal of
Hu's energy security concept is China's plan to reduce energy
consumption by 20 percent during the next five years. This is a
very ambitious goal, but given that China's energy intensity level
is ten times that of Japan and five times that of the United States,
the country has a great deal of room for improvement. (Note: Zhang
articulated the measurement of energy intensity as the amount of
energy consumed per 10,000 RMB of GDP produced. End Note.)


Zhang, Senator Encourage Further Talks
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9. (SBU) Senator Cantwell closed the meeting by commending China for
its energy conservation goals. The United States similarly needs to
set energy conservation goals. For example, the United States
imports half of the oil it consumes, but its domestic production is
incapable of influencing international oil prices. Senator Cantwell
Stated this is an indication that the United States must do a better
job addressing its reliance on imported oil. For his part,
Vice-Chairman Zhang said that he looked forward to being able to
accept Senator Cantwell's invitation to visit Washington State for
energy meetings. China can profit from Washington's experiences
promoting energy conservation and environmental protection. Zhang
encouraged more visitors from Washington State to visit the NDRC to
discuss energy and other economic issues.

Meeting Participants and Clearance Information
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10. (U) UNITED STATES Participants:

Senator Cantwell
Deputy Chief of Mission Sedney
Stacey Baird, Office of Senator Cantwell
Environmental, Science, Technology, and Health Officer Cintron
Economic Officer Jones (notetaker)
Cindy Yang, Interpreter


11. (U) Chinese Participants:

Zhang Guobao, NDRC Vice-Chairman
Zhao Xiaoping, Director General, NDRC Energy Bureau
Li Bin, Deputy Director General, NDRC Department of Foreign Affairs
Li Fang, Director, NDRC Department of Foreign Affairs
Guo Xin, Interpreter, NDRC Department of Foreign Affairs


12. (U) Senator Cantwell and her staff were unable to clear this
cable before departing Beijing.

RANDT