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

UNCLAS SECTION 01 OF 02 BEIJING 023811 SIPDIS SIPDIS SENSITIVE STATE for EAP/CM GWARD AND PSECOR, EB/ESC PHAYMOND STATE/H please pass to Senator Cantwell's Staff USDOE for DOE OIC DPUMPHREY, OFFICE OF THE SECRETARY for MWILLIAMSON TRESURY for OASIA/ISA ADAMS/DOHNER/CUSHMAN USDOC for 4220/ITA/MAC/CMMCQUEEN/HAMROCK USDOC for 1003/ITA/OUS/OC USDOC for 6310/ITA/TD/OIEM/KMURPHY/HBURROUHGS/KHOLLANDE R UDDOC for 6000/ITA/TD/RPACE 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 -------------- ¶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 -------------- -------------- ¶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 -------------- -------------- ¶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 BEIJING 00023811 002 OF 002 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 -------------- -------------- ¶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 -------------- ¶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 -------------- - ¶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