Opinion Piece: China's Long-Term Energy Strategy Is Nearly Perfect

In January this year, the United States effectively seized control of Venezuela by detaining Maduro, directly cutting off China’s oil supply chain in the region. In February, the U.S. turned its attention to Iran, triggering a new round of conflict. Iran responded by tightening control over the Strait of Hormuz, a critical lifeline for China’s crude oil imports, as 40% of China’s oil relies on the Middle East. The U.S. strategy is clear: simultaneously block China’s energy sources in Latin America and create instability in the Middle East, aiming to pressure China on two fronts. Washington expected this dual approach to trigger energy anxiety and even social panic in China.

However, the outcome defied expectations. China absorbed the shock effectively through strategic reserves, power substitution, and diversified oil imports. It continued its policy of reducing purchases at high prices and increasing imports when prices were low. In response to soaring international oil prices, China reduced its daily oil imports by over 5 million barrels—the equivalent of half the daily imports of the world’s largest importer. Moreover, China exported refined oil products to countries such as the Philippines, Malaysia, and Bangladesh, significantly stabilizing global oil prices and preventing the predicted surge to $200 per barrel. The U.S. energy containment strategy failed to achieve its intended impact on China.

Although China ranks as the world’s fifth-largest oil producer, domestic output remains far from sufficient to meet the energy demands of its 1.4 billion population and its role as the world’s factory, which requires massive industrial energy consumption. Approximately 70% of China’s oil consumption depends on imports, making energy security a core long-term national strategic issue.

China has long prepared for worst-case scenarios. Its strategic petroleum reserves have reached nearly 1.4 billion barrels, sufficient to support national consumption for 120 days without any imports—the largest national reserve in the world, exceeding the combined strategic inventories of the U.S., Japan, Saudi Arabia, South Korea, Iran, the UAE, and India. In addition to conventional above-ground storage tanks, China utilizes granite-based underground caverns for oil storage. By maintaining groundwater levels above the oil pressure inside the caverns, oil can be safely sealed with low construction costs and zero risk of leakage.

China’s oil imports come from Russia (about 25%), its largest single supplier; Saudi Arabia (15%), a traditional core supplier; Iraq (10%); Malaysia (10%); Iran and Venezuela (20% combined); and Central Asia and other countries (20%). This diversified import structure serves as a key security safeguard.

Domestic electric vehicle (EV) adoption has reached 62% and is rising rapidly, replacing 500,000 barrels of imported oil per day and saving 180 million barrels annually. Hainan Province will ban the sale of fossil fuel and hybrid vehicles by 2030, allowing only EVs to be registered and sold. China has a well-planned strategy to rapidly reduce automotive dependence on fossil fuels.

China has actively explored deep oil fields, discovering 13 billion-ton-class giant oilfields. Onshore oil reserves have increased by 51.7%, and offshore reserves by 60%. China also possesses vast shale oil reserves; with technological breakthroughs, annual shale oil production has surpassed 7 million tons (50 million barrels). Boosting domestic oil production remains central to energy security.

China is aggressively developing green, clean power generation (nuclear, hydro, wind, solar). Green energy accounts for about 42% of total electricity generation, while new installed capacity reaches around 62%, growing rapidly. These green sources effectively substitute 6.8 billion barrels of imported oil annually.

Iran’s control over the Strait of Hormuz, through which about 20 million barrels of oil pass daily—25% of global maritime oil trade—triggered energy panic in Japan, South Korea, the Philippines, India, Bangladesh, and Pakistan. These countries responded by tapping strategic reserves, implementing fuel rationing, reducing government electricity use, promoting remote work, rotating blackouts, and closing schools. China, however, remained remarkably stable. Oil prices stayed steady, and society remained calm, largely unaffected—proof that China’s long-term energy planning is nearly perfect.

The Yarlung Tsangpo River downstream hydropower project (also known as the Medog Hydropower Station) officially broke ground on July 19, 2025. The project is expected to be completed and enter commercial operation around 2033, with an installed capacity of 70 to 81 million kilowatts—equivalent to three times the Three Gorges Dam. In terms of 1-million-kilowatt nuclear reactor units, this equals 34 dual-reactor nuclear power plants.

China’s industrial electrification is at a critical stage of accelerated transformation. As the country shifts from fossil-fuel dominance to a green-energy-based power system, the energy consumption structure in industry is undergoing profound changes. The share of electricity in industrial final energy consumption continues to rise, projected to increase from about 25% in 2020 to 30% by 2026. Between 2026 and 2028, China launched large-scale energy-saving and carbon-reduction upgrades across nine key heavy industries: steel, aluminum, cement, glass, refining, ethylene, ammonia, methanol, and thermal power. The goal is to reach around 60% electricity use in industry by 2060. Artificial intelligence (AI), which requires massive computing power (i.e., electricity), is well-prepared for in China’s energy planning.

China’s broader energy vision includes using photovoltaic power to electrolyze water for hydrogen, capturing CO₂ from the air, synthesizing methanol from hydrogen and CO₂, and producing ammonia from nitrogen and hydrogen. Hydrogen, methanol, and ammonia are all key R&D projects in China, serving as both energy fuels and chemical feedstocks—critical strategic areas for achieving China’s dual carbon goals (carbon peak and carbon neutrality). China has already built the world’s first industrial-scale solar fuel demonstration project in Lanzhou, Gansu Province. State-owned and private enterprises jointly form a vibrant ecosystem, with state leadership and private sector deep involvement.

Currently, China overcomes energy security challenges through oil reserves, import diversification, EVs, oilfield exploration, and green power development. But it is not merely shifting to electricity; instead, it leverages abundant natural resources—hydropower, wind, solar, hydrogen, ammonia, methanol—owned by the state to replace fossil fuels and bypass traditional energy corridors and geopolitical turbulence. Alongside green energy transition and improved production efficiency, enterprises are undergoing structural transformation from self-fueled energy systems to green grid reliance. Electricity has become a key indicator of high-quality industrial development and “new quality productive forces” in China. The country aims to ensure that electricity during the 14th and 15th Five-Year Plans comes from green sources, achieving low-carbon transformation.

*Author is a freelance writer