World Energy Outlook 2007

Key Assumptions
The energy projections under each scenario, for China as well as all other
regions, rest on a number of key assumptions, especially those regarding the
economy, demographic trends, energy prices and technology (see
Introduction). The Reference Scenario provides a vision of how China’s energy
markets would be likely to evolve over time if no new government policies were
to be introduced during the projection period, thus providing a series of
reference points for the consideration of new policy options. Our population
assumptions, which are the same for all three scenarios described in this
Outlook, are detailed in Chapter 7. The other main assumptions for the
Reference Scenario are detailed below.
Economic growth is the main driver of demand for energy services. Energy
projections are, therefore, highly sensitive to underlying assumptions about
GDP growth and the structure of the economy. In China, in contrast with
most other countries, energy demand has not always grown predictably with
GDP. For example, primary coal demand grew steadily between 1971 and
1996, but fell between 1997 and 2001 – despite continuing rapid economic
growth. Coal demand growth restarted in 2002, surging in 2003 and 2004 by
around 20% per year. Demand for other fuels has soared relative to GDP in
recent years.
Despite higher oil prices since 2002, the Chinese economy has continued to
grow very strongly. There is considerable potential for further increases in
productivity and GDP, especially in the near term (see Chapter 7). The
government has a stated goal of increasing GDP four-fold between 2000 and
2020 and aims at growth of 7.5% per year on average to 2010 in the 11 th Five-
Year Plan. Recent economic performance has surpassed the government target
by a wide margin, with GDP surging by more than 10% per annum from
2002 to 2006 and exceeding 11% in the first half of 2007.
China is expected to continue to grow rapidly, provided economic reforms
continue and favourable global economic conditions persist. Nevertheless,
GDP growth is expected to slow gradually over the projection period as the
economy matures, population levels off and the dependency ratio 1 increases. In
the Reference Scenario, the Chinese economy is assumed to grow at 7.7% per
year between now and 2015. Over the entire projection period, growth is
assumed to average 6% per year (see Table 2 in the Introduction). The coastal
region’s economy is expected to continue to grow more rapidly, averaging 6.1%
per year through to 2030. The share of the services sector in GDP is assumed
to increase steadily over time, from 40% in 2005 to 47% in 2030, partly
thanks to government policies aimed at structural adjustments to economic
1. The ratio of those aged 0 to 14 and 60 plus to the population aged between 15 and 59.
284 World Energy Outlook 2007 - CHINA’S ENERGY PROSPECTS