There is no doubt that China wants to subjugate Asia, echoing Japan's role during World War II.  For those who think China's economy might overtake the United States economy, and thus make China a more formidable adversary, this article aims to provide detail on China's main constraint in that ambition: that its domestic coal production is near its peak and will then go into long-term decline.

Even if China can keep its energy supply constant with an accelerated expansion of its nuclear power sector, the cost of producing coal from deeper mines will mean that the costs of industrial production will rise due to higher feedstock costs.  One of the reasons that China produces the world's cheapest solar panels, for example, is because it has some of the world's cheapest coal-fired power.  German solar panel-producers are hobbled by that country's energiewende, which, translated from the German, means the miracle required to replace coal and nuclear power with sunbeams and breezes and still have a functioning economy.

Figure 1: The United States and China: Primary Energy Consumption by fuel in 2016.

To put China's situation in perspective, Figure 1 shows the contributions to total energy supply in China and the United States in 2016 expressed in millions of tonnes of oil equivalent (data from the 2017 BP Statistical Review of World Energy). [Editor's note: One tonne, or metric ton, is equal to about 1.102 U.S. tons.]  Coal absolutely dominates China's energy supply.  This would be good for China if its coal were going to last a long time.  But China is depleting is coal endowment rapidly.

Figure 2:  World Coal Production, 1830-2014.

One of the reasons why the U.K. dominated the Industrial Revolution is because it was the major coal-producer on the planet at the time.  China now dominates world coal production with half the total.

Figure 3: UK Coal and Oil Production, 1853-2016.

What goes up in fossil fuel production must eventually come down.  A classic case of that is the U.K., which provides two fossil fuel production peaks.  That country's coal production peaked in 1913 and, over the subsequent century, fell to a little over one hundredth of the peak production rate. 

Figure 4: China's domestic coal supply, 1950-2100.

Figure 4 is taken from a review written by five Chinese academics of physical supply and energy return on investment of fossil fuels in China.  The solid blue area is their best estimate of China's future coal production, with the peak year just two years away in 2020.  Then, after 2030, production is expected to fall about half as fast as it rose from 2000 to 2012.

The implications of this are profound.  According to the theory of resource extraction, the coal that is easiest to mine is mined first, and then, after half of the total resource is mined and consumed, operating costs per tonne start rising as supply falls.  The era of the cheap energy that fueled China's economic expansion in the 21st century is almost over.  Note the little spike in production on the graph in 1960, which was due to the Great Leap Forward.

Figure 5: China Fuel Consumption, 1965-2030.

China is now the largest oil-importer at eight million barrels per day.  Up to one million barrels per day of this has been going into building the country's strategic petroleum reserve.  China wants to avoid some of Japan's mistakes in World War II, and thus its strategic petroleum reserve is thought to be close to one billion barrels.  This includes a cargo of crude sold from the U.S. Strategic Petroleum Reserve at Bryan Mound that was unloaded at the port of Qingdao in China.  Selling down one's strategic reserves ahead of an event that will call upon strategic reserves is unwise.  China's domestic oil production peaked in 2015 at four million barrels per day and is now in long-term decline, falling at about 250,000 barrels per day per annum.  The forecast has oil consumption flat in line with an economy that is growing at Japanese-type rates.  Any increase in demand will increase China's import dependency, though it does have a coal-to-liquids industry that could produce up to a million barrels per day.

China's coal production increased at 8.3% per annum from 2000 to 2012, with economic growth at about the same rate over that period.  The production peak is expected to be in 2020, with a moderate initial rate of decline that accelerates to 60 million tonnes per annum from 2028.  For electric power production, part of that decline will be made good by China's nuclear power plant build.  As the cost of coal rises in China, the economics of nuclear power will improve.  But if China wants to have any economic growth from here, it will have to either start importing a lot of coal or accelerate its nuclear plant build.

Either way, the salad days of China's economic growth are over.  In fact, the Chinese will have to paddle harder, year after year, to stop economic contraction.

David Archibald is the author of American Gripen: The Solution to the F-35 Nightmare.