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Tom Holland

Most analysts who argue that China's economic growth is heading for a structural downshift base their argument on fears about unsustainable levels of debt.
With the economic returns on additional investments declining, they believe that attempting to maintain current investment and growth levels must inevitably force China into a crippling debt crisis.

But there is a far more straightforward reason why the world's second biggest economy must slow and why it must switch to a different engine of growth: a simple lack of resources.
In one sense this should be obvious.
According to one estimate China now accounts for more than 30 per cent of all international demand for non-ferrous metals, up from 10 per cent little more than a decade ago.
Clearly China's share of the world's metal consumption cannot continue to increase at the same rate over the next 10 years, so future growth will either have to be a lot slower or a lot less metal intensive, probably both.
But there are other even more severe resource constraints that threaten to restrict future growth, notably the limits China's shortage of water will place on Beijing's energy ambitions.
This column has looked before at how a lack of water will scupper plans to exploit China's shale gas deposits.
Shale gas extraction involves injecting vast quantities of water into the ground at high pressure to crack rock formations and allow the trapped natural gas to flow to the surface.
For deep deposits like China's, you need between 15,000 and 20,000 tonnes of water for each well.
Given that China's most promising shale gas deposits are found in dry provinces with less than 1,500 tonnes of renewable water per head per year, getting the stuff out is going to pose big problems.
If China can't count on shale gas, Beijing will have to rely on coal and nuclear energy to meet its target of doubling the country's electricity generating capacity between 2010 and 2020.
But there's a problem here too. According to analysts at HSBC, Beijing's plans will entail building 453 gigawatts of new coal-fired power stations to add to the country's existing capacity of 630 gigawatts.
Running those power stations will mean burning an additional 1.2 billion tonnes of coal a year. Given that producing a tonne of coal can use anything between three and 11.5 tonnes of water, if all the extra coal is mined at home, China's arid mining regions will have to find around eight billion tonnes more water a year.
That's almost an entire year's supply for the coal-rich province of Shanxi.
And that's just the mining. A 500 megawatt coal-fired power plant is essentially a giant kettle that uses between eight and 12 million tonnes of water each year to drive its turbines and for cooling.
As a result, China's new coal power stations will require an additional nine billion tonnes of water a year. That's going to mean even less water for industry and agriculture.
Of course, Beijing also plans to generate electricity in new nuclear power stations.
Before last year's Fukushima meltdown, the government had planned to build an additional 50 gigawatts of nuclear capacity by 2020.
Those plans have now been scaled back to around an additional 25 gigawatts. But nuclear power plants need even more water for cooling than coal-fired power stations.
Considering that after Fukushima new plants are unlikely to be built bang on the coast where they can use seawater for cooling, that extra capacity will still impose a significant extra demand on the country's already strained water supplies.
In short, the more you examine it, the more China's lack of water begins to make Beijing's energy expansion plans look unrealistic. And without all that extra energy to power the economy, China's growth rates must slow.
tom.holland@scmp.com


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China economy

Beijing's energy ambitions threatened by lack of water

Business

Opinion

Getting shale gas and coal out of the ground needs tonnes of this relatively scarce resource, so do the proposed nuclear power plants


Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


Column

Monitor

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Getting shale gas and coal out of the ground needs tonnes of this relatively scarce resource, so do the proposed nuclear power plants

Getting shale gas and coal out of the ground needs tonnes of this relatively scarce resource, so do the proposed nuclear power plants