Today we are taking a closer look at the pressing problems of the Chinese electric power industry – and possible solutions. In many regions, the lights are currently going out and the assembly lines are at a standstill because coal-fired power production is reaching its climate limits. Christiane Kühl has read the latest report of the International Energy Agency. The report outlines a roadmap for phasing out coal while maintaining energy security. We also look at the opportunities and risks of new reactor technology. The molten salt reactor burns cheap thorium and is considered particularly safe. China has high hopes for the experimental reactor located on the edge of the Gobi Desert.
Back in 2017, China’s government warned against “irrational foreign investments” by its own corporations. At that time, the target was also the tourism group HNA. In Germany alone, the company had taken over Hahn Airport and acquired a stake in German investment Bank Deutsche Bank. In the meantime, irrationality has led to insolvency. But this is not the end of the HNA story, analyses Frank Sieren. The conglomerate has been shattered, but some individual business units appear to be quite viable. This is particularly true for Hainan Airlines, which has earned much praise for its excellent service and safety.
The Tokyo Olympics already seemed somewhat sad due to a lack of spectators. The Covid situation is now forcing Beijing to at least do without foreign guests at the Winter Games; only locals are allowed to enter the venues. Any other approach would be at odds with the strict rules of the past year and a half and would hardly be arrangeable. This marks the end of all comparisons to the cheerful Summer Games of 2008.
In today’s Profile, we look at Annette Schavan, former Minister of Education and now co-chair of the German-Chinese dialogue forum. However, current dialogue without face-to-face meetings is “like swimming without water”, explains the high-profile politician.
Chinese headlines currently speak of energy rationing, production stops, and power outages. These problems are part of the energy transition launched by Beijing, which apparently still experiences some hitches. Together with Chinese scientists, Experts of the International Energy Agency (IEA) have been working to find ways how carbon neutrality can be achieved by 2060.
The horrendous rise in fossil fuels of recent decades must now be followed by an equal expansion of renewable energies for growing power generation, IEA Director General Fatih Birol said on Wednesday at the presentation of China’s energy transition roadmap. The government wants to reach its emissions peak in 2030 and reach carbon neutrality by 2060, which is called the “30/60 target” in China.
The world is urging Beijing to pick up the pace, which the IEA believes is entirely possible. “China has the capability, the economic means, and the political skills to peak earlier – around the mid-2020s,” Birol said.
China is the largest global emitter of greenhouse gases, and its power sector accounts for 90 percent of these emissions. This includes the power consumption of its energy-guzzling heavy industries such as steel, cement, and chemicals production. These three sectors emit about a third of China’s CO2 emissions. The People’s Republic produces more than half of the global steel and cement volume “with Hebei province alone accounting for 13% of global steel production in 2020.” said Timur Gül, head of the IEA’s Energy Technology Policy Division and the report’s lead author. “CO2 emissions from the steel and cement sectors in China alone are higher than the European Union’s total CO2 emissions.” Numbers like these prove China’s immense role in climate protection.
This is part of the reason why the IEA – which had already presented a global roadmap in 2020 – dedicated its first country roadmap to the giant Asian nation. “China alone cannot decarbonize the global economy. But if it meets its targets, China would push global emissions down to the levels of the early 2000s,” Gül said. If all emissions otherwise remain at current levels, that is.
According to the IEA’s Announced Pledges Scenario (APS), photovoltaics will be the number one source of the energy mix in 2045. The following energy sources will see an overall decline in demand by 2060:
According to Gül, efficiency improvements, new materials, and carbon capture and storage (CCS) will make a difference. CCS, direct CO2 storage, and negative emissions from bio-energy could then neutralize the last emissions by heavy industry and long-distance freight transport, for example, from 2060 on. For half of the emission reductions after 2030, China will have to rely on technologies that do not yet exist, according to Gül. Investments in research and innovation are therefore imperative.
In general, the energy transition requires huge investments. In its APS, the IEA 2030 expects investments of $640 billion – ten percent higher than current annual investments. That sounds possible. But after 2030, emissions are expected to drop; further progress will be harder and more expensive. By 2060, the IEA then expects $900 billion, a 60 percent increase to current numbers. The majority of this investment flows into changes to the power sector and transportation. On a global level, it is clear that the electrification of mobility and entire industrial sectors will significantly increase the percentage of power in the energy mix. This is one of the reasons why the expansion of renewable energies in China needs to be considerably accelerated. For the IEA scenario of an accelerated transition, everything needs to happen even quicker – it was put this way to give Beijing a little encouragement. After all, the IEA even considers an earlier emissions peak to be realistic.
But the current power supply problems already show how difficult such a transition can be – both technologically and politically. Factories throughout several Chinese regions have been forced to suspend their production due to strict power consumption goals, while in other regions rationing has even extended to private households (China.Table reported). Multiple blackouts have been reported along the coast. China therefore hastily called on provincial governments on Wednesday to secure the supply of coal-fired power plants. In an announcement, the National Development and Reform Commission (NDRC) stressed that an uninterrupted fuel supply to power plants must be guaranteed in times of shortages. “All efforts” should be made to ensure the transportation of coal for power generation and heating.
Critics of the energy transition blamed the volatility of renewable energy for the sudden power shortage. “There are many voices, and some are against carbon neutrality,” said Chai Qimin of the Environment Ministry’s Climate Change Institute. Good management in the transition to carbon neutrality is therefore key. Chai announced that China will soon launch its own climate legislation. This will involve regulations, market mechanisms, and so-called climate mainstreaming intended to anchor the climate goals in all areas. Many sectors would have to cooperate, Chai said.
In addition to funding, China discusses many other factors that also play a role in Germany: The balance between short-term and long-term interests, lifetimes of factories, and power plants or jobs. The IEA presentation makes this clear.
Gül expects an overall net increase in jobs as a result of China’s energy transition. “But jobs in coal mining or coal washing will be lost, which can hit entire communities hard. New jobs won’t necessarily be created where jobs are lost.” That’s a challenge China needs to address, he said. The coal province of Shanxi is already developing programs to help adapt to the new energy world, according to Gül. Pan Jiahua, a climate change expert at the Chinese Academy of Social Sciences, also sees the benefits of the transformation. The fossil-based industry is capital-intensive, and much of the work is done mechanically. With the shift to solar energy, for example, “there will be jobs at every stage of the production chain”, and the future wages of its workers will flow into consumption and thus strengthen the economy.
A key question in China is: What to do with the existing infrastructure of factories and power plants? According to IEA forecasts, many of them will have to be shut down before the end of their economically viable lifetimes. “Our inventory is quite young, a lot of it was built in the last ten to twenty years,” said Zhang Qiang, a professor at Beijing Tsinghua University. This results in remaining operating times of about 30 years. The shift “should be gradual from the easier part to the more difficult part.” Older capacity in environmentally sensitive areas would need to be taken offline sooner, such as in the Jing-Jin-Ji region surrounding Beijing, which has suffered from water shortages and polluted air for many years.
Zhang also warns, “We need to refrain from frantic and blind investment in industries with high consumption.” China may have pledged to stop building coal-fired power plants overseas, “but over time, we definitely need to stop building them in China as well.” Perhaps by the time of the climate summit in Glasgow, China will know when that time will come.
China is about to begin test runs of a new type of nuclear reactor: a so-called liquid salt reactor. Behind the exotic name lies a type of reactor that runs on the element thorium and is said to offer several advantages over conventional nuclear reactors. The plant, located in the Hongshagang Industrial Park in Minqin 民勤县, north of the city of Wuwei, is expected to start generating power in the next few days, according to Chinese media reports. In any case, the local authorities have promised to begin operations in September.
This is still a low-power experiment. If the concept proves successful, the country could also build liquid salt reactors in series. After all, China can use any energy source that can be activated. Even with the rapid expansion of wind and solar power, a supply gap will remain given the rapid increase in power demand. At the same time, the number of coal-fired power plants is not even decreasing yet. This leaves little time to find other alternatives before the end of the fossil fuel phase-out in 2060. Engineers have high hopes for the liquid salt reactor due to several special features:
There are no fuel elements inside the liquid salt reactor. Instead, the fuel circulates through the reactor core. Its binding and transport medium is salt. The word salt is to be understood here in the chemists’ sense; it is therefore not table salt, but a chemical with a similar structure. For the Chinese reactor, a fluorine compound is used. It has a lower melting point than table salt. A typical temperature for the reactor medium during operation is over 500 degrees Celsius. At this temperature, the salt is as liquid as water.
As a fuel, thorium is added to the molten salt. The thorium itself is not capable of nuclear fission. However, when bombarded with neutrons, it decays to uranium, which continues to decay on its own, releasing new neutrons. These in turn can shoot thorium atoms to pieces. This process continues. Thus, thorium is gradually split into uranium, which in turn decays into more radioactive isotopes under further neutron bombardment. The release of energy through Uranium fission is the core goal.
A typical liquid salt reactor is only provided with the necessary moderator substance inside the actual reactor core, which is required to trigger the chain reaction. Every nuclear reactor requires this moderator to slow down the neutrons released during nuclear fission. This is because neutrons that are too fast whiz past the atomic nuclei to be split; only slowed neutrons are suitable for nuclear fission. During decay, neutrons are produced that are too fast to enable a chain reaction. Every reactor, therefore, contains a moderator; even conventional reactor types such as the pressurized water reactor.
The mixture of molten salt and thorium is now pumped through the core. The reaction always starts at the points where the moderator acts. The substance becomes hot. Outside the core, it releases the heat to steam generators and turbines that produce electricity. It is cooled by a cooling system that runs on self-generated power. Therefore, a site without a river or nearby sea is also suitable.
Nevertheless, this reactor type is not dependent on a power supply and the functioning technical systems to prevent an accident. A huge block of frozen salt is used to cool the circulating reactor medium. When the salt-thorium mixture flows through here, the ice cools it down just enough to be ready for the next pass. Even if all pumps fail, the ice continues cooling the liquid, thawing in the process. Since the reactor material has already melted, a “meltdown” is impossible. A heating up to the point where the salt evaporates and builds up explosive pressure is considered mathematically impossible.
Like with the pebble-bed reactor, the Chinese design is based on an older concept that was rejected in Europe and America. In the 1960s, the USA already tested a salt reactor. At the time, uranium was still used, not thorium. However, the idea was not transferred to commercial use. This is because the advantages are outweighed by some disadvantages:
For the USA, salt-thorium technology seemed too expensive at the time, and the country relied instead on fast breeder reactors, which promised a higher yield of uranium fuel.
Other disadvantages of different types of liquid salt reactors depend on the exact technical design. But one thing is certain: China’s reactor will become “a test bed to do a lot of learning” as Charles Forsberg, an expert in nuclear engineering at the renowned Massachusetts Institute of Technology (MIT) writes in the scientific journal Nature.
In Germany, too, there were ideas about molten salt and thorium. But compared to boiling water and pressurized water reactors, the design seemed too complicated even to physicists in the 1970s. Rudolf Schulten, professor of reactor technology in Aachen, called the “molten salt reactor” an “abomination”. Schulten preferred the clearer concept of a pebble bed reactor, which was eventually built in Hamm-Uentrop.
But the situation today is different. Power has become more expensive overall, which makes the higher costs of new power plant designs less impactful. At that time, the general idea was to make nuclear power plants a cheap mass technology. After Chernobyl and Fukushima, both of which were only operated with their respective unsafe designs due to cost considerations, higher cost for increased safety is considered a good investment. And the availability of Uranium has now a different weight in light of the increasing power demand of a growing, highly technology-dependent humanity. And China is also reaching the point of climate change as a growing country. Germany is rather able to focus on saving costs.
The liquid-salt reactor, however, is not the perfect solution to all power needs that its fans make it out to be. Instead, it shares a number of known problems with all nuclear reactors:
China’s nuclear authorities will likely have weighed all these arguments. But faced with a massive supply gap after coal has been fully phased out, the Chinese are currently looking for new and very different ways of generating power and are open to many ideas. It is by no means certain that the molten salt reactor will win the race. But it could definitely be a technology for the desert regions of western China, where cooling by river or seawater is not possible.
Two top HNA Group executives – founder and former chairman Chen Feng and former chief executive Adam Tan Xiangdong – were detained by Chinese police last Friday (China.Table reported). The arrest for “unspecified crimes” follows just a week after the announcement that the HNA conglomerate would be broken up into four separate companies following its bankruptcy restructuring. Based on a restructuring plan unveiled on September 18, each unit will now operate independently in aviation, airport operations, finance, and commercial sectors.
All existing shareholders, including the largest shareholder, the Hainan Cihang Charity Foundation, will lose their stakes in the company after the restructuring. “Existing shareholders’ stake will be wiped out, a practice that follows market rules and the legal obligations of bankruptcy restructuring,” said Gu Gang, chairman of the board and head of the working committee now responsible for the unbundling of the group’s business. “It is the responsibility that shareholders must bear, and the result of the reckless growth of a private company.”
To support the restructuring, HNA is receiving ¥38 billion ($6 billion) in investment from various backers. About ¥25 billion is going to flagship Hainan Airlines to replenish cash flow. Earlier this month, state-controlled Liaoning Fangda Group Industrial Co. became a strategic investor. Another state-owned company, Hainan Development Holdings Co Ltd, also announced plans earlier this month to acquire a stake in HNA’s airport unit.
The restructuring was not jeopardized by the arrest of the two managers, HNA Group said in a statement on its official WeChat account, “HNA Group and its member enterprises are operating in a stable and orderly manner. The [company’s] bankruptcy restructuring is going smoothly and its production and operations have not been affected.” So the political goal is clear: take power, restructure, without damaging promising market-based business models.
Eleven companies of the conglomerate held a creditors’ meeting earlier this week. According to the plan presented at the meeting, all eleven companies will be reorganized into a group. Most of the liabilities will be serviced via debt-to-equity swaps, i.e. the exchange of debt for company shares. Micro-creditors whose claims do not exceed $15,465 will be paid in full. Any debt over this amount will be settled partly by HNA and other parties and partly in Hainan Airlines shares.
Shares of Hainan Airlines rose as much as five percent after the restructuring updates were announced on Monday – their highest level allowed for the day. Investors are rewarding the restructuring. The stock has nearly doubled in value since May. But it’s still a third short of the value it needed to reach the plateau where the share price hovered between 2016 and 2018. Hainan Airlines’ debt, on which it will have to pay interest, then stands at ¥60 billion (€7.9 billion) after the restructuring, with assets of ¥170 billion (€22.5 billion) – a debt level that should basically not be a problem for a company.
The big problem, however, is that it is not yet clear when the airline will be able to resume normal operations after the COVID crisis. Regulatory authorities assume that all Chinese airlines will not be able to resume international flight operations until mid-2022. Until then, they will continue to rack up heavy losses. Yet, the airline is a gem of the Chinese corporate world. In 2021, Hainan Airlines remains among the world’s top ten airlines in the prestigious British Skytrax ranking, at 9th place (8th in 2019), where it has been since 2017. The only Western airline to make it into the top 10 this year is Air France in 10th, while Lufthansa has slipped to 13th.
The arrest of the two managers marks the closing chapter of a company that embodied China’s economic turn to the world like no other. With only a handful of planes and a share capital of ¥10 million ($1.5 million), the airline mainly brought Russian tourists to Hainan, China’s only tropical island during the early 1990s. One of its early backers was the American financier George Soros. He first invested $25 million in 1995. A coup for the small regional airline and perhaps one of the reasons why it was able to take off in the first place.
Over the next three decades, HNA grew from a regional airline into one of China’s largest private companies. It was owned by a New York-based foundation, much to the dismay of Beijing. Much of its growth, fueled by bank loans, took place after 2010. Chen was eager to get HNA on the Fortune 100 list, and by 2017 the group had climbed to rank 170th. By the end of 2017, its assets had grown to ¥1.23 trillion ($190 billion).
Its money was invested, among other things, in stakes in Deutsche Bank, Hilton hotels and resorts around the world, and land parcels at the former Kai Tak Airport in Hong Kong. However, with the collapse of the previously profitable airline business during the COVID-19 epidemic, the conglomerate with 410,000 employees in its prime, began its inevitable downfall. To reduce its mountain of debt, HNA had already sold off assets such as airport services company Swissport International and US electronics retailer Ingram Micro in 2018, partly under pressure from Beijing.
Details of the alleged crimes committed by the two executives were not disclosed by police. According to Chinese business magazine Caixin, founder Wang Jian, who died after falling from a wall in the summer of 2018, was allegedly engaged in large-scale nepotism. Wang and several other senior executives allegedly owned companies controlled by family members. These companies then apparently received orders from the group.
For example, Chen’s and Wang’s brothers were involved in aerospace materials businesses that had supply contracts with HNA. HNA’s regulatory filings never fully disclosed these entanglements. Earlier this year, the listed company stated that “shareholders and other related parties” had embezzled ¥62 billion, the equivalent of nearly €8 billion. In addition, loan guarantees amounting to ¥47 billion, the equivalent of €6 billion, had been issued in a “way that did not comply with the law.”
Annette Schavan’s job is not easy at the moment: She is chair of the German-Chinese Dialogue Forum – at a time when there is actually hardly any dialogue left. The plenum, with 16 German members and 16 Chinese members, last met in the eastern Chinese port city of Qingdao. That was two years ago. Today, the exchange is limited to telephone calls. “It’s a bit like swimming without water,” Schavan laments.
Now, 16 years after her first visit to China, issues of dispute are piling up: the human rights violations against Muslim minorities like the Uyghurs, the Taiwan issue, the shelved CAI investment agreement, the mutual sanctions. The pandemic has once again exacerbated the diplomatic crisis. How should things proceed now? Dialogue must go beyond economic interests, she said, and relations should not end with numbers. “Europe should be confident and talk turkey,” advises Schavan.
She has only been involved with China since her time as a politician. After graduating from high school, she initially studied education, philosophy, and Catholic theology in Düsseldorf. She completed her studies with a 350-page dissertation. Schavan was just 25 years old at the time. She then made a career for herself in the German CDU party. At the age of 32, she became executive director of the Women’s Union and was sworn in as Minister of Education in Baden-Württemberg in 1995. Ten years later, she became Federal Minister of Education.
She has already experienced diplomatic crises with China during this time, for example in the run-up to the 2008 Olympic Games in Beijing. At that time, Buddhist monks demonstrated in Tibetan Lhasa for the independence of their country, violent clashes broke out leaving at least 80 dead. And Schavan? She is the first German minister to travel to China during the Tibet crisis. At that time, she did not “talk turkey.” The word “human rights“, as can be read in an older media report, does not cross her lips in front of the press.
Instead, the focus is on scientific relations between both nations. “I have always prioritized these,” says Schavan in retrospect. Research and development, new university cooperation, better cooperation in vocational training, were the defining themes of her trips to China. “At the time, we were told that the country had big plans, but that it would not become a serious competitor for Europe or the USA. China would lack the necessary innovative power,” Schavan recalls. Her experience is different. In 2006, she visits a research factory at Tongji University in Shanghai. It’s all about electric batteries. Four years later, she is taking an electric bus across the Expo site at the World Expo in Shanghai.
There, she admires the consistency and confidence with which technological decisions are driven forward and experiences great interest in the German excellence initiatives. She quickly established a healthy relationship with her future Chinese counterpart, Science Minister Wan Gang, and they even were on a first-name basis. She describes the former head of development at Audi as a “real bridge-builder”. After the official appointments, she went on to visit art galleries, admiring expressive artworks that do not quite fit her perceived image of the reserved and disciplined Chinese. “This was an attempt to understand what influences Chinese elites beyond political talk,” she says.
During one of her business trips to South Africa, she learns that Heinrich Heine University has initiated proceedings against her dissertation. The Schavan case divides the scientific community into those who loudly support her – and those who loudly berate her. Finally, the University of Düsseldorf revokes her “Dr. phil.” degree. Schavan decides to defend herself and takes her case to the Düsseldorf Administrative Court. Her complaint is rejected and she resigns. Merkel praised Schavan at the time as “the most respected and distinguished education politician in our country”. A commentary on her resignation describes her as an “unpretentious” politician, one “without much fanfare”.
After that, Schavan retires. She takes on a guest professorship at the Shanghai International Studies University. Finally, she swaps education policy for religious policy and becomes ambassador to the Holy See in the Vatican for four years. In the meantime, however, China also remained one of her themes. Schavan’s time as ambassador coincided with the new agreement between China and the Vatican. Until then, the Vatican had only partially recognized Chinese bishops. For these were selected by the party and not appointed by the Holy See. Schavan defends the advance of that time: “Religious freedom is not a niche topic. Nevertheless, the Vatican cannot be indifferent to the millions of Christians living in China.” She herself supports the inner-church grassroots movement “Maria 2.0”, criticizes the slow solving of the abuse scandals, and pleads for a “liberal Catholicism”. Meanwhile, authoritarian China is far from religious liberalism. The party wants to rule over thought and does not tolerate any doctrine that could dispute its power.
Schavan remembers another time, a different one. One in which there were more than 50 dialogue forums with China. “Back then, there was a spirit of optimism. Everyone hoped the country would open up,” she says. She still speaks regularly on the phone with her former counterpart Wan Gang – he is now co-chair of the dialogue forum on the Chinese side and vice-chair of the Chinese People’s Political Consultative Conference. Together they want to increase the exchange by establishing a Young Academy as well as a cooperation between a German and a Chinese distance university for a joint Open University.
“Science is the diplomacy of trust,” explains Schavan. In 1959, for example, a delegation from the Max Planck Society traveled to Israel at a time when German politicians were not yet welcome there. For the time being, no Chinese are coming to Germany: The government consultations in April took place via video, due to Covid (China.Table reported). Actually, the dialogue forum was supposed to be held in Stuttgart. However, nobody knows when that will be. Pauline Schinkels
Just in time for the National Day on October 1st, the flower decorations like here on Tiananmen Square cannot be missing. The color of the flowers is of course symbolically significant. Red stands for happiness and joy, and yellow stands for power. Thus, yellow has long been a color that only emperors in China were allowed to wear. Now the CCP adorns itself with it.
Today we are taking a closer look at the pressing problems of the Chinese electric power industry – and possible solutions. In many regions, the lights are currently going out and the assembly lines are at a standstill because coal-fired power production is reaching its climate limits. Christiane Kühl has read the latest report of the International Energy Agency. The report outlines a roadmap for phasing out coal while maintaining energy security. We also look at the opportunities and risks of new reactor technology. The molten salt reactor burns cheap thorium and is considered particularly safe. China has high hopes for the experimental reactor located on the edge of the Gobi Desert.
Back in 2017, China’s government warned against “irrational foreign investments” by its own corporations. At that time, the target was also the tourism group HNA. In Germany alone, the company had taken over Hahn Airport and acquired a stake in German investment Bank Deutsche Bank. In the meantime, irrationality has led to insolvency. But this is not the end of the HNA story, analyses Frank Sieren. The conglomerate has been shattered, but some individual business units appear to be quite viable. This is particularly true for Hainan Airlines, which has earned much praise for its excellent service and safety.
The Tokyo Olympics already seemed somewhat sad due to a lack of spectators. The Covid situation is now forcing Beijing to at least do without foreign guests at the Winter Games; only locals are allowed to enter the venues. Any other approach would be at odds with the strict rules of the past year and a half and would hardly be arrangeable. This marks the end of all comparisons to the cheerful Summer Games of 2008.
In today’s Profile, we look at Annette Schavan, former Minister of Education and now co-chair of the German-Chinese dialogue forum. However, current dialogue without face-to-face meetings is “like swimming without water”, explains the high-profile politician.
Chinese headlines currently speak of energy rationing, production stops, and power outages. These problems are part of the energy transition launched by Beijing, which apparently still experiences some hitches. Together with Chinese scientists, Experts of the International Energy Agency (IEA) have been working to find ways how carbon neutrality can be achieved by 2060.
The horrendous rise in fossil fuels of recent decades must now be followed by an equal expansion of renewable energies for growing power generation, IEA Director General Fatih Birol said on Wednesday at the presentation of China’s energy transition roadmap. The government wants to reach its emissions peak in 2030 and reach carbon neutrality by 2060, which is called the “30/60 target” in China.
The world is urging Beijing to pick up the pace, which the IEA believes is entirely possible. “China has the capability, the economic means, and the political skills to peak earlier – around the mid-2020s,” Birol said.
China is the largest global emitter of greenhouse gases, and its power sector accounts for 90 percent of these emissions. This includes the power consumption of its energy-guzzling heavy industries such as steel, cement, and chemicals production. These three sectors emit about a third of China’s CO2 emissions. The People’s Republic produces more than half of the global steel and cement volume “with Hebei province alone accounting for 13% of global steel production in 2020.” said Timur Gül, head of the IEA’s Energy Technology Policy Division and the report’s lead author. “CO2 emissions from the steel and cement sectors in China alone are higher than the European Union’s total CO2 emissions.” Numbers like these prove China’s immense role in climate protection.
This is part of the reason why the IEA – which had already presented a global roadmap in 2020 – dedicated its first country roadmap to the giant Asian nation. “China alone cannot decarbonize the global economy. But if it meets its targets, China would push global emissions down to the levels of the early 2000s,” Gül said. If all emissions otherwise remain at current levels, that is.
According to the IEA’s Announced Pledges Scenario (APS), photovoltaics will be the number one source of the energy mix in 2045. The following energy sources will see an overall decline in demand by 2060:
According to Gül, efficiency improvements, new materials, and carbon capture and storage (CCS) will make a difference. CCS, direct CO2 storage, and negative emissions from bio-energy could then neutralize the last emissions by heavy industry and long-distance freight transport, for example, from 2060 on. For half of the emission reductions after 2030, China will have to rely on technologies that do not yet exist, according to Gül. Investments in research and innovation are therefore imperative.
In general, the energy transition requires huge investments. In its APS, the IEA 2030 expects investments of $640 billion – ten percent higher than current annual investments. That sounds possible. But after 2030, emissions are expected to drop; further progress will be harder and more expensive. By 2060, the IEA then expects $900 billion, a 60 percent increase to current numbers. The majority of this investment flows into changes to the power sector and transportation. On a global level, it is clear that the electrification of mobility and entire industrial sectors will significantly increase the percentage of power in the energy mix. This is one of the reasons why the expansion of renewable energies in China needs to be considerably accelerated. For the IEA scenario of an accelerated transition, everything needs to happen even quicker – it was put this way to give Beijing a little encouragement. After all, the IEA even considers an earlier emissions peak to be realistic.
But the current power supply problems already show how difficult such a transition can be – both technologically and politically. Factories throughout several Chinese regions have been forced to suspend their production due to strict power consumption goals, while in other regions rationing has even extended to private households (China.Table reported). Multiple blackouts have been reported along the coast. China therefore hastily called on provincial governments on Wednesday to secure the supply of coal-fired power plants. In an announcement, the National Development and Reform Commission (NDRC) stressed that an uninterrupted fuel supply to power plants must be guaranteed in times of shortages. “All efforts” should be made to ensure the transportation of coal for power generation and heating.
Critics of the energy transition blamed the volatility of renewable energy for the sudden power shortage. “There are many voices, and some are against carbon neutrality,” said Chai Qimin of the Environment Ministry’s Climate Change Institute. Good management in the transition to carbon neutrality is therefore key. Chai announced that China will soon launch its own climate legislation. This will involve regulations, market mechanisms, and so-called climate mainstreaming intended to anchor the climate goals in all areas. Many sectors would have to cooperate, Chai said.
In addition to funding, China discusses many other factors that also play a role in Germany: The balance between short-term and long-term interests, lifetimes of factories, and power plants or jobs. The IEA presentation makes this clear.
Gül expects an overall net increase in jobs as a result of China’s energy transition. “But jobs in coal mining or coal washing will be lost, which can hit entire communities hard. New jobs won’t necessarily be created where jobs are lost.” That’s a challenge China needs to address, he said. The coal province of Shanxi is already developing programs to help adapt to the new energy world, according to Gül. Pan Jiahua, a climate change expert at the Chinese Academy of Social Sciences, also sees the benefits of the transformation. The fossil-based industry is capital-intensive, and much of the work is done mechanically. With the shift to solar energy, for example, “there will be jobs at every stage of the production chain”, and the future wages of its workers will flow into consumption and thus strengthen the economy.
A key question in China is: What to do with the existing infrastructure of factories and power plants? According to IEA forecasts, many of them will have to be shut down before the end of their economically viable lifetimes. “Our inventory is quite young, a lot of it was built in the last ten to twenty years,” said Zhang Qiang, a professor at Beijing Tsinghua University. This results in remaining operating times of about 30 years. The shift “should be gradual from the easier part to the more difficult part.” Older capacity in environmentally sensitive areas would need to be taken offline sooner, such as in the Jing-Jin-Ji region surrounding Beijing, which has suffered from water shortages and polluted air for many years.
Zhang also warns, “We need to refrain from frantic and blind investment in industries with high consumption.” China may have pledged to stop building coal-fired power plants overseas, “but over time, we definitely need to stop building them in China as well.” Perhaps by the time of the climate summit in Glasgow, China will know when that time will come.
China is about to begin test runs of a new type of nuclear reactor: a so-called liquid salt reactor. Behind the exotic name lies a type of reactor that runs on the element thorium and is said to offer several advantages over conventional nuclear reactors. The plant, located in the Hongshagang Industrial Park in Minqin 民勤县, north of the city of Wuwei, is expected to start generating power in the next few days, according to Chinese media reports. In any case, the local authorities have promised to begin operations in September.
This is still a low-power experiment. If the concept proves successful, the country could also build liquid salt reactors in series. After all, China can use any energy source that can be activated. Even with the rapid expansion of wind and solar power, a supply gap will remain given the rapid increase in power demand. At the same time, the number of coal-fired power plants is not even decreasing yet. This leaves little time to find other alternatives before the end of the fossil fuel phase-out in 2060. Engineers have high hopes for the liquid salt reactor due to several special features:
There are no fuel elements inside the liquid salt reactor. Instead, the fuel circulates through the reactor core. Its binding and transport medium is salt. The word salt is to be understood here in the chemists’ sense; it is therefore not table salt, but a chemical with a similar structure. For the Chinese reactor, a fluorine compound is used. It has a lower melting point than table salt. A typical temperature for the reactor medium during operation is over 500 degrees Celsius. At this temperature, the salt is as liquid as water.
As a fuel, thorium is added to the molten salt. The thorium itself is not capable of nuclear fission. However, when bombarded with neutrons, it decays to uranium, which continues to decay on its own, releasing new neutrons. These in turn can shoot thorium atoms to pieces. This process continues. Thus, thorium is gradually split into uranium, which in turn decays into more radioactive isotopes under further neutron bombardment. The release of energy through Uranium fission is the core goal.
A typical liquid salt reactor is only provided with the necessary moderator substance inside the actual reactor core, which is required to trigger the chain reaction. Every nuclear reactor requires this moderator to slow down the neutrons released during nuclear fission. This is because neutrons that are too fast whiz past the atomic nuclei to be split; only slowed neutrons are suitable for nuclear fission. During decay, neutrons are produced that are too fast to enable a chain reaction. Every reactor, therefore, contains a moderator; even conventional reactor types such as the pressurized water reactor.
The mixture of molten salt and thorium is now pumped through the core. The reaction always starts at the points where the moderator acts. The substance becomes hot. Outside the core, it releases the heat to steam generators and turbines that produce electricity. It is cooled by a cooling system that runs on self-generated power. Therefore, a site without a river or nearby sea is also suitable.
Nevertheless, this reactor type is not dependent on a power supply and the functioning technical systems to prevent an accident. A huge block of frozen salt is used to cool the circulating reactor medium. When the salt-thorium mixture flows through here, the ice cools it down just enough to be ready for the next pass. Even if all pumps fail, the ice continues cooling the liquid, thawing in the process. Since the reactor material has already melted, a “meltdown” is impossible. A heating up to the point where the salt evaporates and builds up explosive pressure is considered mathematically impossible.
Like with the pebble-bed reactor, the Chinese design is based on an older concept that was rejected in Europe and America. In the 1960s, the USA already tested a salt reactor. At the time, uranium was still used, not thorium. However, the idea was not transferred to commercial use. This is because the advantages are outweighed by some disadvantages:
For the USA, salt-thorium technology seemed too expensive at the time, and the country relied instead on fast breeder reactors, which promised a higher yield of uranium fuel.
Other disadvantages of different types of liquid salt reactors depend on the exact technical design. But one thing is certain: China’s reactor will become “a test bed to do a lot of learning” as Charles Forsberg, an expert in nuclear engineering at the renowned Massachusetts Institute of Technology (MIT) writes in the scientific journal Nature.
In Germany, too, there were ideas about molten salt and thorium. But compared to boiling water and pressurized water reactors, the design seemed too complicated even to physicists in the 1970s. Rudolf Schulten, professor of reactor technology in Aachen, called the “molten salt reactor” an “abomination”. Schulten preferred the clearer concept of a pebble bed reactor, which was eventually built in Hamm-Uentrop.
But the situation today is different. Power has become more expensive overall, which makes the higher costs of new power plant designs less impactful. At that time, the general idea was to make nuclear power plants a cheap mass technology. After Chernobyl and Fukushima, both of which were only operated with their respective unsafe designs due to cost considerations, higher cost for increased safety is considered a good investment. And the availability of Uranium has now a different weight in light of the increasing power demand of a growing, highly technology-dependent humanity. And China is also reaching the point of climate change as a growing country. Germany is rather able to focus on saving costs.
The liquid-salt reactor, however, is not the perfect solution to all power needs that its fans make it out to be. Instead, it shares a number of known problems with all nuclear reactors:
China’s nuclear authorities will likely have weighed all these arguments. But faced with a massive supply gap after coal has been fully phased out, the Chinese are currently looking for new and very different ways of generating power and are open to many ideas. It is by no means certain that the molten salt reactor will win the race. But it could definitely be a technology for the desert regions of western China, where cooling by river or seawater is not possible.
Two top HNA Group executives – founder and former chairman Chen Feng and former chief executive Adam Tan Xiangdong – were detained by Chinese police last Friday (China.Table reported). The arrest for “unspecified crimes” follows just a week after the announcement that the HNA conglomerate would be broken up into four separate companies following its bankruptcy restructuring. Based on a restructuring plan unveiled on September 18, each unit will now operate independently in aviation, airport operations, finance, and commercial sectors.
All existing shareholders, including the largest shareholder, the Hainan Cihang Charity Foundation, will lose their stakes in the company after the restructuring. “Existing shareholders’ stake will be wiped out, a practice that follows market rules and the legal obligations of bankruptcy restructuring,” said Gu Gang, chairman of the board and head of the working committee now responsible for the unbundling of the group’s business. “It is the responsibility that shareholders must bear, and the result of the reckless growth of a private company.”
To support the restructuring, HNA is receiving ¥38 billion ($6 billion) in investment from various backers. About ¥25 billion is going to flagship Hainan Airlines to replenish cash flow. Earlier this month, state-controlled Liaoning Fangda Group Industrial Co. became a strategic investor. Another state-owned company, Hainan Development Holdings Co Ltd, also announced plans earlier this month to acquire a stake in HNA’s airport unit.
The restructuring was not jeopardized by the arrest of the two managers, HNA Group said in a statement on its official WeChat account, “HNA Group and its member enterprises are operating in a stable and orderly manner. The [company’s] bankruptcy restructuring is going smoothly and its production and operations have not been affected.” So the political goal is clear: take power, restructure, without damaging promising market-based business models.
Eleven companies of the conglomerate held a creditors’ meeting earlier this week. According to the plan presented at the meeting, all eleven companies will be reorganized into a group. Most of the liabilities will be serviced via debt-to-equity swaps, i.e. the exchange of debt for company shares. Micro-creditors whose claims do not exceed $15,465 will be paid in full. Any debt over this amount will be settled partly by HNA and other parties and partly in Hainan Airlines shares.
Shares of Hainan Airlines rose as much as five percent after the restructuring updates were announced on Monday – their highest level allowed for the day. Investors are rewarding the restructuring. The stock has nearly doubled in value since May. But it’s still a third short of the value it needed to reach the plateau where the share price hovered between 2016 and 2018. Hainan Airlines’ debt, on which it will have to pay interest, then stands at ¥60 billion (€7.9 billion) after the restructuring, with assets of ¥170 billion (€22.5 billion) – a debt level that should basically not be a problem for a company.
The big problem, however, is that it is not yet clear when the airline will be able to resume normal operations after the COVID crisis. Regulatory authorities assume that all Chinese airlines will not be able to resume international flight operations until mid-2022. Until then, they will continue to rack up heavy losses. Yet, the airline is a gem of the Chinese corporate world. In 2021, Hainan Airlines remains among the world’s top ten airlines in the prestigious British Skytrax ranking, at 9th place (8th in 2019), where it has been since 2017. The only Western airline to make it into the top 10 this year is Air France in 10th, while Lufthansa has slipped to 13th.
The arrest of the two managers marks the closing chapter of a company that embodied China’s economic turn to the world like no other. With only a handful of planes and a share capital of ¥10 million ($1.5 million), the airline mainly brought Russian tourists to Hainan, China’s only tropical island during the early 1990s. One of its early backers was the American financier George Soros. He first invested $25 million in 1995. A coup for the small regional airline and perhaps one of the reasons why it was able to take off in the first place.
Over the next three decades, HNA grew from a regional airline into one of China’s largest private companies. It was owned by a New York-based foundation, much to the dismay of Beijing. Much of its growth, fueled by bank loans, took place after 2010. Chen was eager to get HNA on the Fortune 100 list, and by 2017 the group had climbed to rank 170th. By the end of 2017, its assets had grown to ¥1.23 trillion ($190 billion).
Its money was invested, among other things, in stakes in Deutsche Bank, Hilton hotels and resorts around the world, and land parcels at the former Kai Tak Airport in Hong Kong. However, with the collapse of the previously profitable airline business during the COVID-19 epidemic, the conglomerate with 410,000 employees in its prime, began its inevitable downfall. To reduce its mountain of debt, HNA had already sold off assets such as airport services company Swissport International and US electronics retailer Ingram Micro in 2018, partly under pressure from Beijing.
Details of the alleged crimes committed by the two executives were not disclosed by police. According to Chinese business magazine Caixin, founder Wang Jian, who died after falling from a wall in the summer of 2018, was allegedly engaged in large-scale nepotism. Wang and several other senior executives allegedly owned companies controlled by family members. These companies then apparently received orders from the group.
For example, Chen’s and Wang’s brothers were involved in aerospace materials businesses that had supply contracts with HNA. HNA’s regulatory filings never fully disclosed these entanglements. Earlier this year, the listed company stated that “shareholders and other related parties” had embezzled ¥62 billion, the equivalent of nearly €8 billion. In addition, loan guarantees amounting to ¥47 billion, the equivalent of €6 billion, had been issued in a “way that did not comply with the law.”
Annette Schavan’s job is not easy at the moment: She is chair of the German-Chinese Dialogue Forum – at a time when there is actually hardly any dialogue left. The plenum, with 16 German members and 16 Chinese members, last met in the eastern Chinese port city of Qingdao. That was two years ago. Today, the exchange is limited to telephone calls. “It’s a bit like swimming without water,” Schavan laments.
Now, 16 years after her first visit to China, issues of dispute are piling up: the human rights violations against Muslim minorities like the Uyghurs, the Taiwan issue, the shelved CAI investment agreement, the mutual sanctions. The pandemic has once again exacerbated the diplomatic crisis. How should things proceed now? Dialogue must go beyond economic interests, she said, and relations should not end with numbers. “Europe should be confident and talk turkey,” advises Schavan.
She has only been involved with China since her time as a politician. After graduating from high school, she initially studied education, philosophy, and Catholic theology in Düsseldorf. She completed her studies with a 350-page dissertation. Schavan was just 25 years old at the time. She then made a career for herself in the German CDU party. At the age of 32, she became executive director of the Women’s Union and was sworn in as Minister of Education in Baden-Württemberg in 1995. Ten years later, she became Federal Minister of Education.
She has already experienced diplomatic crises with China during this time, for example in the run-up to the 2008 Olympic Games in Beijing. At that time, Buddhist monks demonstrated in Tibetan Lhasa for the independence of their country, violent clashes broke out leaving at least 80 dead. And Schavan? She is the first German minister to travel to China during the Tibet crisis. At that time, she did not “talk turkey.” The word “human rights“, as can be read in an older media report, does not cross her lips in front of the press.
Instead, the focus is on scientific relations between both nations. “I have always prioritized these,” says Schavan in retrospect. Research and development, new university cooperation, better cooperation in vocational training, were the defining themes of her trips to China. “At the time, we were told that the country had big plans, but that it would not become a serious competitor for Europe or the USA. China would lack the necessary innovative power,” Schavan recalls. Her experience is different. In 2006, she visits a research factory at Tongji University in Shanghai. It’s all about electric batteries. Four years later, she is taking an electric bus across the Expo site at the World Expo in Shanghai.
There, she admires the consistency and confidence with which technological decisions are driven forward and experiences great interest in the German excellence initiatives. She quickly established a healthy relationship with her future Chinese counterpart, Science Minister Wan Gang, and they even were on a first-name basis. She describes the former head of development at Audi as a “real bridge-builder”. After the official appointments, she went on to visit art galleries, admiring expressive artworks that do not quite fit her perceived image of the reserved and disciplined Chinese. “This was an attempt to understand what influences Chinese elites beyond political talk,” she says.
During one of her business trips to South Africa, she learns that Heinrich Heine University has initiated proceedings against her dissertation. The Schavan case divides the scientific community into those who loudly support her – and those who loudly berate her. Finally, the University of Düsseldorf revokes her “Dr. phil.” degree. Schavan decides to defend herself and takes her case to the Düsseldorf Administrative Court. Her complaint is rejected and she resigns. Merkel praised Schavan at the time as “the most respected and distinguished education politician in our country”. A commentary on her resignation describes her as an “unpretentious” politician, one “without much fanfare”.
After that, Schavan retires. She takes on a guest professorship at the Shanghai International Studies University. Finally, she swaps education policy for religious policy and becomes ambassador to the Holy See in the Vatican for four years. In the meantime, however, China also remained one of her themes. Schavan’s time as ambassador coincided with the new agreement between China and the Vatican. Until then, the Vatican had only partially recognized Chinese bishops. For these were selected by the party and not appointed by the Holy See. Schavan defends the advance of that time: “Religious freedom is not a niche topic. Nevertheless, the Vatican cannot be indifferent to the millions of Christians living in China.” She herself supports the inner-church grassroots movement “Maria 2.0”, criticizes the slow solving of the abuse scandals, and pleads for a “liberal Catholicism”. Meanwhile, authoritarian China is far from religious liberalism. The party wants to rule over thought and does not tolerate any doctrine that could dispute its power.
Schavan remembers another time, a different one. One in which there were more than 50 dialogue forums with China. “Back then, there was a spirit of optimism. Everyone hoped the country would open up,” she says. She still speaks regularly on the phone with her former counterpart Wan Gang – he is now co-chair of the dialogue forum on the Chinese side and vice-chair of the Chinese People’s Political Consultative Conference. Together they want to increase the exchange by establishing a Young Academy as well as a cooperation between a German and a Chinese distance university for a joint Open University.
“Science is the diplomacy of trust,” explains Schavan. In 1959, for example, a delegation from the Max Planck Society traveled to Israel at a time when German politicians were not yet welcome there. For the time being, no Chinese are coming to Germany: The government consultations in April took place via video, due to Covid (China.Table reported). Actually, the dialogue forum was supposed to be held in Stuttgart. However, nobody knows when that will be. Pauline Schinkels
Just in time for the National Day on October 1st, the flower decorations like here on Tiananmen Square cannot be missing. The color of the flowers is of course symbolically significant. Red stands for happiness and joy, and yellow stands for power. Thus, yellow has long been a color that only emperors in China were allowed to wear. Now the CCP adorns itself with it.
