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In March 2021, China announced the first of its 14th Five-Year
Plans (FYPs)—the Outline of the 14th FYP (2021-25) for National
Economic and Social Development and the Long-Term Objectives
Through 2035 (the national 14th FYP). This is the first in the
series of 14th FYP policy documents to set development plans and
goals for many parts of the economy. Following the national FYP,
more plans and targets for specific sectors, markets, and
individual provinces or companies—particularly state-owned
enterprises—will arrive in the coming months and years.
Together, these policies will the framework for the development of
the Chinese economy and its subsectors in the next five years and
beyond and significantly affect the global energy market.
An assessment of the 13th FYP energy-related targets reveals
that China achieved many important targets but not all, with
COVID-19 being a key disrupting factor. Two key 13th FYP
energy-related targets—total energy consumption and
structure—were among the achieved ones. In particular, the
share of natural gas in the primary mix reached 8.4%, surpassing
the 8.3% target. The only binding gas-related target in the 13th
FYP for Natural Gas Development—14.8 Bcm of underground gas
storage working capacity—was also achieved. Many nonbinding
gas-related targets, both on supply and demand side, were
unsuccessful.
The government will provide policy continuity from recent
directions. The national 14th FYP confirms quality over quantity
for economic growth and excludes a real GDP growth target for the
2020-25 period. Regarding the natural gas market, the government
continues to elevate the importance of supply security and market
reform.
Low-carbon options will be the key development areas under
unprecedented policy focus on carbon emission reduction. For the
first time in the history of FYPs, the government discusses China's
longer-term climate goals and introduces the idea of a carbon
emissions cap to supplement the intensity targets. The official
carbon emissions cap target will be announced at a later date.
Aligning with many policy goals, natural gas will remain a
growth engine for energy supply in the 14th FYP period. The policy
direction on air pollution reduction, carbon emission control, and
gas supply and midstream infrastructure development indicates
continued support for higher penetration of gas in the growing
energy mix. On the other hand, the focus on supply security and
cost reduction from market reforms indicate an expectation of
decelerating gas demand growth in the 14th FYP period compared with
that in the previous five years. In the current IHS Markit outlook,
China's gas demand will grow 6% compound annual average during
2021-25—compared with the 11% growth in the previous five
year—to reach 429 Bcm in 2025.
