The Bottleneck of Reform: China’s Oil Policy in the 1980s

Oil was a crucial factor in China’s relationship with the world during the Reform Era. This chapter analyzes Beijing’s oil policy under Deng Xiaoping and its significance to China’s economic statecraft in the 1980s. Beijing became increasingly concerned about the energy balance at the beginning of the 1980s, when China’s oil production plateaued at two million barrels per day. Rising energy demand due to economic development and declining production in onshore oilfields due to depletion made the prospect of an energy crisis even more daunting. Lacking technology and capital, Beijing decided to explore and develop offshore oilfields through joint ventures with foreign companies, including firms from Japan, the United States, France, and Great Britain. Between 1979 and 1989, 45 companies from twelve countries selected by public biddings undertook 43 offshore development projects in the South China Sea and Bohai Bay. Beijing strove to maintain these projects through adept diplomacy. While confronting Vietnam, a country that cooperated with the Soviet Union to explore offshore oilfields in the South China Sea, Beijing tried to detach the joint ventures from diplomatic turmoil in the aftermath of the Tiananmen Square Massacre. Through energy conservation campaigns, Beijing kept the increase of oil consumption proportionate to the annual production growth of approximately 70,000 thousand barrels per day, and thereby achieved rapid economic development without experiencing an energy crisis during the 1980s.