China's energy sector is one of the key areas in which dramatic change can be expected in coming years. While the bulk of China's energy demand will continue to come from industrial activities for the foreseeable future, the transportation sector is beginning to represent an increasing share of total energy use. The implication of China's shift to a world energy importer are significant. During the next 10 to 20 years, China will have to participate in international energy trade on a substantial and sustained basis, form energy supply and transportation alliances, and make security and environmental choices about fulfilling its burgeoning energy needs. These alliances and trade and policy options will be constrained by the unwieldy organization of China's oil and gas industry and by the aged and inefficient refining and distribution infrastructure that exists in China today.
China sees itself both as an emerging gas market and a land bridge for regional gas distribution.
A natural gas-oriented energy strategy could provide incentive to China to give serious consideration on how to improve relations with neighboring countries. Subgroups of social groups, special interests and civil society are providing a rich texture to China's relations with the United States. In the longer run, these underlying layers will have a deep influence on the development of U.S.-China relations. China should make development of natural gas resources a key priority of its national energy policy. The United States should encourage and assist China in enhancing its natural gas industry as a means to diversify away from heavy reliance on coal.