Beneath the cracked plaster ceilings of the Honghua Knitwear & Garment Factory, sewing machines sat motionless on a muggy afternoon, idled by a rolling blackout imposed to cope with chronic energy shortages. Laborers lolled on plywood bunks in a cramped and airless dormitory, resting before another illegal night shift.
Five miles away, as night fell on Shanghai's famed waterfront promenade, the Bund, neon hummed to life and lights glowed from the heights of the financial center across the river. The same city government that orders local factories to shut down in the name of energy conservation also forces skyscrapers to keep lights on so that investment bankers digging into their foie gras at waterfront eateries can gaze upon a glittering homage to modern China.
The recent failed attempt by the state-owned Chinese energy company Cnooc Ltd. to purchase U.S.-based Unocal Corp. underscores China's quest to lock up supplies of oil and gas around the world as the country's rapid industrialization demands ever more energy. But the contrasts in this and many other Chinese cities -- austerity side by side with state-mandated extravagance -- reveals another reason this country now scours the globe for energy: China has become among the world's most wasteful users of power, its growth in demand exacerbated by its striking inefficiency, say energy analysts and economists.
"A lot of China's energy security problem could be solved if you improved our domestic efficiency," said Yan Maosong, an industrial engineering expert at Shanghai University who advises the central government. "From generation to transmission to power usage, in every link of the chain, our energy industry is not very efficient. Top government leaders have not paid enough attention."
By the government's own reckoning, China's economic growth is absorbing energy at a higher rate than many large economies. To produce $1 million in gross domestic product, China needs 21/2 times as much energy as the United States, five times that of the European Union, and nearly nine times that of Japan, according to the state Energy Research Institute.
Making steel in China in 2003 consumed 10 percent more energy per unit than in the United States, according to state statistics. China's electrical generators consume one-fifth more energy per unit of output than American plants, said Long Weiding, an expert at Tongji University in Shanghai. Chinese air conditioners -- now the fastest-growing draw on power -- are roughly one-fifth less efficient than the world average, Long said.
High and inefficient energy use may seem normal for poor nations going through industrialization and rapid economic growth. According to state statistics, China is more energy-efficient than fast-growing India. But much of China's wastefulness stems from the hybrid nature of its economy, which is caught between its communist roots and a free-market future, experts say. More and more of the demand for energy comes from companies that operate on market principles, but the majority of the supply is generated by state-owned monopolies forged in the time of central planning and with little incentive to increase efficiency.
China's leaders are trying to cut back on energy waste. Last year, the National Development Reform Commission -- a powerful policy-setting body -- released a conservation plan calling for China to more than triple its use of natural gas by 2020 to minimize use of coal, now the source of three-fourths of China's electricity.
State energy companies have been pursuing deals to bring liquefied natural gas from other parts of Asia to coastal cities, with Unocal's gas fields in Indonesia a prime attraction to Cnooc. The plan also calls for the development of more than 20 new nuclear power plants by 2020, doubling the role of nuclear power in China's overall energy supply from 2 percent to 4 percent.
China is in the early stages of implementing minimum efficiency standards for air conditioners. This year, the government imposed the first stage of new vehicle emission standards that could eventually make Chinese cars more fuel-efficient than American models.
And between 1990 and 2002, improved technology cut by one-fifth the amount of energy required to produce steel, according to the Beijing Energy Efficiency Center.
But this progress lands on top of a wasteful legacy -- an industrial base that includes power plants and factories built in the 1950s, when the Communist Party government pursued national development at any cost. The smog blanketing most Chinese cities and the black smoke spewing from factory stacks testifies to the continued role of low-grade coal and antiquated technology in powering China's industry.
The addition of power-conserving lights at office buildings could cut consumption needed for lighting by as much as 80 percent, said Shi Mingrong, a former official at the Shanghai Power Bureau who now serves as a consultant to the local government. Modern machinery at factories could cut energy demand by one-fifth, he said. But Chinese companies -- grappling with fierce competition and tiny profit margins -- tend to view new technology more as a cost today than savings tomorrow.
"Most companies are shortsighted," said Hu Zhaoguang, chief economist at the State Power Economic Research Center in Beijing, a government think tank. "They are reluctant to upgrade their equipment to improve energy efficiency."
Waste also continues to plague the generation and transmission of power, experts say. Power plants operated by municipal and provincial governments face pressures to buy coal from local mines -- even when costs are higher than other sources -- to support jobs and local taxes. Provinces and cities have sunk billions of dollars into new power plants to help alleviate shortages, leaving governments or even individual officials on the hook to pay off loans to state banks.
Guangdong province, a booming industrial territory near Hong Kong, now absorbs roughly one-sixth of China's overall electricity supply. State-owned factories and electricity distributors have been buying from local plants, paying triple the price of electricity that could be brought in from Guizhou and Yunnan provinces, where hydropower is plentiful.
The involvement of provincial governments has also deterred the creation of rational generation and transmission grids, experts say. State officials have erected one white elephant after another -- huge power plants that absorb great quantities of coal -- while neglecting to develop smaller, gas-fired plants that could adjust loads to meet demand more precisely. That has forced the big plants to stay on line even when their full capacity is not needed.
"Everybody goes for the big plants," said Yan, the Shanghai University expert, who reckons that this problem accounts for one-tenth of the energy wasted in eastern China.
The transmission grid is poorly coordinated and saddled with old technology, with as much as one-tenth of the load disappearing along the way, experts say. While the state has allowed private and foreign investors into the power generation business, the grid remains controlled by two giant state firms.
The worst waste is found in the state-owned distribution companies that carry power to homes and businesses. They have traditionally kept a percentage of their revenues and handed the rest to the local government, limiting their incentive to upgrade.
For the past three summers, this outdated system has lagged behind China's growing needs, forcing local governments to ration power in 24 of 32 provinces. This summer, in Shanghai's industrial suburbs, officials have ordered factories to cease operations for a full week at a time.
"Of course it hurts our business," said Dai Hongdi, the general manager at the Honghua garment factory. "It's impossible for our factory to just stop a whole week, so what we do is work at night and hope the officials don't notice."
Across the river in the Lujiazui district, landlords seethed over the opposite problem: Since 2001, the city government has decreed that 40 skyscrapers in four districts must keep their lights on until 11 o'clock during the summer.
"It's about building Shanghai's image as an international city," said Guo Hua, director of the city's Appearance and Environmental Sanitation Administrative Bureau.
Lighting the skyscrapers along the Bund from 7 to 11 p.m. during the summer months consumes enough energy to power 30,000 home air conditioners during the same period, according to experts. The city pays about one-third the cost of this extra lighting, but landlords complain that is inadequate.
"We have no choice," said an official at Jin Mao Group Co., which owns and manages Shanghai's tallest building, the 88-story Jin Mao Tower, estimating that the cost of the extra lighting runs more than $3,000 a month. "It is a government regulation."
Special correspondents Jason Cai and Eva Woo contributed to this report.
A line worker perches on a Beijing power pole. Major cities account for most of China's electricity use -- and waste.