China and the US are, in that order, the world’s two largest producers and consumers of energy. In turn, energy plays a central role in shaping the current US-China strategic competition. Understanding their relative standings and competitive approaches to energy is hence crucial to assessing the state and trajectory of the US-China contest.

In our new research report, we assess the current US-China competitive balance in the energy domain, and benchmark the two countries’ standing in the field.

Both the US and China acknowledge that energy shapes global economic development and security – and, accordingly, assess their national power based on their energy status. This report seeks to assess the current US-China competitive playing field in the energy domain, benchmarking US and Chinese standing in the field.

The analysis finds that writ large, the US and China prioritize similar areas in energy, and measure themselves relatively similarly within those. But they differ in competitive approach to the energy sector and in the scope of their focus on it. First, Beijing treats energy not only as a matter of security but also a competitive domain, one in and through which to project power, acquire leverage, and exact concessions. By contrast, the US tends to place more emphasis on defending and cooperating in energy. Second, in defining its energy priorities, layout, and capacity, China tends to prioritize the entire scope of industry chains, from the upstream to the downstream. China’s energy-related policy discourse, legislation, and firm-level investments have long prioritized vertical integration of energy supply chains, connecting upstream to downstream. The US approach tends to focus more on downstream capacity, especially in new energy domains.

Beijing treats energy not only as a matter of security but also a competitive domain, one in and through which to project power, acquire leverage, and exact concessions.

These differences in focus and approach are particularly acute, and relevant to today’s US-China competition, when it comes to new energy domains and the energy revolution more broadly. China and the United States are both adjusting their approaches to energy in response to – and anticipation of – an energy revolution. But while Chinese discourse and policies suggest that Beijing sees the energy revolution as a competitive opportunity and is positioning accordingly, the United States tends to treat it more as a matter of security and a domain of international cooperation. This difference in orientation, paired with Beijing’s dedicated industrial policy, already manifests in outsized Chinese capacity in new energy fields that could position it to leapfrog, or establish strategic positions of leverage over, the United States. Compounding that asymmetry, Beijing has shown itself willing to weaponize climate cooperation for competitive gain, an approach that directly targets a US vulnerability.

Accounting for the particularities of the US and Chinese approaches to the energy sector, this analysis breaks its assessment of energy standing into three parts, roughly mapped onto the upstream, midstream, and downstream segments of the energy industry.

While Chinese discourse and policies suggest that Beijing sees the energy revolution as a competitive opportunity and is positioning accordingly, the United States tends to treat it more as a matter of security and a domain of international cooperation.

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Raw materials are considered “fundamental” inputs at the uppermost point of the supply chain. Both the US and China have, in official policy, identified advanced high-performance materials as strategic emerging fields of science and technology focus areas. As such, this analysis considers the importance of high purity quartz as a strategic input in the 21st century global economy, and draw comparisons to its role as a strategic material in the 20th century.

Distribution of energy to end users, or energy infrastructure, forms the “synthetic” section of the energy value chain. With the US being the world’s largest producer of natural gas and China being the world’s largest importer, the analysis takes a comparative look at the domestic and cross-border transportation capacities of gas pipelines in the two countries.

Meanwhile, high-tech applications that harness and amplify the value accrued in the up- and midstream sections can spur dramatic advances in the transformation of energy systems. These are considered the “downstream” element of the energy competition.

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This analysis finds that:

• In strategic and critical minerals, China is, broadly speaking, less dependent on the US than the US is on it. Moreover, China defines strategic and critical minerals in terms of their offensive as well as defensive implications. The US only includes in its list of strategic and critical minerals those for which supply is at risk. This not the case for China. This suggests that Beijing sees strategic and critical minerals, and the fundamental points of the energy sector more broadly, as areas through which to develop and project offensive power, not simply points of potential vulnerability. That said, this analysis also finds that the US does still maintain leverage over China in some critical and strategic minerals, including high-purity quartz, that could provide competitive advantage – especially considering Beijing’s sensitivity to such leverage.
• In energy infrastructure, this analysis finds that the US continues to enjoy an advantage over China in conventional energy infrastructure. But China is overtaking, or has overtaken, the US in infrastructure for emerging energies – a reality that could neutralize the competitive advantage that the US currently enjoy based on its established lead in legacy fields. The outcome of that asymmetry could depend on US decisions with respect to the make-up of its energy portfolio and global energy norms. At the same time, even in conventional energy, China’s power as the world’s major energy importer could give it leapfrog potential to shape global pricing and markets, and Beijing may be actively working to that end, with relevant initiatives including the Petroyuan and potential efforts to establish a natural gas trading hub.
• In high-tech applications, this analysis finds that China’s approach orients around establishing a full supply chain and actively coordinating both vertical and horizontal linkages in prioritized high-tech applications. For example, in rare earth permanent magnets, China’s competitive approach hinges not only on acquiring and deploying advanced technology, but also on doing so leveraging relative supply chain control. That supply chain control also facilitates Beijing’s efforts to acquire and deploy technology. This approach demands competitive assessment that looks beyond just technological capacity and rather at the full supply chains behind those – and, from the US, frameworks that take into account dangers of supply chain vulnerability in prioritized high-tech energy applications.