vide a source of inexpensive energy to the developing countries as they seek to become more developed and yet remain mindful of concerns about excessive dependency on oil imports and the need to limit global greenhouse gas (GHG) emissions.

From a strategic point of view, a shortage of domestic oil is a barrier to the development of an automotive industry. Motor vehicles in China consume 85 percent of the country’s gasoline output and 42 percent of its diesel output. In 1995 China’s demand for oil was 3.0 million barrels per day (mbd) or 147 million metric tons (MMT) per year, growing to 4.5 mbd (220 MMT) in 2000, and projected to reach 5.2 mbd (250 MMT) by 2005 (Chen, 2001). In 2000 imports of petroleum were 70 MMT, and an annual increase in imports of at least 10 MMT per year is anticipated in the short term. According to predictions, by 2010 China will need 270–310 MMT of crude oil per year (Yang et al., 1997). Unfortunately, the domestic supply will reach just 165–200 MMT per year, and the deficit of 105–110 MMT must be imported.

The rapid growth in the vehicle sector is the primary force driving China’s rapid shift from being a net petroleum-exporting country to a net importer. This shift not only creates concerns about China’s energy security and balance of payments, but also increasingly strains China’s refinery sector, which traditionally has been largely able to provide the country’s own refined product needs, using a refining network set up for indigenous heavy, sweet crudes (Histon, 2001). A particular concern is the high sulfur content of imported crude oil compared with that of domestic crude. Because the Chinese refineries were built to process the relatively low-sulfur domestic crude, the available hydrodesulfurization capacity is limited.

The quality of fuels is inextricably linked to the regulations for vehicle emissions performance. China has decided to follow the pollution control