Since September, many provinces and cities in China have appearedCurtailmentChao (Image source: Adobe Stock)
[Look at China October 3rd, 2021]Since September, many provinces and cities in China have appearedCurtailmentThe tide has spread to Beijing and Shanghai.
Recently, Beijing issued an announcement stating that some areas will “plan overhaul” between September 27 and October 8.power failure. Although the official explanation is that there is no shortage of power, Shanghai has also announced a multi-day power ration before, and the official explanation is also “planned overhaul.”
Since mid-September, China’s Jiangsu, Yunnan, Zhejiang, Guangdong, Hunan, Anhui and other places have adopted peak power rationing due to power shortages. In late September, a number of cities in the three northeastern provinces suddenly started power cuts. The power outages lasted as short as five hours and as long as more than ten hours. There are reports that sudden power outages in many parts of Northeast China without prior notice have seriously affected the lives of residents. In some places, there are power outages several times a day, and in some places, power outages exceed twelve hours.
At present, the wave of power restrictions in China has expanded to 20 provinces across the country. According to reports, Shaanxi will curtail power until the end of the year; Ningxia high-energy-consuming enterprises will suspend production for one month; Sichuan will suspend non-essential production, lighting, and office loads; processing enterprises in Henan will curtail power for more than three weeks; and Guangdong’s “second stoppage” is not enough , The direct power outage for 4 days; Jiangsu has a 20-day holiday; Zhejiang Chemical Plant will be closed until September 30.
As China’s economy is already in a downturn, coupled with the government’s purging of Internet companies, education and training companies, performing arts circles, and real estate companies, debt crises have generally occurred. Evergrande’s debt alone is as high as nearly RMB 2 trillion.Power shortageMany companies will lie flat, and China’s economy will be even worse. Recently, the hostage diplomacy incident triggered by the Meng Wanzhou case has labelled China as a rogue country. Not only has China’s international situation not eased, but on the contrary, it has become worse. Has the hardship of the Chinese made a comeback?
First, the reason for the electricity shortage
Regarding the power shortage, Chinese officials believe that the excessive increase in power demand has led to a surge in power consumption. According to data released by the Chinese government on September 7, the total value of China’s imports and exports in the first eight months of this year was RMB 24.78 trillion, a year-on-year increase of 23.7% and an increase of 22.8% over the same period in 2019. Among them, exports were 13.56 trillion yuan, a year-on-year increase of 23.2%, and a year-on-year increase of 23.8%, which was a significant increase.
According to data released by the General Administration of Customs of China, in US dollars, the year-on-year growth rate of exports accelerated to 25.6%, the growth rate of imports accelerated to 33.1%, and the trade surplus further expanded to 58.34 billion U.S. dollars, both higher than market expectations.
Cumulatively speaking, in the first eight months of this year, China’s exports increased by 33.7% year-on-year and 30.3% year-on-year, with a trade surplus of US$362.49 billion, an increase of 28.9% year-on-year.
Chinese officials believe that behind these data is the continuous extended working hours of companies and the substantial increase in electricity consumption. There is a saying in China that “golden nine silver ten”, that is, September and October are the peak periods for Chinese enterprises’ orders.
However, people believe that official opinions are not the main reason for the electricity shortage. There are two real reasons.
First, the price of thermal coal has risen.
According to public data, in the first half of this year, the country’s thermal power generation accounted for 73%, hydropower 12.47%, wind power 7.28%, nuclear power 5.04%, and Dayang Energy 2.22%.
Chinese media Caixin quoted a Guangdong No. 1 coal power plant as saying that the current standard coal price of the plant is about 1,400 yuan per ton. If converted into cost, the fuel cost is at least 0.448 yuan per kilowatt-hour, plus other factors such as financial costs, “it is already a loss. Operations”. The local coal-fired benchmark electricity price is 0.463 yuan per kilowatt hour.
After China imposed restrictions on Australian coal imports, it imported 780,000 tons of coal from Australia in the first half of the year, a year-on-year decrease of 98.6%. Due to the loss of high-quality and cheap Australian coal, the price of coal per ton in China has risen by more than 100%.
According to data released by the China Electricity Council, the week from September 16 to September 23 has reached 1,086 yuan/ton, a year-on-year increase of nearly double and an increase of 56.26% from the beginning of the year.
Some scholars pointed out that the main reason for China’s electricity curtailment is the shortage of electricity coal. The price of thermal coal continues to rise. Worldwide, the price of thermal coal is rising sharply. Even in European and American countries, the price of thermal coal has risen to US$200 per ton. In China, the price of high-quality thermal coal is now more than RMB 1600 per ton. Chinese power plants sell electricity to the grid, which then sells it to users. The price of the power grid has not risen, and power plants face such high coal prices. The more power they generate, the more they lose money, making thermal power companies lack the incentive to expand their power generation.
The second is the impact of the “dual control policy”.
As the world‘s largest energy consumer and largest carbon emitter, China has pledged to achieve a carbon peak in 2030 and achieve carbon neutrality in 2060.
The “dual control policy” refers to the implementation of dual control of total energy consumption and intensity. In August, the China Development and Reform Commission issued the “Barometer of Completion of Energy Consumption Dual Control Targets in Various Regions in the First Half of 2021”, showing that 19 provinces across the country are classified as first-level and second-level. Level early warning, including Jiangsu, Guangdong, Yunnan and other provinces where the “power shortage” is serious.
According to reports, only 10 of 30 regions in China barely achieved emission reduction targets in the first half of this year, forcing provincial and municipal governments to increase their monitoring of corporate emission indicators in the second half of the year. Jiangsu Province said this month that it has begun to conduct emission inspections on 323 local companies with annual energy consumption exceeding 50,000 tons of standard coal and 29 other large energy consumers.
Liu Mengjun, director of the Mainland China Institute of the China Economic Research Institute, pointed out that this time it is more like a local government’s error in implementing the central “dual energy consumption control”. It may be that the assessment indicators are about to expire and the local government is anxiously “one size fits all.”
Zhao Chenxin, secretary-general of the National Development and Reform Commission of China, criticized “individual places” in Zhejiang for adopting electricity curtailment measures to promote energy conservation and carbon reduction. Zhao Chenxin’s criticism triggered a wave of public opinion, and Chinese netizens criticized some areas in Zhejiang for “cutting power cuts” in order to achieve carbon reduction targets, and the methods were rude. Some netizens pointed out that these officials “only have political achievements in their hearts, regardless of the lives of the people and the lives of the enterprises.” Other netizens said that there is no heating in southern China, and electricity can only be used if coal is not burned. If there is still a shortage of electricity, how can the people survive the winter?
Second, the serious impact on the economy
According to the Hong Kong Economic Daily News, China International Capital Corporation believes that the power shortage caused by insufficient coal supply has actually affected production since July and may be difficult to eliminate within this year. CICC International estimates that the impact of the “dual energy consumption control” policy on China’s economic growth in the third and fourth quarters will be about 0.1 to 0.15 percentage points.
Morgan Stanley economists predict that if China reduces production at the current rate for the rest of this year, economic growth in the fourth quarter will drop by about 1 percentage point.
At least 15 Chinese listed companies have announced that the electricity shortage has disrupted their production. In addition, more than 30 Taiwan-listed companies that set up factories in China also said that their factories in mainland China have stopped production because they have to cooperate with power curtailment measures.
Japan’s Nomura Securities has lowered its forecast for China’s annual economic growth rate from the original 8.2% to 7.7%, and has also revised China’s third and fourth quarter GDP growth forecasts from the original 5.1% and 4.4%, respectively. Reduced to 4.7% and 3.0%.
Third, the bitter days of the Chinese have arrived
At present, the climate has entered autumn, and the weather is getting colder, especially in Northeast China, where the temperature is dropping rapidly. China’s power rationing will undoubtedly make the people feel shivering. The patriotic passion they have just inspired by Meng Wanzhou’s return to China is quickly fading. After all, they live in a different world from Meng Wanzhou. Meng Wanzhou lives in a mansion in a villa in Canada, can get tens of millions of dollars on bail, pay a huge fine in the United States without blinking, and return to China to take a luxurious charter flight. Ordinary Chinese have to face the cold and have to buy candles for lighting.
In fact, China’s most stupid thing about Meng Wanzhou’s release was to implement hostage diplomacy. The United States and Canada released Meng Wanzhou after a trial session and signed an agreement to postpone the prosecution, but China failed to comply with the legal procedures. Although some Chinese officials claim that the release was due to the sickness of Kang Mingkai and Sbafu who were released on bail pending trial, how can they leave the country when released on bail pending trial? Some claimed that it was because of bail for medical treatment, but China is not without hospitals, and the health of Kang Mingkai and Sbafu are not major problems, so why should they leave the country. Maybe the Chinese government thinks, what’s wrong with my hostage diplomacy? I am a rascal, who am I afraid of?
Some friends may wonder how the power shortage in China caused Meng Wanzhou to return to China. In fact, there is no distance, because the Chinese hostage incident is fermenting and has not ended. China’s sharply rising political risks will cause more Western companies to withdraw their investments. The Chinese may think that their market is large enough that Western countries will not have money to make money, but this view is wrong. Because investment must consider risks, otherwise no matter how big the market is, it will not be attractive. North Korea is economically backward, why do Western companies dare not invest? The reason is simple, because the risk is too great. Investing in North Korea means that there will be no return of meat buns and dogs, and it may even be life-threatening. When China is labelled as a rogue country, China and North Korea are the same type of country.
Forty years of reform and opening up have made China’s economy highly dependent on foreign countries, such as grain, oil, and coal. The decoupling of China from the West will further decline the Chinese economy, and the Chinese people will return to the era of economic shortage, suffering twice and suffering twice. The power shortage is just beginning.
(The article only represents the author’s personal position and opinions)
Source: Beijing Spring
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