China, energy & economy
Despite environmental concerns, China plans dams
Arguing that hydroelectric power provides the easiest route to energy for people living in Tibet, officials in Lhasa say that China has begun scouting sites for potential dams. Although China has sought to reassure people that the dams would not harm biodiversity, critics argue that China has not done due diligence on the issue concerning all the different, subtle roles rivers play. The Guardian (London) (10/14)
July 17
Paulson eyes Sino-US energy pact
Hank Paulson called on the US and China to step up their co-operation on energy and the environment at the beginning of a two-day session of talks under the bilateral strategic economic dialogue.
July 16
China on brink of electricity shortfall
By Jamil Anderlini and Geoff Dyer in Beijing
(FT) China faces its worst power shortage in at least four years as soaring coal prices and government-set electricity tariffs force dozens of small power plants to shut down rather than face mounting losses.
Nearly half of China’s provinces have started to ration electricity as the country enters the peak summer season, facing what analysts describe as its worst coal shortage.
China’s problems mirror those of other Asian countries, where the rising price of fuel and other commodities has had an impact on governments that traditionally subsidise everything from the cooking kerosene used by the poor to the electricity used by industry. Companies in Indonesia, for example, have complained of rolling blackouts and action by the government to force them to shift factory production to weekends.
The emerging power shortages have important implications for both inflation and growth, about which Beijing is to publish fresh figures on Thursday. Second-quarter GDP growth is forecast to have dropped to 10.1 per cent from 10.6 per cent in the first quarter.
May 27
(Stratfor) China is facing higher energy prices at a time when the U.S. economy is weak and the ability to raise prices is limited. As oil prices increase costs, the Chinese continue to export and, with some exceptions, are holding prices. The reason is simple. The Chinese are aware that slowing exports could cause some businesses to fail. That would lead to unemployment, which in turn will lead to instability. The Chinese have their hands full between natural disasters, Tibet, terrorism and the Olympics. They do not need a wave of business failures.
Therefore, they are continuing to cap the domestic price of gasoline. This has caused tension between the government and Chinese oil companies, which have refused to distribute at capped prices. Behind this power struggle is this reality: The Chinese government can afford to subsidize oil prices to maintain social stability, but given the need to export, they are effectively squeezing profits out of exports. Between subsidies and no-profit exports, China’s reserves could shrink with remarkable speed, leaving their financial system — already overloaded with nonperforming loans — vulnerable. If they take the cap off, they face potential domestic unrest.
