China Faces Power Shortages Amid Bans on Australian Coal

China Faces Power Shortages Amid Bans on Australian Coal
Large coal stocks await loading for export at Port Waratah Coal Services on Newcastle, Australia, on April 12, 2007. (Corey Davis/Getty Images)

The Chinese Communist Party’s ban on Australian coal may be backfiring after reports from China indicate power shortages are plaguing the Asian nation as it heads into the winter months.

Reports from China’s Twitter-like platform Weibo and The Australian have noted that seven provinces, including Shanghai, Hunan, Zhejiang, Anhui, Shaanxi, Jiangxi, and Inner Mongolia, have been told to limit their power usage after electricity rationing was introduced.
Residents in these provinces have been told to “orderly use” electricity, and not turn on heating until the temperature drops below 3 degrees Celcius, or 37.4 degrees Fahrenheit. Netizens in cities like Changsha in Hunan province have told of having to climb 20 to 30 floors to get to work after elevators were turned off to save power.
The electricity rationing comes after China’s National Bureau of Statistics reported that China had increased domestic coal production by 1.5 percent since last year. There has also been a decrease in coal imports of 43.8 percent over the same period.
However, this slow increase in domestic coal production from the Shanxi and Shaanxi provinces is not worrying Chinese authorities, the South China Morning Post reported on Dec. 16.

According to the Chinese Communist Party’s (CCP’s) economic planning agency the National Reform Development Commission (NDRC), there is not any cause for concern.

Agency spokesperson Meng Wei told the Post that the regime was coordinating with coal producers to “rationally organise production” and strengthen coal transportation security.

But Meng’s confidence is not shared by Jun Mao, a thermal coal analyst from the Jiangsu Jinying Capital Management, who told the ABC on Dec. 19 that the power shortages were a sign of supply and demand issues in China.

“China’s thermal coal stocks are insufficient, and the price is relatively high,” he said.

Over 7 million tonnes of Australian coal, worth an estimated $700 million, has been sitting off the Chinese coast after Beijing started refusing entry to its ports about six months ago.
Prof. James Laurenceson, a China expert from the University of Technology Sydney, noted that China could live to regret its economic trade tactics against Australia.

“In the longer term, it generates the exact opposite outcome to what the country inflicting the punishment might be hoping for,” Laurenceson said.”This is why disrupting trade is so counter-productive—whether its China, the U.S., or any other country doing the disrupting.”

AMP Capital’s chief economist Shane Oliver concurs.

Oliver told the ABC that all countries that engage in trade wars tend to pay some price.

“Trade wars are not desirable; they do result in both sides losing: obviously one side loses because they don’t get the supply and quality of supply that they’re used to, the other side loses because they lose an export market,” Oliver said.

Australian Trade Minister Simon Birmingham said on Dec. 18 that he had consistently reminded everyone that trade restrictions hurt both parties involved in any dispute.

“China needs to realise that this disruption disrupts Chinese businesses and ultimately, has flow-on impacts for Chinese consumers. And that’s why open trade has helped so enormously,” he said.

Victoria Kelly-Clark is an Australian based reporter who focuses on national politics and the geopolitical environment in the Asia-pacific region, the Middle East and Central Asia.
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