Remind me of those dark days of jungle-raj of 80's and 90''s in West Bengal under the Left Front government . . .
China Faces Power Cuts Thanks to Aussie Coal Ban
There are power cuts across numerous Chinese cities where local authorities can't keep the street lights on and are forcing factories to close.
By ALEX FREW MCMILLAN Dec 21, 2020 | 08:53 AM EST
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Large swaths of China have been experiencing power cuts in recent weeks as a result of the decision by Beijing to ban imports of Australian coal. A couple of lockdown conversations over the weekend lay these tensions bare.
My wife, a graphic designer, fashions a line of custom pet tags, called Bashtags. She gets these produced in China, of course, across the border from us here in Hong Kong.
Yesterday she told me her supply has been cut off these last few days. One center of production is in Yiwu, a Chinese city famous for making low-priced plastic trinkets: plastic flowers, plastic flags, plastic badges. You name it, they'll make it.
It normally takes less than a week for a Bashtags shipment to arrive. Two weeks after my wife placed her latest production order, she is still waiting. There's no word from the supplier as to why they can't deliver, literally, on what they've pledged to produce.
They can't, because the power is shut off. The Yiwu government has ordered factories to idle. It has slashed working hours by as much as 80% until the end of the year, and ordered the smallest factories to shut down altogether. The city has also turned all the street lights off at night.
The power cuts came to Guangdong yesterday, the country's richest province, and biggest center of production. The city of Shenzhen - known as the "Silicon Valley" of China - as well as 14.9 million-person provincial capital Guangzhou, and the industrial cities of Dongguan, Zhongshan and Zhuhai all lost power to varying degrees. For some citizens, the water supply shut off at midnight.
In Hunan Province, the government says its agencies will cut their electricity use, and half of the province's street lights will be turned off at night to tackle the "tightening" power supply. In Changsha, the provincial capital, high-rise buildings can't keep their elevators operating. Workers have sometimes been forced to climb 20 floors to their offices.
More than a dozen Chinese cities have started rationing electricity use. An executive at China Huadian Power (HK:1071), one of its largest energy companies, tells the Financial Times that "many local power plants depend on Australian coal due to its higher efficiency, and now they are having trouble finding an alternative." This comes just as energy use is accelerating, with the economy kicking into gear.
The excuse varies. In Guangdong, people complaining to hotlines were told there was a technical problem, a grid failure. In Yiwu, the factories are being told it's all in the name of the greater green good, "to save energy and reduce emissions," a manager of a plastic factory tells the Apple Daily tabloid. His factory was told to run for two days, then close for two days, or risk a fine and having its power turned off altogether until New Year's Day. Diesel generators, which are worse for the environment, are flying off the shelves so factories can keep working in secret.
The Chinese authorities say they have entered a "wartime state" with electricity consumption. They partly blame a snap of very cold weather. Those explanations are all lies. It's a wartime state from a self-inflicted trade war, rather than boots on the ground.
China has power cuts because it relies on high-quality Australian coal to power its latest generation of coal power plants. The Aussie coal is better quality than anything China can produce itself or get from other sources, like Indonesia, which says it can't pick up production until into the new year, anyway.
Australia accounts for 57% of total coal imported into China. That helps generate 1.6% of all of China's power. But around 10% of the thermal coal used for power in the most-developed provinces comes from Australia, due to its quality.
China last week banned imports of coal from Australia. It has also punished Aussie imports of wine, lobster, barley, copper, sugar and timber.
It's common for China (and other nations, the United States for that matter) to target luxury consumer goods like wine and lobster. They're hardly essential, and high-profile. Any trade action against them grabs headlines without doing any serious economic damage outside those industries.
I was very surprised to see commodities such as coal, copper and timber on the list. China needs those things to drive its economic growth. They are not sexy top-of-mind imports that line the grocery-store shelves. They're gritty goods that come in huge container ships and head into heavy industry, "inputs" that we the people don't see until we get an end product.
My other conversation over the weekend was a FaceTime chat with my sister and her family who live in Sydney.
What do we make of Prime Minister Scott Morrison's meltdown over the Chinese tweet depicting a mocked-up Aussie soldier holding a knife to an Afghan youth's throat, they wondered. I said that while Morrison seemed a little schoolmarm-ish, he was right to push back.
But I think he missed out on the opportunity to call China out on its own reckoning of Chinese wrongs. The information on alleged war crimes committed by Aussie troops in Afghanistan comes, after all, from the Australian government itself, and its report on the conduct of its own forces.
Where is that kind of accounting from China? A country that still has not recognized what happened in the Tiananmen Square massacre in 1989, and routinely covers up its own human-rights abuses, has little in the way of a leg to stand on when it calls other nations out. We still do not know something as simple as how many Chinese troops died in June when they clashed with Indian soldiers high in the Himalayas, or whether any Chinese soldiers were disciplined for escalating the fight.
Australians quite rightly hope that the latest spat with China over coal will wean Australia off the black stuff. Yes, this will be painful for the mining industry, my brother-in-law, who works in headhunting for heavy industry, says. But employment in that sector is a fraction of what it once was. The mining lobby in Australia is far too powerful, he believes, and the country would be better off encouraging 21st century industries than making its fortune digging things out of the ground.
Global coal demand likely peaked in 2013, according to the International Energy Agency (IEA). It's a dying industry. The Australian government forecasts that Australia's coal exports will have fallen by half in two years, from A$70 billion (US$47 billion) for the year through June 2019 to A$36.7 billion (US$25 billion) in the year through June 2021, the end of Australia's fiscal year.
But they had already fallen by 20.1% before China's coal ban. Global coal consumption fell 7% between 2018 and 2020, an unprecedented drop since IEA records began in 1971. Coal has been in structural decline for years in the United States and the European Union, the agency says.
Coal demand is even plateauing in fast-growing China, the only major economy to post growth this year. So the China ban is ripping the Band-Aid off the Australian coal industry.
The Japanese owners of Australia's newest coal-fired power plant have reportedly just written off the value of their entire investment, thanks to dimming prospects for coal. Sumitomo Corp. (SSUMY) and Kansai Electric Power (KAEPF) each own half of the Bluewaters power plant in Western Australia, built in 2009 and which they bought for A$1.2 billion (US$812 million) in 2011. By their most recent corporate accounts, Bluewaters is now worthless.
If Australia wants to retaliate against China, it should restrict exports of iron ore, my brother-in-law says. It is the top exporter of both iron ore and coal into China. Chinese steel mills would grind to a halt.
The spat started when Australia suggested there should be an independent investigation into the origins of the coronavirus. It has been exacerbated by Aussie efforts to stop political interference from China in its own system. China has responded with a leaked list of 14 grievances, including what Beijing says is Australia's "incessant wanton interference in China's Xinjiang, Hong Kong and Taiwan affairs," as well as Australia's decision to ban the Chinese telecoms Huawei Technologies and ZTE (ZTCOF) from its 5G network.
Australia says it is simply holding China to account for values it insists on everywhere. So this political tussle looks set to run and run. Australia could do with some diplomatic backup since China is able to isolate it and punish it economically. For now, both a China stricken by power cuts and an Australia where exporters are scared for 2021 are feeling the pain.
