China’s coal market is facing soaring prices, insufficient stocks, supply shortages, and conflicting policy goals, and is likely to be one of the concerns at the upcoming “two sessions” early next month. Some observers say China’s coal shortage crisis is largely a result of internal problems in China, and that if not handled properly, it could escalate from a purely environmental and economic issue to a complex political one.
Soaring coal prices lead to “power cuts” around the country
China is the world’s largest coal producer, and in 2019, it produced more than 3,745.5 million tons of coal, nearly half of the world’s total coal production, ranking first in the world, with Inner Mongolia topping all provinces with more than 1 billion tons of coal production. However, since the latter half of last year, China, which has abundant coal reserves, has experienced a shortage of coal.
According to a report in China Newsweek, the shortage of coal in China due to insufficient stockpiles has pushed up coal prices. 5500k low-sulfur coal costs nearly 1,000 yuan (about $155) per ton, almost reaching a historical high, and now it is a situation where “you can’t buy coal even if you have money”, and the soaring coal prices have led to a sharp rise in energy mix. China, which has long been dominated by coal, is “pulling the plug” on electricity.
A number of Chinese provinces and cities have been experiencing power restrictions and blackouts, and even first-tier cities like Beijing and Shanghai have not been spared. Zhejiang, Hunan, Jiangxi and other provinces have been implementing “pulling and limiting” measures in the name of “power saving initiatives” and “orderly use of electricity”. Zhejiang Yiwu even to local enterprises to offer a strict “power restrictions”, such as “open three stop one”, “open two stop two”, or even “open one stop four “, thus seriously affecting business operations, enterprises cry out.
Some experts point out that China, as the world’s largest coal producer and the largest coal importer, is experiencing coal shortages because it has implemented Xi Jinping‘s “green” instructions as well as protecting domestic production capacity, strict security procedures, and the implementation of a quota system for imported coal, which has resulted in a combination of factors leading to a shortage of coal stocks. The combination of these factors led to insufficient coal stocks, which in turn affected the power supply.
Experts: The ban on Australian coal imports is not the main factor
The Wall Street Journal recently reported in an analysis that the ban on coal imports to Australia has also exacerbated China’s coal shortage. The report said that since Australia is the largest supplier of coal to China. Chinese buyers are already having to import from further afield and pay a hefty premium on top of prices that have already risen 84 percent since mid-year levels last year.
However, according to official Chinese Communist Party statistics, China imports between 70 million and 80 million tons of coal from Australia each year in 2019, accounting for less than 2 percent of China’s total coal use. According to China’s General Administration of Customs, China consumes about 4 billion tons of coal a year and imported a total of 299.674 million tons of coal in 2019, while exporting just over 6 million tons of coal in the same period.
Levin Dong, executive director of the Asia Pacific Peace Research Foundation. (Courtesy of Levin Tung)
“According to the executive director of the Asia Pacific Peace Research Foundation, Dong Liwen, China’s coal shortage is caused by internal reasons. In an interview with the Voice of America, he said, “Australian coal imports account for less than two percent of the Chinese coal market, and fundamentally Australian coal is not a key seller in the Chinese market, but more importantly, China itself is the largest coal storage and production country. China’s coal production ranked first in Shanxi 10 years ago and first in Inner Mongolia in the past 10 years. Even Shanxi and Inner Mongolia say there is a shortage of coal, so it’s not just an economic issue anymore.”
In addition to the above mentioned Xi Jinping’s “Green China” environmental directive, which has halted or delayed production at many mines around the country and led to coal shortages, Dong Liwen points out that the Chinese government’s gravity-defying crackdown on corruption in the coal mining industry has also made Shanxi and Inner Mongolia, two of China’s top coal-producing provinces, “the worst hit The government’s crackdown on coal mining corruption has also made Shanxi and Inner Mongolia, two of China’s major coal-producing provinces, “the worst hit. Inner Mongolia even shouted slogans that it would “investigate 20 years backward” to corruption after 2000. These two provinces fear that they will be unable to protect themselves due to the lack of coal.
The lack of coal and electricity is to give Xi Jinping a warning?
Wang Zhisheng, secretary general of the China Asia Pacific Elite Exchange Association. (Courtesy of Wang Zhisheng)
“The Secretary General of the China Asia Pacific Elite Exchange Association (CAPEA), Wang Zhisheng, said that even in the years when China’s economy took off and demand for electricity was soaring, such large-scale power restrictions were never heard of in Beijing and Shanghai, but now the “pulling of the plug” has raised suspicions that the central government has lost control over local governments’ “territorial autonomy”, leading anti-Xi forces to take advantage of the opportunity to “blacken” him.
Wang Zhisheng said, “When it comes to ‘advanced hacking’ of Xi Jinping, the aim is not necessarily to bring down Xi Jinping in one fell swoop, but if we can take advantage of the energy crisis or power crisis in China itself, and then further weaken Xi Jinping’s political prestige, or cause some riots to hit Xi Jinping’s political group, I think that may be some of the potential water resources. I think this is what some of the potential players in the water are looking forward to. I think maybe that’s what some of these people in the water are expecting, to deal a blow to Xi Jinping’s own political prestige to a certain extent, and some people are taking advantage of the opportunity to hack.”
In an interview with the Voice of America, the executive director of Taiwan‘s International Institute for Strategic Studies (IISS), Luo Qing-sheng, said that China’s problem is one that has always existed in traditional Chinese politics, where “the central government works against the local government.
Luo Qing-sheng, executive director of the International Institute for Strategic Studies in Taiwan.
Luo Qing-sheng said: “It’s not a coup, it’s just a little lesson to show you that I’m not happy, a group of people are not happy with Xi Jinping. The internal opposition or some people, on the surface can not say anything about you or express any opinion, how to do? Just boycott a little, through this boycott activities to let you know my great, put some resources out, basically is a bargaining process.”
Analysts point out that the lack of coal and power restrictions due to the challenges of soaring prices, insufficient stocks and supply shortages are likely to be on the agenda of the two sessions that will debut next month, whether caused by internal or external factors, and will be a problem that the Chinese government cannot ignore.
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