Power shortage adds fuel to fire

PUBLISHED : Saturday, 01 October, 2005, 12:00am
UPDATED : Saturday, 01 October, 2005, 12:00am

IN THE 1980s, soon after the mainland launched economic reforms, newlyweds coveted the 'Four Big Items' - television, refrigerator, washing machine and electric fan.

With the Communist Party staking its legitimacy on the ability to deliver improved living standards, the price of the bride has risen in the 56 years since the founding of the People's Republic of China.

A flat filled with electrical appliances and a car have become the desired consumer items in big cities like Shanghai. And taken for granted by citizens is that subsidised electricity and cheap petrol will be available to power everything from air conditioners to cars.

So, in a year when the mainland implemented power rationing for companies across much of the country and petrol stations in the most developed regions ran out of fuel, China's energy shortage is nothing less than a measure of government performance and a threat to social stability.

Power outages in Shanghai this summer caused public protests as hundreds of people poured out of residential buildings, shouting and complaining about the city's slowness in fixing the problem.

The demand for resources is driving domestic and foreign policy, causing China to delay painful economic reforms which keep prices low and prompting it to strike deals with all-comers to secure energy supplies.

Although the mainland linked energy prices to the international market, the government was afraid of fully freeing prices due to worries over inflation and how it would affect social stability, said Stephen Green, Standard Chartered Bank's senior economist for China.

'Environmentalists and hard-nosed economists complain that mis-pricing of energy leads to overuse and contributes to China's energy shortages. The pressure for change of energy pricing is clearly building in the system,' he said.

Among the losers are airlines, transport companies and power producers, which are facing higher costs but cannot charge fair prices in the domestic market.

Some manufacturers halted production this summer because electricity producers could not meet demand amid rising coal and oil costs, though the government blamed high temperatures for the power shortages.

Farmers, many left behind in the mainland's new prosperity, are feeling the pinch from rising fuel costs. The mainland has been trying to raise farmers' incomes by encouraging larger-scale production, made possible by mechanisation.

Xie Qing, a rice farmer in Shiniuba village in central Hunan province, uses a tractor and a harvester but fuel prices have increased so much that he is thinking of returning to traditional techniques, a water buffalo and his own two hands.

'Diesel prices are rising too quickly, adding much to my costs, not to mention less-than-ideal grain prices and bad weather. I'm thinking about returning to manual farming, but I will lose money this year regardless,' he said.

At least one other group of affected people, taxi drivers, have been less passive. In eastern Anhui province's capital of Hefei, more than 6,000 taxi drivers staged a strike in August.

In the eastern city of Nanjing, taxi driver Zhang Weihong said a rise in both subsidies and fares had helped relieve dissatisfaction. 'If there wasn't a subsidy, drivers would definitely make trouble,' she said. Shanghai averted a threatened taxi strike after raising subsidies paid to drivers and offering to consider higher fares.

However, economists argue that government-mandated subsidies run counter to the mainland's move towards a market economy.

Securing oil supplies was behind China National Petroleum Corp's recent purchase of PetroKazakhstan.

Additional reporting by Lillian Yang