A summer of power failures looms

PUBLISHED : Sunday, 08 May, 2011, 12:00am
UPDATED : Sunday, 08 May, 2011, 12:00am


With summer yet to reach southern China, power shortages have been spreading from one province to another, prompting the National Development and Reform Commission to warn that the nation will see its most serious shortages in recent years.

But why is all this happening before the usual time of peak demand arrives? The press has been discussing its causes and possible solutions.

Much of this year's rise in demand, as three writers from a research body affiliated to the NDRC point out in the China Economic Herald, comes from industries that should have been phased out - such as those based on high energy consumption and high labour input.

The central government decided in 2006 to close down inefficient production facilities but until now, 'achievement has been limited' because 'a planned-economy approach, rather than a market economy one, has been followed', according to the three researchers.

Many high energy-consuming production lines were unplugged last year to meet the central government's five-year targets for energy cuts. But this year, they are back in operation because the local governments still rely on them for tax revenue and jobs.

Apparently, there is insufficient incentive for local governments to follow Beijing's industrial policy.

In fact, from January to February, when light industry's electricity demand rose 6 per cent year on year, heavy industry, which consumes four times as much power, went up 12.5 per cent. Meanwhile, service industries from retail to banking all saw their growth slow over the same period.

The National Bureau of Statistics reports that power demand from high energy-consuming industries, such as cement and steel production, shot up by 30 per cent. In addition, there have been more investment projects in fixed assets at the local level this year, the first year of the current five-year plan.

Power shortages are almost unavoidable this summer, according to the China Economic Herald, which said the nation should manage electricity production more selectively, restricting use by industry to guarantee residential supply.

Another reason for the flagging power supply lies in the government's price controls for electricity. Power plants have been unable to make a profit or finance their development with the fuel price still rising.

Xu Bin, a commentator writing in the magazine Capital Week, said the mainland's heavy administrative machinery is holding back the momentum of economic growth.

Although the number of matters requiring administrative approval has been reduced to 2,000 from more than 4,000, enterprises still do not feel any relief when they come to deal with the government bureaucracy.

Xu quoted Wang Yukai, a senior researcher in the reform of the administrative system, as saying that the abuse of power in project approval featured in every one of the nation's 80-plus cases of corruption at the ministerial level and above.

The law on administrative approval, enacted in 2004, has not overcome the barriers to its widespread application.

Xu also quoted Yang Jianshun, a law professor with the Renmin University in Beijing, as saying that an enterprise once needed as many as 125 official seals to complete one project approval.

'But now, the realities are becoming even worse. Although the number of seals needed has been reduced, the time needed for each seal has become much longer and more complicated.'

Rising up with the privileged classes, as Wang Chong wrote on Ce.cn, a government-owned portal on economic policies, is a small circle of the super-rich who are buying up the largest portion of luxury goods in the world as well as considerable land rights.

These people represented a partnership between power and money, Wang said.