Deng Xiaoping famously said to get rich is glorious and some would have to get rich first - he might have added some will also get their coal first. As China's planned and market economies collide, it seems that a lot of coal earmarked for its power stations is not getting there. A prospect worse than having no money left for the electricity meter in a Beijing winter is to be left with no power at all, which may be the fate facing increasing numbers of mainlanders, with electricity rationing extended to 21 provinces. And the situation is predicted to worsen next year, according to the State Power Information Network. However, the situation looks much more benign if you pay heed to official figures. Chinese coal producers estimate coal output rose 16 per cent this year to 1.6 billion tonnes and other government statistics show a mere 3 per cent rise in prices. One explanation is that China's energy dilemma is being aggravated by a futile attempt to reshape the most fundamental rule of economics - scarcity. A shortage of any commodity will push up its price - unless you have the power to control its supply and/or demand. Supply will always try to find its way to those willing to pay top dollar. To control supply, or even measure it, in an industry fragmented into more than 6,000 mines looks a thankless task. But recently announced plans that will create 10 giant coal enterprises, each capable of turning out 50 million tonnes of coal a year, indicate the government may try. That figure may account for just 60 per cent of the total coal needs of the domestic power industry, but it is a big step towards consolidation. On the demand side, the massive growth in the private sector has downsized the state's clout as the dominant buyer of coal - so controlling prices is clearly more difficult. Yet coal prices are still largely regulated within a two-tier system which allows independent power producers preferential, cheaper terms compared with non-power coal users. It is not difficult to understand why rational coal producers will sell to buyers paying a higher price whenever possible if excess demand exists. Industry insiders say black market prices for coal have risen by more than 20 per cent this year, although prices vary significantly nationwide. Often this is down to transport costs. China's coal supplies are predominately in the northeast and northwest. This means that in Guangdong, for instance, prices can be two to three times Inner Mongolia's. As a result, it is often cheaper to import. Transport costs by rail are officially government controlled, but road freight costs are not. Here the market sets the price, allowing it to finally assert a more powerful influence in allocating coal and other goods than the official ex-mine prices. As the arteries of China's economy become increasingly clogged, it is those buyers willing to pay top dollar to secure space on scarce vehicles that will find orders filled promptly. And they are more likely to be buyers who have also seen an increase in their end-product prices, such as steel and iron. Power producers have been less happy to accept big price increases, wary that they have less chance of passing them on to consumers. The central government is understandably wary that higher electricity prices could help reignite broader-based inflation. But most would accept higher power prices, if the alternative were rationing or no power at all? If China really wants to meet its coal and power needs, consolidation without price deregulation looks incomplete - after all, higher prices also attract higher investment.