China panics: “Secure your energy supplies at any cost”
Bloomberg reports that, because of the energy crisis that is affecting suffocating China, the central Chinese government officials "ordered to the major state energy companies of the country to make sure the supplies for this winter to all the cost."
How to read this sentence? Beijing is no longer willing to risk state dissatisfaction that China will subsidize coal and natural gas purchases. The result for the world? Even higher energy prices that will also extend to substitute products, such as oil, which in fact rose immediately upon the news.
The news follows a report on Wednesday that China will allow coal price hikes to be passed on to energy sold to manufacturing operations, putting an end to the control normally applied to energy products. production, which, however, will not be transferred to consumer prices due to the government's inflation control policies. This will lead to a fall in margins and could lead to a fall of all that is of the Chinese market system and to the crisis of entire sectors.
According to Bloomberg, the order came directly from Vice Premier Han Zheng, who oversees the nation's energy sector and industrial production, and was delivered during an emergency meeting earlier this week with state agency officials. control of Beijing assets and economic planning agency. The conclusion, according to Bloomberg sources, is that "blackouts will no longer be tolerated". We will have Chinese companies chasing all the world's gas and coal, and Beijing would export the energy crisis all over the world. Perhaps decarbonisation policies will also be sidelined.
The emergency meeting highlights the critical situation in China. A severe energy shortage crisis has gripped the country and several regions have had to reduce electricity to its industrial sector and some residential areas have even faced sudden blackouts. Ironically, as discussed yesterday, the electricity crisis in China is caused by an unprecedented shortage of coal, so unless Beijing is willing to back down on decarbonisation policies, we will have an exponential rise in fuel prices. thermal energy.
Meanwhile, Bloomberg notes that, as a sign of how concerned Chinese officials are, “Premier Li Keqiang promised overnight that every effort will be made to maintain economic growth. China will ensure that basic livelihood needs are met and keep industrial and supply chains stable. , Li was quoted by Chinese national radio during a meeting with foreign diplomats on Thursday ”.
The bottom line is that China has finally reached the limit of how much slowdown it is willing to tolerate and Beijing is about to unleash a tsunami of monetary and fiscal stimulus. It also means commodity prices are about to go absolutely crazy this winter.
Yet it would be enough for China to resume importing coal from Australia to solve many problems. But politics is stronger than hunger ..
Thanks to our Telegram channel you can stay updated on the publication of new articles of Economic Scenarios.
The article China panics: "Secure your energy supplies at any cost" comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/la-cine-va-in-panico-assicuratevi-le-forniture-energetiche-ad-ogni-costo/ on Fri, 01 Oct 2021 07:00:03 +0000.