SocraticGadfly: China's Potemkin economy has its own energy crisis

May 24, 2011

China's Potemkin economy has its own energy crisis

Here's the problem in a nutshell, as the NYT describes it: Coal prices are soaring. Chinese coal-fired power plants are state-owned, or at least state-controlled, yet under a mandate to show a profit. But, Beijing, fearing economic disruption, has kept a VERY tight reign on price hikes.

So, the coal plants have taken drastic action — action they can control. They're rationing generation and power delivery. As in cutting a city of 360,000 down to getting electricity only every third day.

Hypercapitalists will note this shows the limits of a demand economy. But, not necessarily, at least not total limits. The state could, after all, jack up power prices to reflect the market.

What it shows, yet again, in part, is actually the bubbliness of the Chinese pseudomiracle. It shows WHY the government permits and even promotes bubbles — the fear of social unrest, 22 years after Tiananmen Square, is still high in many leaders' minds.

And, there's more fallout.

Also due to price issues, plus production issues, Chinese mines are selling only their crappiest, dirtiest, highest-sulfur coal. Weather and other problems have cut exports from Australia, a major Chinese coal supplier.

And, whether production cuts at factories due to electricity shortages, or price hikes due to realistically-priced electricity, the price of Made in China crapola coming to the U.S. will rise, in addition to rising shipping costs.

Don't expect jobs to move back here, though. Just sulfur compounds wafting across the ocean.

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