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Financial Experts: Increase in Cost of Electricity Would Be Devastating to High Energy Consumption Industries

To deal with a power shortage, the National Development and Reform Commission announced on Tuesday that it will, in an orderly manner, lift the electricity price restrictions and will not cap the price increase for high energy consumption companies. Financial experts believe that if China continues to ban coal imports, the coal shortage will remain an issue. It will also have a devastating impact on the high energy-consuming industries such as steel and chip manufacturing.

As price restrictions are lifted, the government is hoping that it will give coal manufacturers and power companies more incentives to find coal. Beijing has imposed a restriction on coal imports from Australia. China imported 780,000 tons of coal from Australia in the first half of the year, down 98.6 percent compared to the same period last year. Meanwhile the price of coal has risen by more than 100 percent.

The electricity price increase will not only impact high energy consumption industries but also residential consumers. In China, industrial electricity consumption is close to 70 percent while residential electricity consumption is about 14 percent. Even though the head of the Commission gave his assurance that the increase in the price of electricity will not impact residential consumers, Huaxi Securities previously predicted that the rise in electricity prices will directly and indirectly affect the consumer price index.

Since late September, a number of cities in three northeastern provinces suddenly had power outages for as short as 5 hours or as long as more than 10 hours. Power outages have caused an inconvenience to people’s lives as many people complained that they couldn’t charge their phones and couldn’t make online payments or contact their relatives and friends. Some areas even had a water outage as well and the schools were forced to close. Later on, the power crisis was extended to 20 provinces throughout the country.

Source: Radio Free Asia, October 12, 2021