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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

“Workers’ Lives Matter” Gains Popularity in China

An online survey “Worker’s Lives Matter!” is gaining popularity in China. It is a collection of the working hours for employees who work for high tech and other well-known companies. The survey is sparking a debate about the so-called “overtime culture” in China.

“Worker’s Lives Matter!” – Workers also need to live was launched by four recent college graduates. They posted a form on GitHub for tech company employees to fill out listing their company’s name, their position, and their daily working hours.

By last Thursday, more than 4,000 people had signed up to share their data. The companies they work for include high-tech Internet companies such as Alibaba, Baidu, Tencent and Tik Tok.
The collected information shows that most businesses require a five-day work week, but employees actually work between 10 and 12 hours a day.

Working long hours has been a hot topic in China’s high-tech companies and in other white-collar jobs. In 2019, tech company employees launched a similar online initiative to bring the 996 model to the public’s attention for the first time. 996 means employees work from 9 in the morning till 9 in the evening, six days a week.

In recent months, criticism of overtime has been growing. The government’s recent crackdown on high-tech companies has also begun to focus on the treatment of their employees. This year, Internet companies such as Tik Tok, Kuaishou and Meituan have begun cutting their mandatory weekend overtime. In August, China’s Supreme Court ruled that the 996 model is illegal.

Source: Deutsche Welle, October 14, 2021

Taiwan Business Investment In Mainland Dropped by Half in Past Decade

Taiwan business investments in mainland China have dropped by almost half from 61.2 per cent to 33.3 per cent in the past decade. This suggests that Taiwanese businesses are fleeing China in large numbers. Those who are still doing business in China face mounting business risks.

Lin Zonghong, a researcher at the Institute of Sociology at the Chinese Academy of Sciences in Taiwan recently spoke at an online forum regarding Taiwan business investment risks in the mainland. According to Lin, Taiwan business investment in the mainland can be divided into three stages. The first stage was from 1992 to 2007. That was when Taiwan’s Foreign Direct Investment (FDI) in the mainland kept rising. By 2002, it passed 60 percent of its total FDI. From the 2008 global financial crisis to 2014 when the Sunflower Student Movement broke out in Taiwan, FDI from Taiwan in Mainland reached its peak. The Sunflower Student Movement refers to a movement in which a coalition of students and civic groups organized  to protest the passing of the Cross-Strait Service Trade Agreement (CSSTA) by the then ruling party, the  Chinese Nationalist Party (KMT). The third stage is post 2015 when Taiwan investments were withdrawn from the mainland and shifted to other southeast Asian countries and the U.S..

Lin believes that China’s FDI has been overstated because it includes investments from Hong Kong, which accounts for 75-80 percent of the total. Those investments from Hong Kong were originally from the mainland. They were re-directed through Hong Kong into the mainland just to qualify for foreign investment tax incentives. If the inflow from Hong Kong was excluded, China would have seen a negative FDI.

Since 2007, Taiwan businesses have been losing tax and labor benefits that they used to receive on the mainland. Many of them ended up moving to middle or western regions in China. In 2007, there were still 356 Taiwanese businesses in the mainland. By 2017, the number was 124. By 2020, only 108 were left. Also compared to Taiwan, business costs are higher in the mainland. The data suggests that the gross profit for Taiwan businesses operating in the mainland is less than it is for those operating in Taiwan.

Since Taiwan businesses entered the mainland in 1998, Taiwan has seen factory closures, unemployment, low wages among the younger generation and an increase in poverty. Lin reiterated that Taiwan businesses must understand the business risks in the mainland and look at the current business environment in the mainland as a warning for future business decisions.

Source: Epoch Times, October 17, 2021

Chinese Refugee Recalls Harassment Call From China

On September 27, Ding Yiduo, a refugee from China, shared with the Epoch Times about a harassment phone call he received from China.

In 2019, prior to China’s National Day, Ding posted comments in his WeChat account to support the Hong Kong pro-democracy movement. He was detained, interrogated and threatened. After his release, Ding worked as crew member for a Chinese ocean carrier. In 2020, when he was on a business trip to the US, Ding decided to stay and seek refugee protection.

On September 25, Epoch Times published an interview with Ding about his experience in China. Two days later, Ding received a call from the chief of his village back home. The village chief called Ding a traitor and accused Ding because he vilified China and the party. He told Ding that if Ding can’t control the damage from the  Epoch Times‘ report, Ding’s name will be removed from his family’s genealogy.

Ding believes that the CCP public security bureau must have ordered the village chief to make the call, which was full of CCP propaganda and manipulation. He told Epoch Times he became more disappointed about CCP regime after the call. He thinks that he should do more to expose the evil nature of the CCP.

Source: Epoch Times, September 29, 2021

Party Officials Take the Tang Ping Attitude

“Tang Ping” has become a social buzzword in China. It refers mainly to the younger generation, to those who choose to take a passive attitude toward life and to stay away from the fierce competition in China. This vast form of passive civil disobedience came at a time when the communist regime was promoting “working and consuming” to keep the economy running, as it faces international isolation. At the beginning of this year, the CCP’s mouthpiece People’s Daily issued number of articles urging young people to abandon this idea.

Recently, however, it appears that CCP party officials have taken on the “Tang Ping” attitude at work. On September 27, People’s Daily published an article that the CCP organization department in Longwan district, Wenzhou city of Zhejiang province wrote. The article highlighted a phenomenon that some party officials are holding a “Tang Ping” mentality because of re-election. It cited that some officials have stopped doing their jobs or taking any responsibilities because they feel they have reached their retirement age or they have little chance of being elected or promoted. The article appealed to the officials to change their attitude and not to “Tang Ping.” It asked them to change their mentality for the sake of the party and the nation and to put self-interest behind the bigger goal (of the party).

Source: People’s Daily, September 27, 2021

Xi Jinping’s Latest Power Purge: Two Former Security and Justice Officers Ousted

Within a two day period, two high ranking officials in the public security sector in China were ousted. This move indicates Xi Jinping is continuing to purge his political opponents prior to the Chinese communist party’s 20th Congress in 2022. Xi has determined that, by 2022, he must completely secure the power of his leadership.

On October 2, the Central Commission for Discipline Inspection issued a short statement that Fu Zhenghua, the former Minister of Justice, is being investigated. The Commission didn’t provide further details. Just two days earlier, on September 30, the Commission issued a separate notice announcing Sun Lijun, the former vice-minister of Public Security, would be prosecuted for fraud, being too politically ambitious, and damaging the party’s unity.

Between 2013 and 2018, both Fu and Sun held several official positions. One was the head of the 610 Office—an extralegal secret police force akin to Nazi Germany’s Gestapo, which has been implementing Beijing’s persecution policies against Chinese citizens who practice Falun Gong, a spiritual practice that involves meditation exercises and moral teachings.

In 2012, Xi Jinping began a relentless “anti-corruption campaign” to eliminate his political opponents. Since then, more than 100 “tigers and flies”— high- and low-ranking officials — have been purged for crimes of corruption such as bribery and embezzlement. There has been some speculation that, following the removal of Fu and Sun, another bigger “tiger” could be ousted next.

Source: Epoch Times, October 2, 2021

Electricity Prices Increase Following Recent Power Cuts

Since August, over 20 provinces in China have issued notices to limit electricity usage. This has caused blackouts in certain regions. The power plants are faced with increased electricity demand while there is a coal shortage and thus coal prices are higher. They are operating at a loss because the electricity price is set according to State Council guidelines.

Starting in July, over eight provinces have increased the price of electricity, but they are still within the 10 percent ceiling previously required by the State Council. Several provinces introduced peak demand pricing to normalize the usage. Currently the electricity price increase is aimed at business electricity consumption rather than at residential use.

On September 29, the National Development and Reform Commission issued a notice calling for increased coal production while enabling the coal power plants to set a price that is market driven and reflects the changes in demand and cost.

The central authorities said it is expected that this wave of price increases will continue to expand.

Source: Central News Agency, October 1, 2021

Cost of Ocean Freight from China to U.S. Up Tenfold Due to Container Shortage

Because of a container shortage, the cost of ocean freight from China to the U.S. has soared tenfold since August and reached a record high.

The price of a 40-foot container from China to the U.S. used to cost between US$1,000 and US$2,000, but since August it has risen to a record US$20,000. COVID shutdowns in ports in certain cities in China and other countries as well as a shortage of drivers at the port are the main culprits. It has a domino effect on the downstream supply chain, particularly in September and October when most of the goods entering the North American and European markets are for the upcoming Christmas shopping season.

Even though Chinese container manufacturers have increased their capacity to build more containers, it will still take some time to ease the constraint. Therefore, the container shortage will last for a while.

Source: Epoch Times, September 28, 2021