Economy/Resources - 68. page

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
https://www.rfa.org/mandarin/yataibaodao/jingmao/ac-10122021051920.html

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
https://p.dw.com/p/41gnO

State media China News Weekly (中国新闻周刊) quoted experts who expect that, against the backdrop of “carbon peak” and “carbon neutral” targets, it is expected that a larger scale and more severe power shortages will occur frequently during the 14th Five-Year Plan period (2021 to 2025).

The recent blackouts in China have affected more than 10 provinces, among which the Northeastern provinces have had to “pull the plug” and cut residential power usage completely.

Between 2016 and 2020, China cut its coal production capacity of over 1 billion tons. Yuan Jiahai, a professor at North China Electric Power University, pointed out the fact that the country’s annual coal production was between 5 and 3.75 billion tons, respectively before and after the cut in capacity.

Since last year, the coal-producing province of Inner Mongolia has been affected by the coal business-related anti-corruption campaign. A large volume of coal production capacity has been reduced due to factors such as an increased measure of safety supervision of coal mining, environmental protection, and the criminalization of the overcapacity of production.

On the demand side, since 2017, China’s coal consumption has rebounded back to an annual level of 4 billion tons, while the advanced coal production capacity released in these two years is about 200 million to 300 million tons per annum. There is a gap between total coal supply and demand.

According to Feng Yongsheng, a scholar at the Chinese Academy of Social Sciences, against the backdrop of the “carbon peak,” and the “carbon neutral” target, because the generation of renewable energy is random, volatile and intermittent, a high proportion of new energy in the power system will lead to a growing gap between the peak and base power load, or the difference in the electric generation between high demand and minimum level required. Feng expected that during the 14th Five-Year Plan (2021 to 2025) period, there will be frequent occurrences of large scale and sever power shortages in China.

Source: Central News Agency, October 4, 2021
https://www.cna.com.tw/news/acn/202110040256.aspx

China’s real estate companies are fighting for their survival. While the world’s focus was on how the Evergrande Group (恒大集团) will resolve its debt problem, another real estate company, Huaxia Xingfu (华夏幸福), became the first company to offer a debt restructuring plan.

Huaxia Xingfu has debts valued at 219 billion yuan (US$34 billion). On September 30, it held a conference with financial institute debt holders. After the meeting, it announced a plan to pay off or defer its debts. The announcement included the following:

1. Sell high-quality assets to recoup about 75 billion yuan in cash (Editor’s note: This action is not a direct debt payment; all the items below are.)
2. Sell assets, which will deal with associated debts of 50 billion yuan.
3. Extend or settle high-priority financial debts of about 35.2 billion yuan.
4. Pay back debts of 57 billion yuan with cash.
5. Set up a trust with the company’s own property holdings to offset 22 billion yuan.
6. For the remaining 55 billion yuan in debt, the company will extend, reduce interest rates, and gradually settle them through subsequent business development.

Though Huaxia Xingfu claimed that it will not run away from any debt, a senior debt restructure expert believes that the loss to the debt holders will be inevitable and the loss could be huge.

For the first item, he estimated that Huaxia Xingfu may have to sell assets worth 150 to 250 billion yuan to get back 75 billion cash (court auctions usually result in sales at 30  to 50 percent of the original values). Huaxia Xingfu will use its properties for the second item and the debt holders may recover 50 to 70 percent of their money. The third item might refer to loans not secured by properties, which on average will result in a recovery rate of 10 to 30 percent. The debt holder may get 10 to 20 percent back from the fourth item. The fifth item may have a 60 to 80 percent loan recovery. The recovery rate on the last item, the sixth, may be just 5 to 10 percent.

Source: Sina, October 1, 2021
https://finance.sina.com.cn/tech/2021-10-01/doc-iktzqtyt9175683.shtmlto

Ren Zhengfei, the founder of the Chinese telecommunications equipment giant Huawei, proposed that the company would hire more foreign talent and turn its U.S. R&D centers into “recruitment agencies.” He also stated that Huawei’s R&D centers in other countries should also step up talent recruitment.

Huawei made an  announcement on September 28, 2021. It stated that Ren made the above remarks on August 12, 2021, at a Huawei meeting on how to recruit foreign talent.

At that meeting, Ren pointed out that Huawei is at a critical stage of strategic survival and development. It must be more active in acquiring the best talent in the world. In addition to recruiting the top talent in China, it must increase the recruitment of overseas Chinese students.  More importantly, Huawei should step up its efforts to hire foreign talent and increase the budget for Huawei’s overseas R&D centers.

He expressed that the United States imposes restrictions on some Master’s and Ph.D. student visa applications. Chinese students returning from studying in the United States will gradually decrease in the future. Therefore, Huawei must find ways to attract talent from other countries who are studying and working in Europe and the United States.

Ren asked that Huawei’s overseas R&D centers take responsibility and carry out the mission of recruiting talent. “It is necessary to turn the North American R&D centers into talent recruitment agencies.” Ren emphasized that all overseas R&D centers must do the same in order to build a global talent network for Huawei.

Ren said, “We need to recruit some ‘high noses’ [foreigners] that know how to use ‘foreign guns and cannons.’ It may take three to five years to move gradually from the approach of the Chinese Communist Party (CCP) army [against Japan in World War II] to an internationalized approach. In particular, we must attract outstanding talent from other countries who have studied or worked in the United States and Europe to work in China.”

Ren further stated that overseas R&D centers are primarily for research, not product development and that Huawei should encourage those currently engaged in product development to work in China for some time.

Ren believed that it is necessary to support some outstanding Ph.D. candidates to join Huawei in China and do post-Doctoral studies in coordination with Chinese universities.

Source: Huawei, September 28, 2021
http://xinsheng.huawei.com/cn/index.php?app=forum&mod=Detail&act=index&id=6466593

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
https://www.cna.com.tw/news/acn/202110010291.aspx