Winter Storms Threaten China's Economy
Severe winter storms, which have hit much of central, eastern and southern China with snow and freezing temperatures, are threatening a national economy already strained by serious energy shortages and mounting inflation.
Deliveries of a range of goods, such as coal and fresh food supplies, have been disrupted across a broad swath of China as road, rail and air transport was slowed or halted by the unusual weather that during the past week has struck areas that are accustomed to milder winters.
The government called for emergency cuts in energy supplies to manufacturing industries to ensure there was enough power to warm homes and keep hospitals, railways, broadcasters and the financial system operating.
'Key enterprises should take social responsibility' and limit energy use to prevent widespread power failures, Chinese premier Wen Jiabao said in a statement after a telephone meeting with other senior leaders on Sunday.
Chinese leaders are struggling to soften the blow of the storms ahead of next week's lunar New Year holiday, when tens of millions of Chinese people return to their hometowns.
Already, hundreds of thousands of people have found themselves stranded at train stations across China as power outages on electrified lines have disrupted service. Local authorities have been housing travelers in schools and other government buildings.
Heavy snow has killed 24 people in China since Jan. 10 as more than 77.86 million people had been affected by the snow in 14 provinces, according to the Xinhua News Agency. The snow has led to the collapse of about 107,000 houses and damaged 399,000 other homes with direct economic losses already estimated at about $3 billion, according to Xinhua.
In the city of Kaili in the southern province of Guizhou, surgeons had to use flashlights when power went out in the middle of operations they were conducting at Kaili People's Hospital. Zeng Guohua, a surgeon, says power outages occur four to five times a day and have lasted as long as four hours.
In an effort to ease shortages, the government has given priority to food and coal transportation. Trucks carrying food are being exempt from toll fees. Railroads have been ordered to devote more capacity to moving coal. But rail traffic remains hindered by snow.
China's decisions could have ripple effects across the world. Many aluminum makers, whose products are used in a range of products such as cans and rockets, have shut down production in storm-affected areas. Aluminum smelting requires a lot of electricity. The shutdowns could put upward pressure on world aluminum prices.
As snow, sleet and rain fell in Shanghai, China's financial center, for the third day in a row yesterday, the Shanghai stock market's main index fell 7.2%. Shares of airlines and other companies expected to be hurt by the bad weather fell sharply.
Investors also worried that storm-related supply disruptions would further fuel inflation, which is already at its highest level in more than a decade, and prompt the government to raise interest rates, slowing the economy and depressing share prices.
With China's fast growth -- its economy expanded 11.4% in 2007, the fastest since 1994 -- depending on the ability to move goods and people quickly, the current disruptions could have broader economic implications.
Reliable road, rail and port connections, and steady supplies of electricity, have been an important competitive advantage for China in attracting manufacturing and other investment. The government has already announced heavy investment in new infrastructure this year, including $41 billion to expand railroads and $35 billion to improve electricity grids.
The bad weather, which forecasters say could continue for another week or more, highlights weaknesses in the country's energy policies.
In an effort to rein in inflation, the government has resorted to price controls, including a cap on electricity and gasoline prices. Meanwhile, market prices of coal and oil have continued to rise.
Some analysts say that has led refiners and electrical generators, whose profits are getting squeezed, to limit output.
China's National Development and Reform Commission, which sets the country's industrial policy, however, insisted yesterday that coal shortages and not electricity-price caps are the root problem.
A spokesman for the State Electricity Regulatory Commission said that 17 of China's 34 provinces and regions had suffered storm-related blackouts. The main reason, the spokesman said: 'transportation problems and a lack of coal.'
Yan Jisheng, an official at the Leiyang Power Station, one of the largest power plants in central Hunan province, says generators there have been shut intermittently because of coal shortages.
He says the plant has a five-day supply of coal now, compared with a usual inventory of 10 days. Electricity supplied by the station has also been disrupted by weather-related damage to transmission lines.
In Wuhan, a city of more than eight million people in central China's Hubei province, supplies of fresh food are dwindling and prices have been spiking.
An official at the city's largest supermarket chain, who asked to be identified only by his surname, Leng, said that supplies had fallen by about 50% in wholesale markets in Hubei and average prices for vegetables sold in his company's stores have doubled.
Deliveries of a range of goods, such as coal and fresh food supplies, have been disrupted across a broad swath of China as road, rail and air transport was slowed or halted by the unusual weather that during the past week has struck areas that are accustomed to milder winters.
The government called for emergency cuts in energy supplies to manufacturing industries to ensure there was enough power to warm homes and keep hospitals, railways, broadcasters and the financial system operating.
'Key enterprises should take social responsibility' and limit energy use to prevent widespread power failures, Chinese premier Wen Jiabao said in a statement after a telephone meeting with other senior leaders on Sunday.
Chinese leaders are struggling to soften the blow of the storms ahead of next week's lunar New Year holiday, when tens of millions of Chinese people return to their hometowns.
Already, hundreds of thousands of people have found themselves stranded at train stations across China as power outages on electrified lines have disrupted service. Local authorities have been housing travelers in schools and other government buildings.
Heavy snow has killed 24 people in China since Jan. 10 as more than 77.86 million people had been affected by the snow in 14 provinces, according to the Xinhua News Agency. The snow has led to the collapse of about 107,000 houses and damaged 399,000 other homes with direct economic losses already estimated at about $3 billion, according to Xinhua.
In the city of Kaili in the southern province of Guizhou, surgeons had to use flashlights when power went out in the middle of operations they were conducting at Kaili People's Hospital. Zeng Guohua, a surgeon, says power outages occur four to five times a day and have lasted as long as four hours.
In an effort to ease shortages, the government has given priority to food and coal transportation. Trucks carrying food are being exempt from toll fees. Railroads have been ordered to devote more capacity to moving coal. But rail traffic remains hindered by snow.
China's decisions could have ripple effects across the world. Many aluminum makers, whose products are used in a range of products such as cans and rockets, have shut down production in storm-affected areas. Aluminum smelting requires a lot of electricity. The shutdowns could put upward pressure on world aluminum prices.
As snow, sleet and rain fell in Shanghai, China's financial center, for the third day in a row yesterday, the Shanghai stock market's main index fell 7.2%. Shares of airlines and other companies expected to be hurt by the bad weather fell sharply.
Investors also worried that storm-related supply disruptions would further fuel inflation, which is already at its highest level in more than a decade, and prompt the government to raise interest rates, slowing the economy and depressing share prices.
With China's fast growth -- its economy expanded 11.4% in 2007, the fastest since 1994 -- depending on the ability to move goods and people quickly, the current disruptions could have broader economic implications.
Reliable road, rail and port connections, and steady supplies of electricity, have been an important competitive advantage for China in attracting manufacturing and other investment. The government has already announced heavy investment in new infrastructure this year, including $41 billion to expand railroads and $35 billion to improve electricity grids.
The bad weather, which forecasters say could continue for another week or more, highlights weaknesses in the country's energy policies.
In an effort to rein in inflation, the government has resorted to price controls, including a cap on electricity and gasoline prices. Meanwhile, market prices of coal and oil have continued to rise.
Some analysts say that has led refiners and electrical generators, whose profits are getting squeezed, to limit output.
China's National Development and Reform Commission, which sets the country's industrial policy, however, insisted yesterday that coal shortages and not electricity-price caps are the root problem.
A spokesman for the State Electricity Regulatory Commission said that 17 of China's 34 provinces and regions had suffered storm-related blackouts. The main reason, the spokesman said: 'transportation problems and a lack of coal.'
Yan Jisheng, an official at the Leiyang Power Station, one of the largest power plants in central Hunan province, says generators there have been shut intermittently because of coal shortages.
He says the plant has a five-day supply of coal now, compared with a usual inventory of 10 days. Electricity supplied by the station has also been disrupted by weather-related damage to transmission lines.
In Wuhan, a city of more than eight million people in central China's Hubei province, supplies of fresh food are dwindling and prices have been spiking.
An official at the city's largest supermarket chain, who asked to be identified only by his surname, Leng, said that supplies had fallen by about 50% in wholesale markets in Hubei and average prices for vegetables sold in his company's stores have doubled.