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China's growth flickers to a halt
Three Gorges Probe ^ | 07.04.04 | Jonathan Watts

Posted on 07/12/2004 6:35:53 PM PDT by Dr. Marten

China's growth flickers to a halt
by Jonathan WattsBeijing: It looks like the set of a Spielberg science fiction epic. At night, deep in the heart of Sichuan province, miles and miles of vast, silent darkness suddenly give way to the glare of hundreds of spotlights, the frenetic activity of cranes and tractors, and the roar of millions of tonnes of water thundering out from turbines the size of cliff faces.

This is the world's biggest hydroelectric plant ?the Three Gorges Dam on the Yangtze river ?which was rushed into operation last year to meet China's seemingly insatiable appetite for energy. Engineers are now working around the clock to finish the final stage of the project, which will eventually generate 18,000 megawatts of electricity.

This is supposed to satisfy a tenth of the nation's power needs ?one of the main justifications for a scheme that was pushed ahead despite concerns for the river environment and the welfare of hundreds of thousands of people who were forced to move before their homes disappeared under the waters.

Even this mega-project has not been enough to prevent the worst power shortages in more than 20 years. A summer of cuts, partial blackouts and restrictions has now prompted experts to warn of an energy crisis with global implications.

The world's most populous and fastest-growing nation is eating up a growing share of the planet's oil and coal, pushing up international energy prices and increasingly being forced to look beyond its borders for supplies. In the next 15 years, demand is expected to double, which would bring about a change in the balance of power ?not just in terms of electrical supply, but diplomacy, security and finance.

The environmental impact is huge. After the United States, China is the world's biggest emitter of greenhouse gases.

China is on the biggest power-plant building spree the world has ever seen. Last year spending on generators almost doubled to 200 billion yuan (?3bn). So many new hydroelectric dams, coal-fired generators and nuclear facilities are being built, the equivalent of Britain's entire electricity output is being added to the capacity of the country's national grid every two years.

But it is not coming on line quickly enough to meet the appetite for power, with a sharp increase in factories producing steel, cars and concrete. Rising affluence means that a growing middle class can afford gas-guzzling cars and electricity-gobbling air-conditioners.

From January to April, the demand for energy in China rose by 16 per cent, outstripping demand to such an extent that 24 of the country's 31 provinces were hit by power cuts and partial blackouts or 'brownouts'.

In Guangzhou and other manufacturing centres, the lives of tens ?possibly hundreds ?of thousands of factory workers have become nocturnal because of power shortages in daytime.

In Shanghai ?the nation's business centre ?employers have been advised to send staff home when the mercury rises above 35C, factories are having to switch production hours and entertainment establishments are prohibited from turning on their coolers before 4pm.

'Insufficient energy supply and power shortages have become a bottleneck for the city's rapid development,' Shanghai's vice-mayor, Hu Yanzhao, admitted.

Hit by power failures in peak periods, factory owners are adjusting production schedules, but many warn that their profitability is at risk because of output falls and rising energy prices. 'Energy is a really big problem for us,' said Osmo Oja, the director of a plant in Shenzhen. 'We've faced shortages and sometimes even 24-hour cuts. At times we have survived only because of our own power generator.'

So far the effect on the economy has been limited, but if the situation continues analysts warn that China's attractiveness to foreign manufacturers could be threatened. 'It's a long-term crisis, and one that will deepen,' said Andy Xie, Asia-Pacific chief economist for Morgan Stanley. The strains are evident through the chain of energy supply. Despite a rise in production by 25 per cent, coal stocks are at their lowest level in more than 20 years. Many power plants have been forced to cut supplies or switch to diesel.

But that is becoming an increasingly expensive option. A decade ago, China had an oil surplus that it could sell overseas, but its domestic demand has increased so much that it overtook Japan last year as the world's second biggest importer. According to the International Energy Agency, China accounts for half of the global growth in demand for oil. Some analysts believe that this is a bigger factor than the Middle East crisis in the recent rise in oil prices to a 20-year high.

The need to secure energy resources also helps to explain why China has become a more active player on the global stage. In the past two years, Beijing has dropped its usual reticence to engage in joint military exercises with Central Asian nations, and to rival Japan in 'pipeline diplomacy' towards Russia, aimed at tapping into the giant oilfields in Siberia.

With nuclear plants, hydroelectric dams and gas pipelines under construction, the government predicts supply will meet demand within two years. But analysts warn that ?unless the economy cools down or greater effort is paid towards energy conservation ?the problems are likely to re-emerge soon afterwards.

'China's challenge is to boost power capacity in 20 years to a degree that took America half a century,' said Zheng Jianchao of the Academy of Engineering of China. 'To do that, we need an additional supply equivalent to four more Three Gorges hydroelectric dams, 26 Yanzhou coalmines, six Daqing oilfields, eight gas pipelines and 20 nuclear power plants, as well as 400 thermal power generators and the network to link them all together.'

If this can be achieved, the global balance of power will be transformed. If not, the world's fastest-growing economy could simply run out of steam. Between the two extremes is a greater emphasis on energy conservation.

Xu Dingming, director of the Energy Bureau, said recently that it was not feasible to keep boosting supply to match the expected 400 per cent increase in the size of China's economy by 2020.


TOPICS: Business/Economy; Culture/Society; Editorial; Foreign Affairs; News/Current Events; Politics/Elections
KEYWORDS: china; chinastuff; energy; energyprices; globalism; threegorges; trade

1 posted on 07/12/2004 6:35:54 PM PDT by Dr. Marten
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To: Dr. Marten
we need an additional supply equivalent to four more Three Gorges hydroelectric dams, 26 Yanzhou coalmines, six Daqing oilfields, eight gas pipelines and 20 nuclear power plants, as well as 400 thermal power generators and the network to link them all together.'

And it's all sitting to the North ... in Siberia.

2 posted on 07/12/2004 6:38:42 PM PDT by Centurion2000 (Many a law, many a commandment have I broken, but my word never.)
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To: *China stuff; HighRoadToChina; maui_hawaii; Slyfox; Free the USA; rightwing2; borghead; ChaseR; ...


3 posted on 07/12/2004 6:39:08 PM PDT by Dr. Marten (I donated to the Democratic Party today, but I forgot to flush it down the toilet....)
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To: Dr. Marten

Invest Now?

4 posted on 07/12/2004 6:40:04 PM PDT by maestro
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To: Dr. Marten

Interesting post..however, if as many assume..much of the Chines economic growth turns out to resemble the "Massachusets miracale"..or doesn'tmplode under a weight of bad/fradulent loans..then this is a handy,a nd face saving excuse..

5 posted on 07/12/2004 6:40:49 PM PDT by ken5050 (We've looked for WMD in Iraq for LESS time than Hillary looked for the Rose Law firm billing records)
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To: Dr. Marten

I just don't see the problem. The Chinese seem to have a pretty free market economy at this point, so it will adjust to balance demand versus supply. I only wish the US liberals would stop tinkering with our economy. With all of the regulations, taxes, and mandated employee programs, we handicap our economy. Of course, China is also more likely to experience a nuclear plant melt-down than we are! I guess some regulations are OK. 8)

6 posted on 07/12/2004 6:54:36 PM PDT by CitizenUSA
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To: Dr. Marten; maui_hawaii
Thanks for the ping. ChiCom Watch has a bunch of related articles today:

US-China trade battle heats up
China defends currency quota on foreign banks
China's automakers start to slide
China Stocks Slide
China's Bourses: Stock Markets Or Casinos?
Foreigners feed on China's huge appetite for crude
China's imports and exports soar
China retreats in chip dispute - for now
Shanghai switches off neon lights
Grinding The Rust Off China's Northeast

Hit by power failures in peak periods, factory owners are adjusting production schedules, but many warn that their profitability is at risk because of output falls and rising energy prices.

I guess the real impact depends on the factory. Owners may simply cut wages (if any are given) and/or the PRC will continue to peg the renminbi against the dollar (ie not float the currency)...There are probably other means to keep their products cheaper than competitors and artificially boost the economy. Many, however, don't do much for economic stability.

7 posted on 07/12/2004 8:24:57 PM PDT by batter ("Never let the enemy pick the battle site." - Gen. Patton)
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To: Dr. Marten

Wasn't it the rationale of the environmentalists to shift the dirty manufacturing plants to developing nations in order to reduce pollution and energy use in the United States? Well, they've succeeded. Except that the pollution isn't gone, it's just transferred. And the energy use isn't lessened. It's multiplied many times with the accelerated industrialization of this major population center. Nice work, fellows. I'm sure you know where we can get some extra oil reserves, because the Chinese will be competing for all of the ones we have now.

8 posted on 07/12/2004 8:39:46 PM PDT by henderson field
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To: henderson field

henderson field wrote: "And the energy use isn't lessened."

VERY good point! What the environmentalists don't understand is this: It takes high technology to reduce pollution and increase efficiency. This high technology is located in advanced countries, like the US and Japan. Third world countries simply don't have the economic or technological means to be environmentally efficient. It's the third world that does the most damage to the ecology. Just look at how much the US has cleaned up its air and water over the last 30 years! No doubt the Chinese are still dumping vast quantities of industrial byproducts into their rivers.

9 posted on 07/12/2004 8:47:02 PM PDT by CitizenUSA
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To: Centurion2000
And it's all sitting to the North ... in Siberia.

Siberia has her own rules, and the Chicoms wouldn't last a single winter.

Koreans, on the other hand, might feel right at home.

10 posted on 07/12/2004 9:28:50 PM PDT by struwwelpeter
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To: struwwelpeter

errr. china does have cold provinces -- they could easily take over Siberia if Russian nukes weren't preventing that. Once the chinese figure out a way to incapacitate that, bye bye Mother Russia. The way I figure it, Russia as a state has existed only since after the Mongols invaded and left viz. in the 1500s. What is now Russia was for centuries just open steppe, free for the taking. This could not be invaded from the West -- both Napoleon and Hitler got defeated by Russian weather. But, it CAN be taken from the east -- the Huns and the Golden horde proved that. Actually, it's not only Russian nukes that prevent a chinese invasion -- the Asian powers are forming alliances to balance each other out -- China is in alliance with Pak and the islamicstates while Russia is in alliance with India and India is in alliance with Vietnam, Iran and Israel

11 posted on 07/13/2004 2:29:51 AM PDT by Cronos (W2K4!)
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To: Cronos
Much of China's 'growth' was a lie. Its a communist government, communists lie.

Besides remember when they thought Japan would buy the US in the 80's?? ha!

12 posted on 07/13/2004 2:32:15 AM PDT by GeronL (
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To: GeronL

What has China's growth got to do with my post? My post talked about the geo-political posturing.

13 posted on 07/13/2004 2:33:42 AM PDT by Cronos (W2K4!)
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To: GeronL
Besides remember when they thought Japan would buy the US in the 80's?? ha!

Actually Japan DID buy the US, mostly -- quite a lot of American real estate is held by Japanese companies. Of course, this has pulled in Japan to get a lot closer to the US. Can you even envisage a Japan at war with the US? No.
14 posted on 07/13/2004 2:35:00 AM PDT by Cronos (W2K4!)
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To: Cronos
Just a reaction to the headline/article.

Not specifically directed at you... I forgot to delete your name. And I know that China would look at Siberia very closely.

15 posted on 07/13/2004 2:35:32 AM PDT by GeronL (
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To: maestro; Dr. Marten; soccer8
Invest Now?

While it wouldn't constitute a direct investment into China, situations like this lead to some of the few potentials to sell things to China.

Super conductive materials might be one...

Solar power might be another.

There is a big problem there and someone is going to have to spend $$$ to fix it.

I don't tout China a lot, but if someone comes up with a super efficient power grid system using superconductivity or something...

Wow. And it won't be just for use in China either. We will probably adopt it first, and after we pay for all of the technology, we will start to sell overseas to places like China...

Of course we are talking 30 and 40 years out...

16 posted on 07/13/2004 7:39:38 AM PDT by maui_hawaii
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To: GeronL
Not a great counterexample; Japan does own a large portion of the United States, and we own very little of Japan in return. In fact, at least in some industries, American companies literally cannot own property in Japan (at least this was true until recently, but I haven't verified that it still holds true this morning.)

Japan has over $600 billion in our public debt; out of every tax dollar collected from you, a nice bit of it goes to Tokyo. In fact, it is now enough that Japan can now pay about 30% of its own interest due on its $4 trillion or so of public debt just from the money it collects from the U.S. Treasury.

Neat, hunh? Our huge budget and trade deficits with Japan mean that you not only get to work for the American government until May each year, but that at least a few weeks are spent working for Japan's government too! (Don't worry, with the rate China has been accumulating dollars, you'll get to put in more days for them, too.)

Japan's "failure" was more of a matter perception than reality; Japan did succeed in buying the U.S., or at least a good part of it. Sure, they made some famously bad deals like Rockefeller Center and Pebble Beach. But they were buying here because there so much money chasing so little land in Tokyo that even the big prices we charged were small change. When they lost on those particular investments, it didn't certainly throw them in the poorhouse. Their own stock bubble and asset bubble did slow them down for a decade, but now things are looking better.

Let me vent a bit. We have spent the last many years negotiating "trade agreements" that are breaking us. Literally. We already work for other governments just to pay the interest on that debt, and that debt is growing madly. (I am conflating our trade and budget deficits a bit, but they go hand-in-hand since we are the world's reserve currency, something we have been playing off to fund these twin deficits.)

We have to stop this stupidity. "Free" trade is anything but: It is costing us all enormously, and it is growing worse each year. We have gone from the days when we thought a $100 billion per year was bad to today, where $600 billion per year is regarded as naught.

I have seen the argument that because it is only a tiny fraction of our GDP, it doesn't matter. Remember deficits accumulate into debt , which you continue to pay interest on until you retire some of it. I have also seen the argument that, heck, they're only dollars. Well, yes, with that attitude, we might eventually destroy their value, but that is even more unpleasant situation than our indebtedness. Ask Germany about inflating the currency into the stratosphere.

We all have to collectively work to pay the interest on that debt, and while some of the free traders certainly don't mind working for Japan or China for a few weeks each year, a lot of us probably do.

17 posted on 07/13/2004 8:16:28 AM PDT by snowsislander
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To: struwwelpeter

Do you ever miss it?

18 posted on 07/16/2004 6:10:33 PM PDT by Askel5
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