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China Faces an Electricity Crisis

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Welcome to Foreign Policy’s China Brief.

The highlights this week: China grapples with power shortages across the country, why Beijing may breathe a sigh of relief for Japan’s new prime minister, and more on China’s hostage diplomacy.

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Welcome to Foreign Policy’s China Brief.

The highlights this week: China grapples with power shortages across the country, why Beijing may breathe a sigh of relief for Japan’s new prime minister, and more on China’s hostage diplomacy.

If you would like to receive China Brief in your inbox every Wednesday, please sign up here.


Blackouts Rock China

China is suffering a power supply crisis, adding strain to an economy already burdened by a growing property and debt crisis. The problems have been brewing for months, but in the last week, 20 out of 31 mainland provinces and regions have intermittently cut power, resulting in factory shutdowns and domestic blackouts. Even Beijing, which is highly prioritized in the electrical grid, has implemented a power-rationing plan.

Power cuts used to be routine in China, and households were well prepared for them. Even in the 2000s, Beijing experienced unexpected power failures every few months. By the 2010s, the grid had stabilized, and power cuts became unusual. As a result, households and institutions—many of which once had their own generators—aren’t equipped to cope. The shutdowns have left high-rise residents stranded without elevators and caused traffic problems.

But clashing economic and governmental incentives, not generator capacity, are causing the problems. Fifty-six percent of China’s power comes from coal, and thermal coal prices have more than doubled around the world after the initial shock of the pandemic. A Chinese ban on Australian coal hasn’t helped. In most countries, these prices would be passed on to consumers, but Beijing tightly limits the maximum price of electricity—causing generators to reduce their supply or shut down rather than lose money.

On top of that, local governments have struggled to meet targets imposed under China’s dual control of energy consumption policy, which requires governments both restrict total power consumption and show a favorable ratio of power consumption to productivity. When they missed their targets last week, it may have prompted authorities to seek to reduce power usage further, although that seems a minor factor compared to coal prices.

The shortages are hitting already stretched global supply chains, with both Apple and Tesla factories suffering shutdowns in China as well as many more small businesses that play a key role in global manufacturing. The crisis comes just as factories are revving up for the Christmas rush, meaning likely shortages on shelves in the West. Consumption targets caused similar problems in the major export center of Yiwu, China, last December.

An improvised and rapid series of both central and local government reactions to the crisis is likely, which may spark more problems. So far, the official response has stressed rationing over price adjustments, but Guangdong and Hunan provinces have already introduced so-called floating tariffs to try to make power production profitable again. But time is not on the government’s side: China’s Golden Week holiday starts on Friday, during which more than 600 million people usually travel, with consequent energy spikes.

The more worrisome deadline is the arrival of what is likely to be a very cold winter. The northeast, which already suffers from economic decline, is among the worst hit areas for power shortages. The region had a major heating crisis in 2017, when over-zealous government policies resulted in coal heating systems being shut down or destroyed, leaving many villages and towns freezing.


What We’re Following

Japan’s leadership elections. Japan’s Liberal Democratic Party (LDP) chose Fumio Kishida as its next leader—and thus the country’s next prime minister. The move may have elicited sighs of relief in Beijing, since Kishida is seen as a relatively moderate figure on China. Although Kishida served as foreign minister under hawkish former Japanese Prime Minister Shinzo Abe, his own stances differed.

Nonetheless, Kishida has already signaled a willingness to take a harder line on Beijing, such as by setting up a special advisor on human rights. Japan’s public has turned heavily against China, with 89.7 percent of Japanese viewing the country negatively. The LDP seems to be following suit.

Beijing’s hostage diplomacy. The release of Michael Kovrig and Michael Spavor, the Canadians held hostage by Beijing after Canada detained Huawei chief financial officer Meng Wanzhou on U.S. fraud charges in December 2018, ends a long-running standoff that leaves behind serious wounds. But it’s notable this week also saw Victor and Cynthia Liu, two young U.S. citizens banned from leaving China, return to the United States. China intended to force their estranged father, wanted financier Liu Changming, back to the country.

Beijing regularly threatens the family members of fugitives or dissidents, including with the increased use of exit bans. The Liu siblings’ release may have been part of a complicated three-way diplomatic deal around Meng. Many other foreign citizens, such as Australian journalist Cheng Lei, remain detained on dubious charges in China.

Legal expert Julian Ku has a smart take on how China is leveraging the weakness of its own judicial system and the strength of the West’s judiciary for its own ends.

Abortion debate. A line in central government documents that speaks of “reducing medically unnecessary abortions” has prompted heated debate among China analysts. Similar language appeared in 2011 documents, but the latest language comes as Beijing’s family planning policy places increased emphasis on natalist policies to overcome serious demographic gaps. A more generous reading of the line sees it as a call for greater sex education and contraceptive access, policies also mentioned in the document.

As sociologist Leta Hong Fincher and others have noted, the underpinnings of new authoritarianism are fundamentally patriarchal. State policy still uses coercive power to reduce minority births, but for women in the Han ethnic minority, the trend is in the other direction. There are already reports of abortion, once easily available in China, becoming harder to access.


Tech and Business

Evergrande stumbles on. The debt-laden property firm Evergrande Group is still juggling money to keep the wolf from the door, with no sign of an imminent bailout but plenty of painful deadlines ahead. As Logan Wright writes in Foreign Policy, the problems go far beyond Evergrande, but the firm is still a valuable test of the government’s priorities.

If the state steps in, it risks worsening an already swollen bubble; if it stays out, it risks widespread defaults. One thing that seems likely is Xu Jiayin, the founder of Evergrande, is likely to go down hard. It doesn’t help he’s mentioned prominently in Desmond Shum’s recent memoir Red Roulette: An Insider’s Story of Wealth Power, Corruption, and Vengeance in Today’s China, which discusses the corruption and politicking of Chinese elite life in the 2000s and 2010s.

LinkedIn censorship. LinkedIn remains one of the few Western social media services available in China because it censors its content there to meet government demands. The scope of that censorship has increased in recent years, and LinkedIn now offers “help” for affected individuals to make their content available in China again. Although such self-censorship is typical for Chinese companies, Western companies voluntarily signing up to it should be concerning.

LinkedIn’s content is currently only censored in China, but getting that censorship lifted requires removing it from one’s profile altogether.

Raimondo’s dual position. U.S. Commerce Secretary Gina Raimondo swung between backing. economic engagement with China last Friday to vigorous complaints about intellectual property theft and blocking critical business deals on Tuesday. The second remarks may have in part reacted to criticism she received over the first, but it also represents the fundamental contradiction of U.S. business interests Raimondo said she wants to represent.

On the one hand, U.S. companies are increasingly aware of what a hostile and risky environment China is. On the other hand, many of them still desperately want access to the market and are keeping up their traditional role in U.S. lobbying as some of the biggest boosters of the Chinese Communist Party.

This is not a CAPTIS article. Originally, it was published here.