Tuesday, May 17, 2011

China Forced to Ration Electricity

Looks like those price controls are working out real well for China.

Roughly one month ago, I wrote:
Price controls are always an attempt by government to fight economic reality. If economic forces are pushing prices toward a certain level and government attempts to institute price controls will only result in shortages and long lines for the purchase of goods. It is an extremely crude tool of economic coercion that can suck the life blood out of an economy. This is not a sound move by Chinese officials and may signal the end to the recent Chinese super-growth.

Guess what?

Chinese provinces are rationing electricity as soaring coal prices squeeze power generation companies, reports FT.

FT goes on:
Chinese officials have been warning for weeks that shortages would be more severe than usual this year. On Tuesday, Xue Jing of the China Electricity Council, an industry body that reports to state regulators, told state media that China would "face its most severe electricity shortage since 2004".
China is not quite communistic, but it is far from a complete free market environment.

And if you think it is something else besides price controls that are causing the problem, then note this further FT reporting from China:
Ms Xue said there could be a national shortage of 30m kilowatt hours this summer, which she said would equate to the consumption of three Chongqings, referring to the southern city of 31m.

Chinese electricity companies are facing financial pressure from the increase in global energy costs as Beijing hesitates to increase state-controlled electricity prices because of concerns over inflation.


  1. China: becoming more like the US every day!

  2. There's been hundreds of years worth of evidence that price controls always fail. Why does every government try at some point to fight it?