The Government Blinked First in China’s Energy Crisis
Xi may have avoided a winter power emergency for now, but only serious, structural economic reform will prevent a future meltdown.
Securing power supply at all costs.
Photographer: Qilai Shen/BloombergThe cash crunch faced by property developer China Evergrande Group in recent weeks has drawn comparison to the 2008 financial crisis, when seemingly minor turbulence in real-estate finance blew up into an economy-destroying hurricane. There’s an even better candidate for a 2008-style emergency in China right now, though: The energy crunch that’s sent coal prices soaring over $200 a metric ton and cut power to industry and homes across the country.
The vast state-owned power generators that keep China supplied with electricity — the parents of listed subsidiaries China Shenhua Energy Co., Huadian Power International Corp., Huaneng Power International Inc., Datang International Power Generation Co. and China Power International Development Ltd. — are in a similar position as U.S. mortgage giants Fannie Mae and Freddie Mac. Like Fannie and Freddie, they’re partially state-owned entities whose job is to use private finance to fund public-policy goals — in the U.S. case, mass homeownership; in the Chinese case, cheap power.