Extensive Blackouts During Snowstorm Reveals Vulnerability of China’s Economy

Correspondent Ye Pengfei of Singaporean United Morning News (Zao Bao) wrote a commentary on the extensive blackouts and railroad paralysis in China caused by a recent snowstorm:

The snowstorm came just about a week before the Spring Festival, adding extra burden to China’s overloaded railroads. It caused such devastating problems that Premier Wen Jiabao had to go to Beijing West Railway Station personally for inspection, urging officials to be well-prepared for the upcoming transportation rush.

China’s power supply system was also severely influenced. Large-scale blackout happened in 13 provinces during the storm, which was unprecedented in the past ten years. Various places across the country were in dire shortage of coal. News headlines such as “ Jiangsu’s coal storage can just sustain electricity generation for four days and a half” and “Shangdong’s coal would be used up in less than nine days” showed how serious the shortage is.

Although the problems were directly caused by severe weather. But it shouldn’t be the single factor to be blamed. China’s economy has been rapidly developing in the past thirty decades, ranking No. 4 in the world, making it indisputably a rising superpower. Therefore it’s perplexing that a snow storm can easily cause a nationwide paralysis of its railway and power systems. It reminds people of the damage done to American international image by Hurricane Katrina in 2005.

China’s media immediately came to the conclusion that the root of the problems lie in in the fact that China’s railways, power plants and power grid are monopolized by the state.

A commentary on China Business News explicitly pointed out that the power shortage was caused by monopoly, and exemplifies that how the existing monopoly in China’s economic system could lead to serious economic woes.

Another article on Chongqing Times said that power plants have to suffer profit loss because of the rising prices of coal, but the state-owned power grid companies are reaping handsome profits. The assets return rate of Guangdong Power Grid Company was as high as 11%. Therefore the monopoly of power grid should be rescinded.

An article on Red Network questioned why all the industries that experience supply shortage are those who are monopolized by the state. The author said that China had long entered the era of supply surplus, and only state-monopolized industries experience shortage problems, such as power, railway, and oil industries . The power industry experiences this problem frequently. Power shortage happens once every several years in the country, causing serious problems.

The author continued to say that the original purpose of creating these monopolized companies is to prevent shortage and ensure stable supply. However, they’ve produced exactly the opposite results.
Obviously, the conflict between providing public services and seeking its own profits on the part of monopolized companies will become increasingly acute as China’s economy develops.


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