China Escalates Trade War With Australian Coal Ban, Despite Shortages

China has officially banned the importation of Australian coal, striking at the heart of the country’s energy sector. The decision, announced on Monday, escalates the Australia-China trade war that began after Canberra called for an independent investigation into the origins of COVID-19 in March. Significantly, the decision comes even as China faces its own shortage of coal this winter, which has prompted nation-wide energy saving initiatives. The Sydney Morning Herald’s Eryk Bagshaw reported on the blockade, which was first reported in state tabloid Global Times:

The decision, taken by China’s National Development and Reform Commission at a meeting with 10 Chinese power plants on Saturday and reported by state media on Monday, means Australian coal will be blocked indefinitely while China ramps up imports from Mongolia, Indonesia and Russia, and expands local production.

China’s international state media outlet, The Global Times, reported the commission had given approval to power plants to import coal “without clearance restrictions, except for Australia, in a bid to stabilise coal purchase prices”.

China’s spot coal prices have risen above $US90.82 ($120.17) per tonne compared to $US62.82 per tonne for Australian coal as it restricts imports to protect local producers. The decision aims to reduce the price for state-linked firms as Beijing continues to punish Australia economically for its push for a coronavirus inquiry, and criticism of China’s human rights records and national security legislation. [Source]

China had been informally blocking Australian coal imports for more than a month after determining that imports had exceeded implicit import quotas. As Associated Press’ Rod McGuirk reported, even after the announcement on Monday, Prime Minister Scott Morrison continued to treat the ban as “media speculation,” while pledging to launch a complaint with the World Trade Organization in the event of an official announcement. Chinese officials have remained circumspect about the ban:

Morrison said he was treating the report as “media speculation” because the Chinese government had yet to clarify its position.

“If that were the case, then that would obviously be in breach of WTO rules,” Morrison told reporters. “It would be obviously in breach of our free trade agreement and so we would hope that’s certainly not the case.”

[…] Asked about the report, Chinese Foreign Ministry spokesperson Wang Wenbin gave no specifics but said China had “recently taken measures against some imported Australian products in accordance with law and regulations.”

[…] Wang said China would “never accept” accusations of unfair trade practices, and accused Australia of having politicized bilateral exchanges in trade, investment, science and technology, while targeting Chinese companies with increased security checks on investments. [Source]

With China as Australia’s second largest export market for coal, the new ban represents a massive blow. Australia is the world’s largest coal exporter, and the government has steadfastly resisted any efforts to wind down its production, even amid growing pressure stemming from coal’s role in accelerating climate change. As The New York Times’ Damien Cave reported, Beijing’s ban is a rude awakening for Canberra about the perils of its reliance on the sector:

“A transition has been forced upon us,” said Richie Merzian, the climate and energy program director at the Australia Institute, an independent think tank. “It’s hard to see how things will really pick up from here.”

Prime Minister Scott Morrison has ridden Australia’s traditional reliance on fossil fuels into power. He famously held up a hunk of coal in Parliament in 2017, declaring “don’t be scared,” and first became prime minister in an intraparty coup after his predecessor, Malcolm Turnbull, tried to pursue a more aggressive approach to combating climate change.

[…] It is not a huge job producer. Only about 50,000 people worked in coal mining last year in Australia. (Plumbers clocked in at around 80,000.)

But it is a huge moneymaker. Coal production in Australia has more than doubled over the past three decades, with the share that is exported jumping to 75 percent in fiscal 2017, up from 55 percent in 1990. [Source]

In Canberra, the damage done by the ongoing trade war has begun to sow discord among the major political parties. As the Financial Times’ Jamie Smyth reported, while the Labor and Liberal parties have traditionally held similar positions regarding China, members of the opposition Labor party have begun to voice discontent with the Morrison government’s handling of the trade conflict:

“I think the government really does need to stop focusing on splashy headlines and work out what is it doing, how is it helping our exporters, how is it helping those who are so dependent, and have become more dependent on China for Australian jobs,” Penny Wong, Labor spokesman on foreign affairs, told Australian television last week.

[…] Ms Wong’s criticism was directed at Mr Morrison’s decision to respond directly to a mid-level Chinese diplomat’s “repugnant” social media post, which depicted an Australian soldier holding a knife to the throat of an Afghan child.

The government has dismissed Labor’s criticism, noting that the opposition party has backed all its main policies, including excluding Huawei from 5G networks, combating foreign interference and calling for an international inquiry into the origins of Covid-19 in Wuhan. [Source]

In China, the decision to ban imports of Australian goal may not only have to do with its list of grievances with Australia. Protectionism and pressure from some domestic sectors for China to ensure “energy security” may also be motivating its rejection of imported coal. On Tuesday, Bloomberg News reported on efforts by China’s domestic coal industry to maintain its relevance amid China’s effort to phase out the fuel and achieve carbon neutrality by 2060. The report also covered concerns about unrest due to structural unemployment, and China’s desire to achieve “self reliance,” which might persuade Beijing to continue coal production, if not ramp it up:

Easing off coal slowly would reduce abrupt shocks that risk bringing unrest, the Communist Party’s biggest nightmare, by dulling the inevitable pain to China’s army of coal workers. “The industry will cut jobs, but it should be slow and gradual,” says Wang Haigang, Xinyuan’s deputy general manager. His mine had 3,000 workers in 2012, and by 2025 plans to have fewer than 1,000. “It may take a long time, but we’re aiming for a future in which no workers need to work underground.”

[…] In May, [Chen Jinxing, former chairman of one of China’s biggest coal power generators], told China Electric Power News, a trade publication, that coal should play a “foundational role” in stabilizing China’s power supply to help “make sure China is self-sufficient and will never be controlled by others.”

That’s an argument the industry has used for years to lobby for more government support, and one that’s gained credence as China becomes increasingly isolated on the global stage. At the party’s annual legislative meeting in May, delegates from China’s coal industry submitted proposals that centered on the fuel’s role in providing “energy security,” a term gaining popularity amid growing nationalism.

There’s good reason for the coal industry to think it can find a way to coexist with the 2060 pledge. It’s done it before. When Xi began pursuing more progressive climate policies five years ago, companies began upgrading their plants to trap more of the small particulates that generate smog, and to produce more electricity from every ton of coal they burn. Chinese power companies now brag that their best coal power plants are on the same environmental level as some gas-fired units. [Source]

In the near term however, Chinese citizens may be facing a difficult winter, as a shortage of coal domestically has sent prices soaring and forced the introduction of tough energy saving measures. On Wednesday, South China Morning Post’s Amanda Lee, He Huifeng, and Su-Lin Tan reported that the domestic price for thermal coal had shot up far above the government’s upper price limit:

China has in recent years cut back on electricity for factories to ensure households have enough power for heating during the winter, but the situation is more complicated this year. Many manufacturers are working at full capacity to meet foreign demand for medical supplies, medicines and consumer electronics because of the coronavirus outbreak in the United States and Europe.

[…] China has imposed import restrictions this year to keep domestic coal prices within a certain range – ideally between 500 and 570 yuan per tonne – to protect the profitability of domestic miners.

But coal prices have skyrocketed since October to a level not seen since May last year, fuelled by seasonal demand and buoyant industrial activity as China’s economy rebounds strongly from the pandemic, according to data analyst Trading Economics. [Source]

Chinese workers are feeling the effects of the coal shortage, as governments impose energy saving measures. Sixth Tone’s Yuan Ye reported that in Wenzhou, public servants were prohibited from turning up the heat unless temperatures dropped below 37 degrees Fahrenheit:

Wenzhou, in the eastern Zhejiang province, is imposing the temperature-dependent heating policy to save energy and meet the province’s annual target for cutting carbon emissions, according to an announcement Sunday. The mandate, which will last until the end of the year, also stipulated that all government offices should keep their air conditioning units set to 16 degrees Celsius or below, and turn off all unnecessary lights.

[…] An employee from the Zhejiang Provincial Energy Administration told The Beijing News that, during a meeting Friday, provincial authorities had tasked all public departments with limiting the use of heating equipment, as the province had not met its annual energy usage target. She told the outlet that it was too cold to work at the office without heating.

“We were freezing to death,” said the employee. “I brought a hot water bag with me because I couldn’t bear it.” [Source]


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