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February 1, 2008
It's Not Just Bad Weather
Loss of power in Southern China has stranded millions of Chinese workers trying to return to their villages for their yearly trip home. While the crisis in Guangzhou is being blamed for the most part on bad weather, there is another cause: price controls.
Here are the details from the Finanical Times:
The widespread price controls instituted by Beijing to combat inflation, the number one economic priority of the central government at the moment, have in fact helped worsen the present crisis. On top of the snow storms, the root of the coal and power shortages is a partially deregulated pricing system that has pitted the two industries against each other in a game of chicken.
Coal prices have been largely deregulated in recent years. Power prices remain controlled. As coal prices have soared in recent months and weeks, mines have held back supplies to try to cash in, while the generators have reduced their power output rather than pay up.
Posted by Peter Mork at February 1, 2008 9:17 AM
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