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China's power shortage would hurt manufacturing exports affected

    China's manufacturing unexpectedly strong growth could be the electricity shortage will increase the drag, which could further push up inflation in China is at the high rate.

    China is now facing the most serious since 2004, power shortages,booster cables the price is determined by the government, which means that many power plants facing a "loss of production that" the difficulty. China now has more than a dozen provinces to restrict industrial use of electricity, battery clip while the Beijing Olympic Games, in efforts to ensure the power supply. National Grid Company (StateGridCorp.) executives have been sent to other Olympic co-host cities to ensure that the power supply.tow rope National Grid control the vast majority of China's power lines.

    Societe Generale Bank (SocieteGenerale), chief Asia economist Ma Bowen (GlennMaguire), ratchet tie dowm we again stepped into the power shortage may limit the period of economic growth.

    The impact of electricity price is the Chinese continued to show strong growth. On Monday, the China Customs released July over the previous year, exports grew by 26.9%, much higher than June's increase of 17.6% of the time. This shows that the performance of Chinese exporters are still better than many people expected.

    However, the pace of power generation is unable to keep up with demand impact on the industry. With the global economic weakness could lead to reduced demand for exports to China, analysts expect the Chinese government will improve after the Olympics later this month to stop the declining trend in price even further.

    Despite the price increase will lead to additional generating capacity power plants, but in terms of inflation has been at the high was aggravated. It would also swallow the erosion of corporate profits. Currently, corporate profits have been rising wages and the impact of raw material prices. National Bureau of Statistics released on Monday, July producer price index rose by 10%, the highest increase since 1996. The consumer price index went down in the past few months, is expected to drop to 7% in July under.

    The latest of these data seem to only exacerbate the economic outlook and investors concerns about corporate profits. China's benchmark Shanghai Composite Index tumbled 5.2% on Monday, a record low of more than 18 months.

    Chinese government on June 20 raised electricity, gasoline and diesel prices, but the price increase is very small, power plants and not get rid of loss-making situation. Today, the China Electricity Council (ChinaElectricityCouncil) is lobbying the Government to amend the pricing system, the resulting loss of business subsidies. The Federation said in a report last week, we suggest that at the appropriate time to solve the coal and electricity prices continue the conflict between power companies as soon as possible to reverse the losses.

    They are also less willing to buy more coal, but the loss of sales of electricity prices. This leads to low coal stocks at: China Electricity Council, as of the end of June, stocks of coal for power plants for 11 days, 17 days less than the same period last year. Analysts said the government recently tried to intervene in the coal market, but in the implementation of the policy he ran a lot of difficulties. A few years ago, the basic price of coal has been liberalized.

    Standard Chartered Bank (StandardChartered) economist Stephen Green (StephenGreen) said that unless some radical reforms to the pricing, otherwise the power plant's production initiative is not high.

    The Council expects China's power shortfall will reach 712 million kilowatts at present the total installed capacity of 2%. The lower percentage figure masks some areas of the severity of electricity shortage: As the eastern industrial province of Shandong Province to meet its electricity installed capacity of one third of the gap. This led to power cuts, and aluminum mines, and rationing of electricity and other big power.

    Canadian mining company SilvercorpMetalsInc. Last week that it mines in Henan Province, the impact of power cuts by, forcing the suspension of its July more than three hours every day. China's 20 large aluminum plant in July also announced that due to power shortage this summer to cut 5-10 percent.

    In order to improve air quality during the Olympics, the Government has asked a number of provinces around Beijing factory shutdown. This may bring short-term 7-8 months of additional production.

    Currently, the government is also considering other measures. In early August the State Council issued a circular urging local governments to improve energy conservation awareness. File that tight oil and electricity supply has become constrained economic and social development of the important factors. Document pointed out that China's energy consumption of cars and industrial machinery 20% higher than in developed countries.

    There are some worrying situation indicates that the pricing is not the only problem. According to the Government, the recent signs of decline in coal quality, which means that each ton of coal produces less heat and power, while the pollution is more, the indications that the mining companies earlier than some analysts expected to use a sub- reserve. This may affect China's environment and long-term impact energy security.

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