Chinas Crisis-Hit Energy Bureau Lacks Tools For Job


2004-12-16
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Bright city lights: Economically vibrant Shanghai is one of China's biggest burners of energy. Photo: C.H.So

WASHINGTON—China's energy industry regulator, the Energy Bureau of the National Development and Reform Commission (NDRC), may soon be abolished for failing to solve massive power shortages across the country.

But analysts say the agency—an office of around 20 people in the cabinet-level NDRC—was never given enough power to solve the country's energy problems in the first place.

"They don't have the time, they don't have the manpower to address these extremely complex problems, as well as the fact that they don't have the seniority," Philip Andrews-Speed, China energy expert at the University of Dundee, told RFA's Wu dialect Energy Watch program. "They cannot order any of these state companies or ministries to do anything."

They don't have the time, they don't have the manpower to address these extremely complex problems, as well as the fact that they don't have the seniority.

The official English-language China Daily newspaper reported Dec. 2 that the government was considering plans to replace the bureau because it had "failed to curb the widespread energy crunch that broke out in late 2002."

The bureau was "too weak and inferior to oversee an energy industry that has total assets of more than 10 trillion yuan (U.S.$1.2 trillion)," the paper quoted its critics as saying.

Authority over the sector is divided among several government agencies. One department is in charge of setting energy prices, while another regulates transport of oil and coal.

In search of a scapegoat

"China's always going to go for bureaucratic solutions rather than free-market solutions, so this shouldn't come as too much of a surprise," Sam Dale, Singapore bureau chief of Petroleum Intelligence Weekly , told RFA.

"China has been blindsided by its voracious energy demand over the last three years, and I guess it's only human nature to look for someone to blame," he said.

Officials have reportedly ruled out the possibility of creating a new Ministry of Energy because the task would take longer than the term in office of the current administration, which ends in 2008.

Washington-based energy consultant Edward Chow said it would be hard for any agency to deal with China's problems until the government addressed the economic and consumption policies that caused them.

China has been blindsided by its voracious energy demand over the last three years, and I guess it's only human nature to look for someone to blame.

Big coal users and producers have reportedly blamed the Railways Ministry for monopolizing the railways and failing to provide enough capacity, arguing that they could do a better job themselves.

The Datang Group, a major power producer, and Inner Mongolia's Yitai Coal Co. proposed in a report to the NDRC that they be allowed to build their own railways.

The idea seems to have won some support. The director of the NDRC's Institute of Comprehensive Transportation was quoted as saying that he was baffled by the Railways Ministry's approach.

Runaway demand for rail transport

But analysts say the fundamental issue of the railway monopoly needs tackling before any real change can take place.

"The railroad sector in China is obviously in need of investment, and to the extent that liberalizing the sector to allow privatization will help increase the capacity, that is certainly something that needs to be looked at," Chow said.

"But once again, the railroad monopoly obviously is a matter of state policy based on the fundamental approach that the government has to managing the economy, and it cannot be dealt with in isolation."

The railways handle just 30 percent of demand for transportation from main coal producing regions, forcing the additional traffic onto highways.

The problem is causing power companies to run low on coal, creating power shortages. Transportation of other goods has been delayed to make way for coal, aggravating the shortages of other needed commodities like steel.

"You could argue that if the mining companies had the right to build their own railway lines, they might have done better, but I don't think they would have," said Andrews-Speed.

"The whole surge in energy demand took everybody by surprise. The mining companies were as surprised as anybody. So, even if the mining companies had the right to build their own railway lines, you can't build railway lines that fast."

"You have to say, why does the railway system have a monopoly, and that is because the government grants it a monopoly. Why has the Energy Bureau failed? Because the government failed to set it up with the staff and the powers to be successful," he said.

Dale agreed. "It really all stems from the fact that China's economy is still to a great extent centrally planned, and those central planners just got it badly wrong," he told RFA. "They didn't guess quite how much electricity demand there would be."

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