China Subsidies Strain Resources

2008-01-29
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China’s rural residents are rushing to take advantage of government subsidies for electric appliances, but experts say the country will pay the price with more power shortages and pollution from coal.

At the end of the day, social stability—keeping the people happy—will override almost anything else.

Since the Ministry of Finance announced a 13 percent subsidy for farmers to buy televisions and other appliances in December, consumers have been going on a shopping spree, China’s official Xinhua news service reported Jan. 20.

The move, billed as the government’s “special present” to 900 million rural residents before the annual Spring Festival, was also aimed at stimulating domestic consumption, the news agency said.

The discounts have reportedly led to “crazy buying,” with farmers lining up for bargains on refrigerators, mobile phones, and televisions on the government’s preferential subsidy list. Manufacturers have cited thousands of sales per day.

Philip Andrews-Speed, a China energy expert at Scotland’s University of Dundee, said surging sales of power-consuming appliances means more electricity demand and more pollution from the country’s coal-fired power plants.

“This goes against what we had believed was a top government priority, which was energy conservation and energy efficiency,” Andrews-Speed said.

China’s government has been trying to meet a five-year goal of reducing major air pollutants by 10 percent and saving 20 percent of energy used per unit of GDP by 2010. So far, results have been mixed.

Andrews-Speed said subsidizing items such as televisions will make it harder to curb coal consumption and meet the government’s energy-saving goals. But the government also seems to be driven by complaints about the growing gap between rich and poor as wages in China’s cities rise.

“At the end of the day, social stability—keeping the people happy—will override almost anything else,” he said. “And I think this is what we’re seeing in this case.”

Contradictory policies

But China’s government faces contradictions between its economic and energy policies as it struggles to stem inflation while ensuring a stable energy supply.

On Jan. 20, Vice Premier Zeng Peiyan called on major oil and power generators to boost production after hearing their annual reports, according to state media. But China’s State Council had said earlier in the month that it wouldn’t allow increases in fuel or power prices “in the near future,” giving producers no incentive to increase supplies.

The price freeze has already led to regional shortages of both fuel and electricity, as well as shrinking stockpiles of coal.

The power shortages may disappoint many of the farmers who have just invested in new electric appliances, said Robert Ebel, chairman of the energy program at the Washington-based Center for Strategic and International Studies.

“It may be that will happen—that everybody will get their color TV, and then they’ll plug it in. And suppose there’s no electricity, or the electricity is off for a couple of hours before it comes back on,” he said.

Ebel said that China’s contradictory policies may contribute to the social instability that the government has been trying to avoid.

“It’s just not going to work, and everybody’s going to end up being unhappy—the government and the people.”

Original reporting by Michael Lelyveld. Edited for the Web by Richard Finney.

Blog: RFA Unplugged

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