Guest blog: China’s blackouts have complicated impact

By Jonathan Bass, CEO
Whom Home, Innova Luxury Group, PTM Images

Chinese factories and homes are in the dark. This week, two-thirds of the country experienced blackouts and rationing, and in just two weeks, Chinese coal reserves could run out.

Xi Jinping’s official Communist Party line is trying to appease John Kerry and the Biden administration by showing China’s power grid is simply shifting from fossil fuels to renewables. The message to Washington is “look the other way; polluting power plants have been curbed. High-energy and carbon-producing industries have been cut back.”

But it’s more complicated than that.

First, there’s the matter of supply.

Drought has impacted hydro electric supply. Nuclear only supplies 4.9% of China’s electrical needs.

China uses about 3 billion tons of coal to generate 65% of its electricity. While it is only importing 7% of that, 70% of the imported coal is from Indonesia. As with all imported products, quality does matter, and Indonesian coal is 30% less efficient than Australian coal. Australian high-grade coal is used in the critical energy and steel production sectors. But the Australian coal ban resulted in a shortage of only 35 million tons of high-quality coal. Not enough to shut down the country!

The CCP is using this as an opportunity to shut down smaller manufacturers and favor larger, state-run industries.

It is using the grid to track down and identify tax cheats. Medium and smaller factories tend not to pay VAT in China; these factories tend to be smaller producers that manufacture lower-cost products. The government has implemented an A, B, C policy, closing those factories from two to four days a week to as much as 20 days a month.

Let’s not forget that China is the world’s top producer of carbon dioxide.

So, no matter what 350 million Americans can do to curb emissions, 1.5 billion Chinese have a much greater impact on the environment. Electricity rationing is now in effect in only 20 out of China’s 31 provinces.

Last year, Xi announced his intention to cut China’s carbon output by 65% before 2030. But China’s National Development and Reform Commission said only 10 out of 31 provinces have met their fossil-fuel targets. In fact, power generation pollution exceeded pre-pandemic levels in the first quarter of this year.

Renewable energy, such as wind and solar, is available but not yet reliable or of sufficient scale.

So this leaves coal reserves dangerously low. There’s only enough supply for about two weeks at most.

In the meantime, the CCP-controlled news service, Global Times, blamed the problem on “the collapse of the (northeast) power grid, which added to the regional power shortage”.

If anyone has driven around China, we can see that the Chinese people do not waste electricity in their homes: The buildings are always dark. Yet the Global Times urged that “Chinese society should implement sustainable development and strengthen the coordinating use of electricity. China has to accelerate the development of nuclear energy, hydro-electric power, wind power, and solar power.”

This will take years to build, and what about the 1,600 coal fire plants they are building in 63 countries around the world.

Impact on Supply Chain

As Ambassador Katherine Tai said this week, she outlined a need to review the tariffs imposed on the CCP, but yet the Chinese government has never complied with the phase 1 agreement. Why would we review tariffs when the CCP has not even delivered on what they have agreed to in the past?

It seems as though someone keeps moving the goal line.

As a North American manufacturer, I understand the threat China presents on the future of supply chain independence. If we hang a carrot out for the U.S. importers and retailers of Chinese-made products, they will continue to kick the can down the road. They believe the Biden administration will return our trade relationship to how it was: “Free Trade.”

But let’s not forget fair and ethical trade. We need to use this moment to invest in supply chain independence and invest in our nation’s future. We need to invest with countries of shared values close to our borders, not those that want to see our destruction.

Ambassador Tai said that “Biden welcomes competition to support American workers, grow our economy and create jobs at home. And for too long, China’s lack of adherence to global trading norms has undercut the prosperity of Americans and others around the world.”

This is the opportunity for our elected and non-elected officials to lean in. We are on the 10-yard line. We don’t need an infrastructure investment plan, a plan to move goods and services on highways if we don’t have products to move. They should be looking to invest in making those goods and products domestically, closer to the point of consumption. Once the Biden administration is confronted with the reality of the situation, we will have spent all our money on electric cars and highways with nothing to go and purchase.

As Chinese citizens are being told to turn down their water heaters, stop using their microwaves and turn off their lights while their shopping malls are shutting early, Americans will feel the pinch when they have no water heaters, no microwaves, no light bulbs to turn on, and our shopping malls will be empty.

Do Biden and Tai not hear the dog whistle, that the Chinese state-controlled media has begun informing its captive audiences that the shortages are all part of the plan.

How China gets over the “speed bump” of transitioning from coal to other forms of energy is yet to be seen

The ongoing trade dispute with Australia remains a choke on coal supplies, as does reduced production after a series of Chinese coal mine accidents.

Natural gas supplies are also strained globally, with large economies — including Europe — rushing to secure supplies ahead of winter and feed renewed industrial demand. While Biden has curbed our exploration and capture of natural gas, he risks leaving us to face a cold winter.

Meanwhile, the world is bracing for supply-chain disruptions in everything from Chinese made masks and toilet paper to T-shirts.

If Beijing is warning its citizens to brace for more to come, our citizens have lived the last year going through a pandemic, supply chain disruptions, container shortages and now possibly no electricity to power their cars. In this situation we are not the first domino to fall, but we will be among the last to feel it.

This column does not represent the views of Furniture Today and BridgeTower Media.

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