China’s electricity rates and global supply chain impact

An article in the International Herald Tribune (25 May 2011) describes the fact that China’s central government has forced lower electricity prices to maintain export competitiveness. But utilities have responded with lower production, thus increasing production costs for factories. A push to lower coal prices charged by coal miners, an input for many electricity producers has caused supply of poorer quality sulphur rich coal and consequent penalties for electricity producers from environmental authorities. A push to use diesel generators by factories will increase their costs, but this is countered by a ban on diesel exports. The pressure on electricity demand in turn comes from generous terms provided to inland rural consumers to buy air conditioners and refrigerators, thus boosting demand but creating unintended consequences. Will all these factors decrease the cost competitiveness of Chinese manufacturers ? Should we expect the environment to suffer as a result ? Or will it end up boosting alternate energy sources in china and provide the cheapest source of green power based manufacturing ?

About aviyer2010

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