Recently, China’s power shortage has been severe. Experts say that it was caused by diplomatic friction with Australia that made China retaliate economically, banning imports of Australian coal. However, this strategy adversely affected China because failure to replace Australian coal has led to power shortages in factories and households.
China consumes 60% of the world’s coal, and 60% of Chinese consumption is Australian coal. The ban on imports of Australian coal caused power shortages. Instead of highly-efficient Australian coal, Indonesian and Mongolian coal has been imported, which is not enough. Alternatives such as oil and natural gas have also been imported to fill the gap, but prices have risen due to COVID-19. In addition, as winter approaches, demand for coal heating is expected to rise, making it more difficult for China to overcome power shortages.
The reason for Chinese retaliation against Australia is diplomatic. Last year, Australia proposed an international investigation, indicating China as the source of COVID-19. In addition, relations between the two countries, including conflicts over human rights in Xinjiang Uighur, reached their worst. As a result, China suspended imports such as beef and coal and raised tariffs, taking advantage of Australia’s high economic dependence on China. Experts predicted that Australia would suffer significant damage, but China’s damage seems to be greater so far.
China’s ban on coal imports is political as well as diplomatic. It is a carbon-neutral part of the Xi Jinping administration’s eco-friendly policy. Accordingly, China has constantly been reducing coal consumption. However, the power shortage leads us to believe that China remains dependent on coal for now.
The power shortage is not just China’s problem. Factories unable to operate in China, the mecca of manufacturing worldwide, have disrupted the production of intermediate goods. As a result, global inflation and supply chain confusion seem inevitable.
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