Xi Jinping Undeterred From Structural Shifts Despite China���s Economic Slowdown

China’s efforts to ease an energy crunch by stabilising volatile coal prices have been complicated by a surge in wholesale petrol and diesel costs, forcing filling stations to ration fuel.

The energy crisis has intensified pressures on Beijing ahead of this weekend’s COP26 climate summit in Glasgow.

China’s economic planning agency said on Thursday that it met energy companies about “setting standards” to combat “excessive profits”, raising expectations that the government could set new price caps on coal.

The caps would follow government limits on power prices for industrial and retail users that have exacerbated electricity shortages in the past few months.

But a surge in the wholesale prices of gas and diesel, which have jumped almost 20 per cent over the past month, have led to widespread rationing in recent days, according to state media. Wholesale fuel prices now exceed government-set retail prices, piling financial pressure on refineries and petrol stations.

The coal and petrol shortages have highlighted China’s dependency on carbon fuels even as Beijing reiterates its commitment to ambitious environmental targets ahead of the COP26 summit.

President Xi Jinping wants China to achieve carbon neutrality by 2060, with emissions peaking by the end of this decade. Last year China accounted for more than half of global coal consumption.

The National Development and Reform Commission, the state economic planning agency that has been considering measures to control skyrocketing domestic coal prices, said that it would dispatch inspection teams to mines. Coal prices rose at Rmb2,000 a tonne in some regions this month.

High prices and rigid caps on how much coal-fired power generators could charge made it impossible for many producers to operate at a profit, worsening the power crisis that spread rapidly across the country in September. The State Council, China’s cabinet, has since said it would allow generators to sell more electricity at market rates.

Thermal coal futures traded on the Zhengzhou commodities exchange fell to their lowest level in more than a month on Thursday, down 13 per cent to Rmb1,033 a tonne.

Jack Shang, an investment analyst at Citibank, said that price caps would make it difficult for domestic coal miners and importers to meet demand through the winter months. China’s coal imports increased 76 per cent year-on-year in September.

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Source : https://www.ft.com/content/f04d09d6-174d-4528-84ad-2916a1412764