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Will power crunch upset global investors?
By Fu Jing (China Daily)
Updated: 2004-06-14 22:21

Chinese experts and officials warned that the growing electricity shortages being experienced across the nation may cause foreign investors to reconsider their business arrangements in China.

While most believe the current passion of investors will not cool, investors could choose to move plants to provinces such as Sichuan, and Hubei or cities like Chongqing where electricity demands are more easily met.

"Those provinces rich in energy supply will be investment targets," Zhang Jianyu, a visiting scholar with Tsinghua University told China Daily.

Recently, multinationals such as Coca-Cola and General Motors in Shanghai, Hangzhou of Zhejiang Province and Guangdong Province have had to temporarily stop production during peak hours because of power shortages.

But Zhang reminded investors that the current shortages are likely to become into surpluses after 2006 since the Chinese Government is busy now constructing power plants.

"So it's a hard decision for investors," Zhang said.

The analyst's comments came against concerns circulating among Hong Kong media that present electricity shortages may hinder overseas enterprises from continuing to invest in the mainland.

An official surnamed Xia with the National Development and Reform Commission expressed continuing confidence that the power strains will not chill the zest of overseas investors.

"I've seen no sign of an investment slowdown because of electricity shortages," said Xia. "Investors are still attracted by the country's and investment environment."

Zhang Jianyu said current shortages may even become an investment opportunity for some foreign energy enterprises, mentioning British Petroleum.

"Because they hold energy sources and they can sell more to China," said Zhang.

Zhang even said shortfalls will not become alarming if effective management is put in place.

Meanwhile, a Xinhua report on Sunday indicated that China's extensive shortages of energy may worsen before 2020. And accelerating development of power-intensive machinery, the auto, steel and manufacturing sectors, along with the growing pace of urbanization and low energy efficiency are blamed for the trend.

An industrial report by the State Information Centre with the National Bureau of Statistics forecasts China will face a more severe power shortage this year than it did last. Some two dozen provincial areas have imposed power brownouts in the past few months, according to Xinhua.

Xu Dingming, a leading official with NDRC's Energy Bureau said China's output of primary energy was equal to 1.603 billion tons of standard coal last year, up 11 per cent over the previous year.

But demand outpaced supply as shortages of coal, power and oil were reported in many areas of China, whose economy grew by 9.1 per cent last year, and more than 7 per cent in the two years before 2003.

Xu said China is now in the middle stages of its industrialization phase characterized by faster development of energy-extensive machinery, auto, iron and steel sectors.

Urban residential consumption of energy also rose dramatically due to the country's fast pace of urbanization and improved standard of living.

The per-capita energy consumption for urban residents is 250 per cent more than that of their rural cousins, said Xu.

Meanwhile, overseas investors are relocating their processing and manufacturing sectors to China, especially the manufacturing sector characterized by high energy consumption, further straining the country's energy supplies.

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