Readers: economic development models are irrational, energy security strategies are insecure, coal prices have fallen sharply, and coal companies have suffered widespread and persistent losses, and together they have dragged the coal market into misery。
In the first half of 2014, nine of the country's provinces lost their entire sector of coal, with 20 out of 36 large enterprises and 9 on the edge of profit or loss, causing the coal industry to lose. At the same time, coal stocks of electricity, traders, ports, etc. Have reached an all-time high of over 500 million tons, making traders attractive。
Unreasonable economic development model
Because the country's people were “poor”, the government had long placed economic growth high and above all, with income growth and poverty reduction as its primary objectives. As a result, china sustained a high growth rate of 9. 8 per cent per annum for 35 years. As a result, academic views such as “china’s economy is still driven by investment” and “china’s economy can sustain sustained growth” have become the dominant voice and have influenced successive generations of chinese policymakers。
In fact, it is true to focus on economic growth itself, but after all, economic growth is only one goal, not all, but one of the most important. But the question is, what kind of economic growth should we focus on? How can the extent and level of economic growth be assessed? Is it a risk to those industries, even a disaster
If the traditional way of evaluating economic growth is followed, it can simply be argued that it is good to pursue GDP quickly and for a long time. However, GDP is only a calculated figure, and the range of methods and calculations behind it directly affects the development paths and strategies of industries。
In the country, GDP is currently calculated largely in production terms, measuring the value created by all resident units during the accounting period from the point of view of production, and the sum of the value created by the industries of the national economy during the accounting period and the transfer value of fixed assets, i. E. The value added by the industries of the national economy. That is, the value of all products produced in the material production sector is subtracted from the value of material consumption during the production process (e. G. Depreciation of fixed assets, raw materials, fuel, power, support materials)。
From an investment perspective, this pattern of GDP growth can be achieved only if there is a sustained increase in monetary investment, accompanied by large-scale investment in the enterprise to achieve an increase in value added by the investing enterprise. Unfortunately, in pursuit of GDP growth, the long-term failure to effectively address such problems as the externalities associated with investment projects, and the global economic crisis of 2008, the government unexpectedly adopted an extraordinary monetary stimulus of $4 trillion plus three years of credit of $2. 6 trillion, leading to massive investments in energy-intensive, highly polluting steel, cement, and electrolytic aluminium. While GDP has been raised, increased pollution from haze, water quality in rivers and lakes, soil, etc. Has resulted in greater external inefficiency, not only in severe resource disruptions, but also in increasing social tensions, while at the same time provoking high growth in demand for coal, combined with long-term distortions in prices of factors of production and non-prices (such as collective rent-seeking and rent-seeking by some government officials), which appear to have been significantly reduced in product costs, problems of energy inefficiency and overconsumption have increased。
Energy security in cold war thinking
Worse still, in keeping with the government's goal of achieving and ensuring GDP, some powerful domestic energy strategists have long insisted on developing energy strategies that meet current GDP needs at all levels. But almost invariably, “energy self-sufficiency” is seen as a golden rule in energy security strategies. The idea of energy security has hardly escaped the cold war mentality, fearing disruptions and discrimination in supply. Thus, in the strategic design of energy, it is a desperate effort to organize the development of domestic resource products, such as primary energy, even if it runs counter to the values of resource assets and the real need for balanced development in the context of globalization, to exploit domestic primary energy sources, such as coal, with the “innovation” of government organizations, without any consequences to guarantee the attainment of domestic supply and GDP objectives。
In recent decades, in particular, export-oriented industrial policy guidance, while increasing domestic industrial processing capacity, the exchange of huge and declining united states dollars has also made domestically produced primary products highly competitive internationally and proud of the nation. However, once the international market has begun, chinese firms are often accustomed to choosing the “cooking beans” strategy, using competitive price strategies to consolidate their share of the international market. As a result, one anti-dumping investigation after another will continue to be defeated by the wto, which in turn will further spread overcapacity within the country and worsen the business environment, a process in which international trade and economic booms will directly affect energy producers such as coal。
Fortunately, the current government has seen these unscientific state policies。
Coal industry in strategic crisis
For a long time, to achieve “energy self-sufficiency” as an energy security strategy, and to meet the goal of pursuing GDP growth, our country has created an excessive demand for and high dependence on domestic coal, pushed up coal prices, exceeded $1,000 per ton at the peak of 5,500 kilocalories/kg powered coal prices in 2011, and stimulated the passion and impulse to invest in coal mines for all, furthering the madness of coal production. The fall in the price of coal has so far fallen by more than 50 per cent following the retreat of the country's economic after-effects caused by the global economic crisis of 2008, bringing china's economy closer to a backward disadvantage, a slowdown in economic growth, slow growth in innovation, falling demand for coal, an increase in stocks, and the fall of policies such as the increase in the import of some varieties of coal, as well as the investment of “all” shale gas and natural gas substitution。
Despite the industrial restructuring that the coal industry has been undertaking in recent years, it has spent a great deal of money on the construction of mega-modern mines while phasing out its behind capacity. However, in the face of weak macroeconomics, faster coal-chemical industries and local government pressure from GDP indicators, taxes, employment, social stability and official trends, overcapacity, environmental security, contractual spirit and justice of the rule of law are not all matters. As a result, the “cut-off” has been slow, leading to the retreat of backward production and advanced production capacity, all of which have created an “energy crisis” within the economy。
To date, however, it has also been argued that the coal industry today is facing a predominantly structural surplus to the coal market. In addition, the china coal industry association (hereinafter referred to as the coal industry association) has recently called for strict control of the total amount of production by coal enterprises in order to reduce coal production by more than 10 per cent this year。
In fact, ica’s call for a reduction in production is to ask a group of ducks to voluntarily remove their own velvet from their bodies to keep others warm for the winter, i. E. To voluntarily assume the loss and price risk of “overcapacity” of coal, once energy security in other industries has been ensured. However, the reduction achieved by such associations should not be too good. The smaller the business, the better the income from over-exploitation and sales, the smaller the game function, so that many coal companies continue to rely on early release of capacity, increased production, and more thin sales to increase the revenue from their main operations. In the case of large coal companies, the financial pressure to build large, modern mines at great cost in the previous period will not improve, and if production is not cut, the market will continue to deteriorate, placing it in a dilemma。
Thus, all this is about a crisis in the energy security strategy itself。
Feng quiwei, a long-standing columnist in the international energy industry economy, investment avoidance, research and advice on international relations, and several media outlets。
Responsible editor: zhang dei
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