China Faces Economic and Energy Challenges

China is facing an extreme energy crisis that shows no signs of abating this fall as blackouts crisscross the country. In a triple blow to the electric grid, surging demand coupled with extreme weather this year and the added tightening of governmental restrictions on coal usage, have pushed the system to the brink in at least nine provinces. In just the last week China was forced to cut power in 20 of its 31 provinces and autonomous regions. Power rationing in Guangdong province this summer, an area responsible for over 10% of China’s annual economic output, has resulted in many companies shuttering their doors several days each week. According to Laura He, of CNN Business in Hong Kong, power cuts in China equal an area as large as Great Britain, Germany, Japan, and France combined. Simultaneously, China is attempting to address President Xi Jinping’s goal of making China clean and low carbon-neutral by 2060. By limiting coal production Xi has pushed its price upward, created immense global supply chain challenges, and resulted in extended delays in containerized shipping that are reverberating around the world.

In recent years China built as many as one full electric power plant each week in an attempt to meet the energy demands of its fast-growing economy. Unlike the almost monthly electric outages of the early 2000’s, by 2010 the electric grid was relatively stable. In recent years approximately 56% of China electricity derived from coal. Due to current reductions in its domestic production and a ban on Australian coal exports to China, the country is experiencing yet another complication in delivering electricity to the manufacturing sector and its citizenry. Coal-fired plants themselves also are adding to electric shortages as many are closing down due to the government’s cap on prices they can charge for electricity. Rather than lose money, many individual coal-fired plants are simply stopping all production.

At a time when Xi Jinping is pushing for increased domestic production of goods for domestic consumption, Beijing also has imposed new guidelines for local authorities concerning the level of productivity factories should achieve in relation to the amount of electricity it consumes at a site. “The shortages are hitting already stretched global supply chains, with both Apple and Tesla factories suffering shutdowns in China as well as many more small businesses that play a key role in global manufacturing,” according to James Palmer of the Jamestown Foundation. The energy crisis is directly impacting Chinese citizens, too. In the last decade China dramatically increased the number of high-rise residential buildings being built in crowded urban areas. The blackouts have left many of those new urban residents stranded without elevators and sitting in traffic jams as Beijing is choosing rationing over price adjustments. Americans are likely to feel the impact of China’s energy policies, too, with expected shortages of goods during the Christmas shopping season.

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Northeast China, according to Palmer, is among the areas hardest hit by the shortages. Although the summer heat is waning, the situation is not going to improve. Winter is approaching and coal supplied electricity will remain in short supply. Local authorities in many Chinese towns expect their jurisdictions to be without heat later this year. On September 29, in response to social unrest over the anticipated shortages, the National Development and Reform Commission, China’s economic planning organization, published a long document detailing the measures that China is taking to address the supply of energy (coal and natural gas), the rationing of electricity, and the upcoming heating needs for households in northern China. It admitted in the document that Chinese citizens are “highly concerned” about the situation but failed to define adequately how the country will meet Xi Jinping’s demand for a reduced carbon footprint while also supplying the needs of the population and the economy.

DARIA NOVAK served in the United States State Department during the Reagan Administration, and currently is on the Board of the American Analysis of News and Media Inc., which publishes usagovpolicy.com and the New York Analysis of Policy and Government. Each Thursday, she presents key updates on China.

Illustration: Pixabay

Quick Analysis

Ukraine’s Frozen Conflict

As we approach winter in the northern hemisphere, the war in Ukraine is beginning to resemble a “frozen conflict” from many perspectives. Ukrainian President Volodymyr Zelensky recently told the media he hopes the war will end faster once President-elect Trump takes over in January. Opinions in Moscow, however, differ from that of the Ukrainian leader. Russian President Vladimir Putin argues that the North Atlantic Treaty Organization (NATO) needs to exclude Ukraine from joining in “exchange” for peace. If it does not, he says, then no end to the war is in sight. So far there is no Christmas solution. Several NATO countries, according to Vladimir Socor of the Jamestown Foundation, are tentatively considering “coalitions-of-the-willing” to provide security for Ukraine outside of the formal NATO framework. There is, however, no collective mechanism today under which such an arrangement is viable. According to the NATO Charter, while Ukraine is a NATO partner country, it may not join as a full member since it has not fulfilled the requirements for membership. That has not stopped NATO and allies from continuing “to provide Ukraine with unprecedented levels of support, helping to uphold its fundamental right to self-defence,” according to the organization. Socor says that keeping Ukraine out of NATO will not advance peace with Russia. Waiting for a peace settlement, he suggests, would only serve to encourage Moscow to continue the war indefinitely. Although the Biden Administration officially withdrew its support for Ukrainian membership in 2021, NATO maintains an “open door” policy toward membership-seeking countries. The current White House position led the way for European states to oppose Ukraine’s membership saying that a decision should be delayed until “conditions are met.” Biden pushed for changing “open door” to a “bridge” metaphor. It is not intended as an across-the-board NATO policy and has been implemented in the past on a case-by-case basis, says Socor. “The alliance’s open-door policy was not fully insulated from Russia’s non-statutory blocking power, and NATO-aspirant countries’ path toward membership was not always irreversible.” Russia has successfully blocked states like Georgia from joining, first in 2008 and again after the war in Ukraine began in 2014. Russia recognizes the value add of Ukraine to NATO is enormous and that Kyiv has a better case than some other nations. Putin’s invasion was, in part, intended to foreclose that option. By 2021, Moscow was pushing hard to maximize its war objectives, which included further annexations of Ukrainian territory. A main goal for Putin was, and is, to ensure there is no Ukraine left to join NATO. As President-elect Trump prepares to assume office in January, he is faced with the historical challenges presented by the war. Post-conflict security guarantees were the center of several proposals made during the 2023 military stalemate. The incoming Trump Administration has yet to outline how it intends to handle the Russia-Ukraine war. Analysts in Washington believe that the new Administration will expect its European allies to guarantee the majority of Ukraine’s security needs. As we approach 2025, several European nations have acknowledged that they do not view Ukraine as eligible for NATO membership as it would draw the organization into the middle of the conflict. Others want to wait until the war is over or pending a “peace” settlement before considering Ukrainian membership. Socor reports that some “influential voices” are suggesting that “Kyiv should join NATO after “freezing” the war along a stable armistice line, de facto accepting Ukraine’s partition, with NATO security guarantees applying de jure to the government-controlled territory only.” This would mean starting accession talks soon with the actual talks to commence only after a ceasefire is in place. Trump arrives in Washington at a time when Putin’s hybrid strategies of war in Ukraine have eviscerated commonly-held differences between war and peace. “Absent a political consensus in NATO over Ukrainian membership, certain European allies, including France’s President Emmanuel Macron, are holding informal consultations about post-conflict security guarantees to Kyiv by NATO members outside of NATO’s framework,” according to the Jamestown Foundation. The Biden Administration downplayed the discussions on possible forms of military assistance and defense industry cooperation by sending only an Assistant Secretary of State. For a European peace to hold the Trump Administration would need to formally extend the United States’ nuclear deterrence to Ukraine. Options under discussion in Europe include a “coalition of the resolute” to deploy forces to Ukraine as part of a possible armistice package, deterring further Russian attacks, says Secor. European officials are also debating, without any agreement, whether its military forces could perform non-combat logistical roles to free Ukrainian forces to fight. None of the possible courses of action has moved forward as all eyes are waiting on the incoming Trump Administration for clues about its intended level of support for a NATO framework and other non-NATO proposals. Daria Novak served in the U.S. State Dept.