China’s tourists are trickling back after two years of coronavirus disruptions. But will it last? (SCMP)
2022-07-01
Expansion in air as June PMI back to black (China Daily)
2022-07-01
Wealthy Provinces Slash Civil Servant Pay Amid Budget Crunches (Caixin)
2022-06-30
Many civil servants in several wealthy Chinese provinces will have their annual incomes cut by 20% to 30% this year, Caixin learned, as local governments face fiscal pressure amid the pandemic. A civil servant’s annual income consists of 12-month salaries, allowances, subsidies and bonuses, according to the country’s civil service law. But since January, authorities in several provinces, including Guangdong, Zhejiang and Jiangsu, asked local state-owned and state-backed institutions to stop paying year-end special bonuses and allowances. Several affected civil servants told Caixin that the move would lead to a significant drop in their annual incomes. Two civil servants in Guangdong’s Shenzhen city and Jiangsu’s southern area said they expected their respective annual incomes to drop by more than 20% and 25%. A civil servant in Zhejiang’s Ningbo city said the adjustment will cost him bonuses that previously accounted for 40% of his annual income. Although his monthly salary rose, his annual income will decline by about a third due to the bonus cut, the civil servant said. “The more developed the place is, the more (the annual income of local civil servants) will drop,” another civil servant in Zhejiang told Caixin, warning that many would then be unable to make their house payments. Economic disruptions from Covid restrictions slowed local fiscal revenue growth this year. As the country continues to manage pandemic flare-ups, most regions have warned that they will be on tight budgets this year and slashed their annual revenue targets. Richer regions such as Shanghai, Jiangsu and Zhejiang face “extremely high” financial pressure as they struggle to balance budgets while handing over large sums of tax income to the central government to support poorer regions’ development, according to Nie Huihua, an economics professor at Renmin University of China in Beijing. The country’s top leaders pledged last August to rein in the incomes of the wealthy to promote “common prosperity.” At a recent press conference, Wang Jianfan, head of the Ministry of Finance’s budget department, urged local governments to ensure the “three guarantees.” They are that government services continue to operate, that salaries supposed to be paid by the government get paid, and that a basic standard of living for residents is maintained. In recent years, the obligation to adhere to the three guarantees has meant that some local governments put stricter curbs on hiring and a greater emphasis on cutting other outlays. Caixin learned that the adjustment of civil servants’ incomes is also linked to a long-running campaign to curb irregular, unfair payments of bonuses and allowances by state enterprises, especially those in rich regions that have access to extra income and provide large financial incentives to their employees. The adjustment aims to regulate bonus payments, according to Liu Xin, a professor at Renmin University’s School of Public Administration and Policy. However, it doesn’t mean local governments are intentionally cutting the incomes of civil servants. Instead, most of the bonuses paid centrally at the end of the year would be gradually given to them as part of their monthly salaries, based on their work performance, Liu said. This will enable some of the less well-off civil servants to get a better sense of career fulfillment, Liu said.
RCEP agreement helps boost foreign trade among member economies: CCPIT (GT)
2022-06-29
Local and National Interests Clash in China’s New Green Power Market (Caixin)
2022-06-28
In late April, a unit of the state-owned Chinese oil major Sinopec Group made the first purchase of electricity in Hubei province through a national green power trading system that is currently being piloted. Sinopec Jianghan Petroleum Administration Bureau Co. Ltd., one of Sinopec Group’s power generation subsidiaries that purchases green power, committed to buying nearly 60 million kilowatt-hours (kWh) of electricity generated by certain renewable sources this year — all for a lower price than what the company would’ve paid for power from a more traditional polluting source. “After repeated negotiations, we eventually agreed on a unit price that is 0.012 yuan below the cost of coal-fired power,” said Huang Han, the director of the company’s operations department. “It will reduce our (annual) costs by nearly 7.4 billion yuan ($1.1 billion).” Such is the potential of a national green power trading market. Under the pilot program, which China launched in September 2021, power generators are permitted to sell wind- and solar-generated electricity directly to certain types of end-users like Jianghan Petroleum, as opposed to the grid like usual. Those end-users, in turn, can offset their carbon footprint through the purchase. Other types of renewable power, such as hydropower, are supposed to be included later. At the end of March, more than 1,600 parties had traded 9.4 billion kWh of green electricity on a platform that the State Grid Corp. of China runs under the pilot program, according to the company. Over the first four months of the year, 3.81 billion kWh was traded in total via the green power trading system, accounting for 0.3% of all direct electricity trading in China. If the pilot program’s boosters were looking for an example to highlight the potential of the nascent trading system, Jianghan Petroleum’s experience checks a lot of boxes — a deal directly negotiated between consumer and producer in which green power is supplied at a lower price than polluting coal-generated electricity. However, the pilot hasn’t always produced the outcomes sought by policymakers. In March, Taiyuan Iron & Steel Group Co. Ltd., a subsidiary of the world’s top producer China Baowu Steel Group Corp. Ltd., signed a contract with Jinneng Holding Shanxi Electric Power Co. Ltd. to purchase at least 1.1 billion kWh of green power this year. That’s enough electricity to supply one-fifth of the steelmaker’s annual needs, according to a source from Taiyuan Iron & Steel’s environmental protection department. Unlike Jianghan Petroleum, however, Taiyuan Iron & Steel won’t be getting electricity that’s cheaper than the fossil-fuel variety. “According to the contract, we will pay 0.01 yuan more per kWh for green power than coal-fired electricity,” the source told Caixin. As more companies get into green electricity trading, flaws have emerged that have already undermined the market in some cases. That’s because the trading system has been set up in a way that has at times pitted regional and national interests against each other, leading to opaque pricing, obstacles to interregional trading on a market designed to be nationwide, and confusion about the corresponding system for obtaining carbon credits. All this matters because China has been promoting nationwide green electricity trading for the better part of a year to get more consumers using renewable energy. Policymakers in Beijing want renewables to account for one-third of total power usage by 2025 as the country pursues its dual carbon goals of peaking its emissions by 2030 and reaching carbon neutrality by 2060. As seen in the Jianghan Petroleum and Taiyuan Iron & Steel examples, prices may vary under the green power trading system. In part, this is due to differences in local rules about electricity pricing. China General Nuclear Power Corp., which runs solar arrays and wind farms along with its nuclear power plants, has traded green power in Jiangsu, Guangdong, and Hubei provinces, as well as the Guangxi Zhuang autonomous region, a company source said. As a seller, CGNPC would like to get the best possible price for its electricity, but that desire runs counter to local government price controls designed to stop energy prices from “skyrocketing.” In South China’s economic powerhouse of Guangdong, the provincial government caps the price of green power at 0.554 yuan per kWh — 20% above its cap on the price of coal-fired power — plus a surcharge of up to 0.05 yuan per kWh that serves as a sort of subsidy for generators. Add it up and green power generators can earn no more than 0.604 yuan for every kWh they sell in the province. Next door in Guangxi, the government has only capped the price of green power at 20% over the cap for coal-fired power, amounting to 0.50724 per kWh. The other major factor obscuring prices is the fact that the deals are negotiated privately. Despite these clear price restrictions, the actual price that a seller can get through the green power trading system largely still depends on its negotiations with the buyer, said a source close to the policymakers that designed the system. How prices are determined remains unclear. “It is a black box — it’s nontransparent,” the source said. At the start this year, the National Development and Reform Commission (NDRC), the Ministry of Industry and Information Technology, and five other authorities jointly released a plan to “further” spur the demand for green energy, especially from industrial leaders and major state-owned companies. Three or four years ago, multinational conglomerates were the main customers of green power in China. But now, companies from steelmaking, crude oil, and international trade are also participating. But despite the ongoing push from the central government to decarbonize, price is still what matters most to buyers. And the fact that green power is green isn’t enough for some customers, the source from China General Nuclear Power told Caixin. If coal-fired power is cheaper, that is what they will purchase, despite the all the “political benefits” of buying green. In China, the regions rich in solar and wind power resources tend not to be the ones that consume the most electricity, a situation that makes a pretty good case for the idea that direct sale of green electricity across provincial borders might offer some efficiency gains. In September, the German chemicals giant BASF SE purchased solar power for three of its production bases in Shanghai from generators in the Northwest China’s Ningxia Hui autonomous region, according to a company news release at the time. The deal was for enough electricity to meet 30% of the production bases’ total power needs until the end of 2022. BASF told Caixin that there is sufficient renewable energy in western China to supply major production and commercial hubs in the central and southern parts of the country, but because almost every province has its own rules, price mechanism and trading department, it is a challenge to purchase electricity from a different region. Part of that challenge stems from renewable energy usage quotas that the central government has asked provincial-level governments to meet each year. Beijing has asked each region to ensure that a certain share of its annual electricity consumption comes from renewable sources. This poses a problem for provinces that have failed to meet these quotas, even though they have generated much green power. Northwest China’s Xinjiang Uyghur autonomous region, for instance, failed to hit the consumption quotas for both renewable energy and of non-hydro renewable energy last year, even though it “significantly” increased how much wind and solar power it used from the previous year, according to the National Energy Administration (NEA). The reason? Xinjiang used a lot more electricity overall in 2021, which reduced the share of green power consumed, the source close to the policymakers said. More importantly, Xinjiang exported a lot of green electricity to other parts of China, which “contributed nothing to the local consumption quota,” the source said. Neighboring Gansu province already took the lesson. It also missed its renewable energy consumption quota in 2021, and has since tightened up its rules for transmitting power outside the province. According to a local industry insider, the Gansu government has instructed renewable power generators to sell at least 90% of their electricity to local users this year to ensure the province hits its numbers. That means that Gansu’s power generators might have to turn down customers from outside the province even if they are offering higher prices than locals. The insider said the local generators should be allowed to sell to those offering the higher price, but can’t because they now have their own number to hit. The source close to policymakers pinned the problem on the current power pricing mechanism, which is the result of “half central planning, half marketization.” Meanwhile, some buyers are complaining about the confusing logic behind the green certificate — digital proof that a buyer has purchased 1,000 kWh of green power, which it can then use to offset its carbon footprint. Companies can obtain a green certificate by either buying one directly or by purchasing green electricity, including through the green power trading system. But the source from Taiyuan Iron & Steel told Caixin that although the company had bought millions of kilowatt-hours of green power through interregional trading, it still isn’t sure whether it will get the green certificates as promised, because its home province of Shanxi has not officially established a green power trading system. Even in areas that have an active market — such as Beijing and Guangzhou — many companies still have not received their certificates, because the certificate is issued by a separate government agency, the National Renewable Energy Information Management Center under the NEA, which doesn’t handle green power transactions. Industry sources cautioned that many other problems remain unsolved, including conflicts between the green power market and the regular power market. But still, sources are confident the demand for green power will stay strong, driven by government backing for its dual carbon goal.
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