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Energy Shortfall to Persist

With tremendous investment driving China's economy, supply shortages of coal, electricity and oil will continue for some time, a senior economics official said Tuesday in Beijing.

"We still see no sight of change or things getting better in this regard," said Ma Liqiang, director of the Economic Operation Bureau under the National Development and Reform Commission. "The supply is still tight."

A shortage of transportation for energy is also hindering the nation.

The third quarter will see growing demand for coal, electricity, oil and means of transport while summer is in full swing, said Ma, ruling out the possibility that demand will decline in any sizable way by the end of the year.

"What we are doing now is trying to be a good coordinator and doing our best to meet demands of organizations and enterprises urgently in need," Ma said at yesterday's news conference on the economic situation.

Ma said railway companies can only meet 35 percent of transportation demands despite all locomotives having been working at full speed.

At the moment, railway companies have listed coal, grain, oil and fertilizer as priority materials for transport.

Ma's commission also outlined policies to address electricity shortages, which already have affected 24 provincial areas across China over the past few months.

Starting this month, prices for electricity used in industry have been raised on average by 2.2 fen (0.26 US cent) per kilowatt-hour (kWh). The prices in China currently average about half a yuan, or 50 cents, per unit. As for household electricity, the commission has called for hearings before any price adjustments.

"Most urgent among all of the economic objectives is to cool down industries which need lot of electricity," said Zhu Hongren, deputy general director of Ma's bureau. "This is a continuing effort to address the problem of over-investment in some sectors."

Amid government's repeated warning of too much investment since last summer, China's fixed asset investment in the second quarter increased 28.6 percent over the same period of last year.

Zhu said he was concerned about China's excessive car production capacity with year-on-year storage rates soaring by up to 89 percent by the end of June.

Statistics indicate that, so far, there are 118,000 vehicles waiting to be sold, among which 105,000 are cars.

"For the auto industry, market-oriented measures should play a vital role in cooling things down because the sector is fully competitive in China," Zhu told China Daily.

He said administrative measures will be taken to cool off investment in three industries: Steel, electrolytic aluminum and cement. Investment in those sectors soared rapidly early in the year despite repeated warnings from the government of over-investment.

(China Daily July 21, 2004)

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