China’s decision to stop coal imports from Australia has seemingly backfired, according to reports, with the “economic coercion” causing an energy crisis.
China intended to punish Australia’s economy after the government recommended an inquiry into the origins of COVID-19, holding Australian coal ships at ports and in storage facilities.
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Australia turned to energy-hungry countries like India and South Korea, while China has been struggling to replace Australian coal, unsuccessfully attempting to increase imports from Indonesia, Russia, South Africa and even the United States.
According to geopolitical expert Sergio Restelli, China has run out of options, with surging prices of coal hampering its industrial output significantly.
“Beijing is scouting for coal from wherever possible to meet the energy demand,” Restelli said.
“With the failure to procure the required coal, Beijing—in a humiliating loss of face—has had to turn to Australian coal.”
Australian National University Associate Professor Shiro Armstrong agrees.
“The Chinese have done themselves a lot of reputational damage in the way they have quite transparently tried to coerce Australia with economic sanctions,” he said.
The main problem for Beijing is it needs to buy coal at market prices but can only sell electricity at prices capped by the government. Therefore, power plants have little incentive to boost their generation unless the government increase to raise the electricity prices for users.
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But with the ongoing energy crisis impacting the country’s economy, raising electricity prices will only worsen the situation.
“Energy-intensive industries will be most affected by electricity rationing. The combined share of the industrial sector in affected provinces with power rationing is about 14 per cent of the Chinese GDP,” economist Kevin Xie said.
