THE Philippines must brace for the impact of China’s power crisis, which has affected its manufacturing sector, and could imperil global trade, according to economists.

This week, news reports surfaced that China’s bid to toughen its emissions standards has led to a shortage of coal supplies. With high demand from manufacturing firms, coal prices in the so-called Factory of the World have skyrocketed. Former University of the Philippines School of Economics Dean Ramon L. Clarete told the BusinessMirror that China’s emission targets are quite ambitious and deferment of their targets will lead to a quick recovery from their current woes.

“China’s competitiveness is going to get hit by the [power] crisis. And world trade as well. But the Chinese government can easily recover by deferring its climate change commitments and importing coal. The target implementation is quite ambitious,” Clarete told this newspaper.

Clarete said China remains heavily dependent on coal. Developing liquefied natural gas (LNG) and renewable energy (RE) sources into mainstream power sources are still years away from turning into reality, he added.

“It’s a development we need to prepare for. That [power crisis in China] and the looming bankruptcy of a real-estate firm with potential of dragging down its financial system,” Clarete, however, said.

Ateneo Center for Research and Development (ACERD) Associate Director Ser Percival K. Peña-Reyes said bracing for the impact of China’s crisis would be wise, given that the Philippines is a net importer.

Peña-Reyes said the power crisis in China is causing supply-side problems which may lead to more expensive imports from China. This will especially be felt in food imports.

He echoed former ACERD Director Alvin P. Ang, who wrote in his column in the BusinessMirror last Friday (Economic growth is a moving target: https://businessmirror.com.ph/2021/09/23/economic-growth-is-a-moving-target/?fbclid=IwAR2iP3KoHzlZk8cg5VokdtxcPFkuIkGdD2nlvguMZrpA4nrQssFjlPjaLQA) that the Philippines is 40 percent dependent on trade. With the country’s trade deficit accounting for 10 percent of the economy, the country imports more than it exports.

“China’s supply-side problems due to its power crunch might have an inflationary effect as well on the stuff that we import from them, most especially food. I guess we need to diversify import sources, or find a way to boost domestic production,” Peña-Reyes told the BusinessMirror.

In an e-mail to the BusinessMirror, University of the Philippines Professor Emeritus Epictetus Patalinghug said, however, that the impact from the “power price increase” in China may be small on the country’s external trade performance.

Patalinghug said the country’s trade with China, even if it is considered a major trading partner of the Philippines, may be significantly affected by shipping woes and the increase in fuel prices.

He said the logistics industry is currently plagued by a shortage of shipping crew, many of whom reside in countries with limited vaccines such as the Ukraine, Greece, Indonesia, Panama, and of course, the Philippines.

“Even without power price increase in China—I do not call it a power crisis—imports [are] bound to increase due to rising shipping costs and the rise in the price of oil per barrel,” Patalinghug said.

“However, the purchasing power of Filipinos willing to celebrate the Christmas season will tolerate price increases. May 2022 election spending will add to the inflation pressure after Christmas,” he added.

Coal crunch, row with Aussies

Patalinghug said China’s coal problems were a result of its “diplo-matic and economic friction” with Australia.

He said Australia earned the ire of China for its insistence in the conduct of an international investigation on the origin of Covid-19 which was first detected in Wuhan, China.

As a result, Patalinghug said, China is boycotting coal exports from Australia. This is now causing the limited supply of coal in China, sending coal prices to increase.

On Tuesday, World Bank East Asia and Pacific Chief Economist Aaditya Mattoo said China’s announcement to toughen its emissions standards can actually work for the benefit of China, even if there are sectors that could be hit by this effort through higher costs of transitioning to cleaner technologies.

Mattoo said China’s aim of becoming carbon-neutral could make it a catalyst for greater international cooperation toward the Paris Goals and transform Beijing into a global leader in renewables.

“For China, there are huge domestic benefits in terms of health. But even in terms of worker productivity could be higher with less particulate matter. Finally, China can be a leader in green technology, in some ways it already is,” Mattoo said.

“So any downsides need to be weighed against the upsides of a greener world where China’s tremendous innovative and industrial capacity will be a huge advantage,” he added.

On Monday, a Reuters report noted that the power crisis in China has already affected the manufacturing sector and households.

Guangdong and other industrial hubs in China are already experiencing consumption caps and power disruptions.

In 2020, Chinese President Xi Jinping said China will cut its carbon dioxide emissions per unit of GDP by over 65 percent by 2030 from 2005 levels.





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