China Market Slumps as Oil Weighs
(by Sam Hopkins) - In China, it is now the Year of the Rat. I live in the city, where rats aren’t so welcome, but in the Middle Kingdom the rat symbolizes a new beginning.
It’s also the year of the Beijing Olympics, China’s coming-out party for the world to see the ancient land’s 21st century resurgence.
But as the Year of the Rat starts the new zodiac cycle, China’s energy crisis is nibbling at Beijing’s heels.
A see-saw of policy moves coming from the central government at the end of 2007 is playing havoc with China’s consumer base, which is reeling from eleven-year highs in inflation. Food and fuel, of course, are the main pressure points of any modern economy, and when the Communist Party of China (CPC) moved last November to ease the burden on oil refiners, it upped the onus on Zhou Public.
China’s crude oil refiners, many of which are headed by businessmen with major guanxi (the Chinese term for balance of favor and webs of influence, or, simply, “pull”) in Beijing, have complained that government-imposed price caps on energy prices are squeezing margins to the size of a grain of rice as oil prices soar.
So Beijing responded in November with a 10% increase in prices for refined oil products such as gasoline, and China’s new breed of motorists is feeling another pinch. November’s year-on-year consumer price increase of 7% was the most in over a decade.
From bottom to top, China’s economy needs the juice to carry it forward. Despite official pronouncements that coal is still king, you can’t stick slag in the gas tank, and crude oil consumption stats bear out the country’s increasing reliance on oil.
On January 14, the government-published China Securities Journal ran a pretty common headline on China’s recent economic rise: “China Imports Record Amount of Crude Oil.” Though crude oil output from China has increased by about 2% per annum over the past few years, an analyst with the State Information Center said, oil consumption grew by 200% more, or 6% per year.
It’s also the year of the Beijing Olympics, China’s coming-out party for the world to see the ancient land’s 21st century resurgence.
But as the Year of the Rat starts the new zodiac cycle, China’s energy crisis is nibbling at Beijing’s heels.
A see-saw of policy moves coming from the central government at the end of 2007 is playing havoc with China’s consumer base, which is reeling from eleven-year highs in inflation. Food and fuel, of course, are the main pressure points of any modern economy, and when the Communist Party of China (CPC) moved last November to ease the burden on oil refiners, it upped the onus on Zhou Public.
China’s crude oil refiners, many of which are headed by businessmen with major guanxi (the Chinese term for balance of favor and webs of influence, or, simply, “pull”) in Beijing, have complained that government-imposed price caps on energy prices are squeezing margins to the size of a grain of rice as oil prices soar.
So Beijing responded in November with a 10% increase in prices for refined oil products such as gasoline, and China’s new breed of motorists is feeling another pinch. November’s year-on-year consumer price increase of 7% was the most in over a decade.
From bottom to top, China’s economy needs the juice to carry it forward. Despite official pronouncements that coal is still king, you can’t stick slag in the gas tank, and crude oil consumption stats bear out the country’s increasing reliance on oil.
On January 14, the government-published China Securities Journal ran a pretty common headline on China’s recent economic rise: “China Imports Record Amount of Crude Oil.” Though crude oil output from China has increased by about 2% per annum over the past few years, an analyst with the State Information Center said, oil consumption grew by 200% more, or 6% per year.
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