Editorial and translation: Jenny Ball
Yesterday I saw the video of Lili, one of my favourite YouTubers. It’s about the CCP’s restoration back to the planned economy, and the insight of her analysis was quite sharp and I couldn’t but agree. I’d like to share some of her main points here.
We all know that coal prices skyrocketed some time ago. After the thermal coal contract reached an all-time high of 1,982 yuan/T on October 19, a report issued by the National Development and Reform Commission(NDRC) on the evening of that day (October 19) The news of “Intervention Measures” touched the nerves of the market. Thermal coal fell silently that night, but what was the news of this intervention? It is in fact a seminar that the CCP’s NDRC brought together people from coal companies, coal industry associations, power companies, and other parties concerned. NDRC said that it was studying the implementation of interventions on coal prices under legal regulations. Warn these coal companies: if they don’t cut prices, they will be brought to justice for speculation.
According to the Futures Daily, on the morning of October 27, the Price Department of the NDRC convened a meeting of the China Coal Industry Association and some key coal companies. In the meeting, it was further clarified the detailed intervention scope of the current price of thermal coal, including the pit price and the end customer price. The intervention method is to implement a benchmark price plus a floating range for the thermal coal pit price. The thermal coal end customer price intervention method is independently determined by the provincial governments. The specific price standard is that the NDRC sets a unified benchmark price for thermal coal pit openings, which is 440 yuan/Ton including tax, and the maximum increase up to 20%, which is 528 yuan per ton. From the perspective of the trend of thermal coal futures, in just a few days, it has dropped from as high of 1982 yuan to 1033 yuan, which almost cut the price by half.
Like all commodities, little has invested over the years. Because the Federal reserve has released a lot of bank notes to water the market, everyone feels that investing in the virtual economy such as the stock market and the real estate market makes more money, and no one is unwilling to invest money in production or manufactures because the investment time is long, and then the profit is relatively much lower. Then in 2020, due to the pandemic, Western governments began to print money like madness to stimulate consumption, yet production capacity cannot be quickly increased in a short time. In addition, the market is full of US over-issued currency, so all commodity prices began to increase.
There is also the reason for the strict inspection of environmental protection in the CCP China, which is that many coal companies have been closed in the name of environmental protection. As the consequence they reduced coal production. In addition, due to trade war with Australia and CCP has stopped importing coal from Australia, the superposition of these aspects has caused China’s coal prices to grow wildly. After the price of coal soared, many power generation companies reduced their power generation because the more they generated the power, the more they will loose. Therefore, there was a phenomenon of power cuts.
The solution to all these problems should be to let the market adjust itself. The price of coal has risen, and many coal companies have been alleviated from the loss of money for so many years. They will naturally increase their input. After the production of coal, the price of coal will automatically fall. Just like us common people think, the price of pork has risen, then raising pigs can make more money, so people will start raising pigs, and then the price of port will naturally fall.
This is the function of market economy. But the CCP did the opposite, using administrative means to control everything, and forcing coal companies to cut prices. The coal company is not a fool. The coal produced is at a loss if it is sold out. Why do I produce then? Therefore, coal companies will definitely find various reasons not to do production, such as the equipment is broken down and needs to be repaired, maybe as long as a few years repair. Then there will be a shortage of coal. Even you have money you can’t buy any coal.
Some netizens said that the NDRC’s strong regulation is correct, because it’s heating season in the North already. If coal costs two to three thousand yuan, there will definitely be public complaints as the power supply and heating in the Northeastern rural areas in winter. Local governments have no money to subsidize, so the prices of coal must be intervened and controlled.
Please do have a bit of common sense: To reduce coal prices, the only way is price increase as it can stimulate production capacity, and no other methods can be efficient. If you cut the prices and sell at a loss, then they won’t be able to produce. So it can only mean the shortage of coal even if you have money, you can’t buy it any more. So the things as “Approval Notes” by leaders in the past would reappear. Only the leaders’ “approval notes” allow you to buy things. The dual price system before the 1980s will return. Then there will be coupon for coal. In fact, not only coal, diesel is also at the restricted prices. See if many areas have already under control? If CCP China is returning back to the Mao era of controlled economy?
A few years before many people complained about the high cost of medicines,right? Therefore, the hospital has adopted the method of centralized drug procurement. The price of medicines in hospitals was indeed much cheaper, but the cheap ones have to be out of stock all the time, and the cheap drugs were not available. In a word: it leads to a shortage. The planned economy is actually a shortage economy.
But all the controlled economy is conducive to the people in power because the market economy is guided by prices, and the planned economy decide by the leadership power. CCP leaders are very good at calculating, they take advantage of shortage for people to beg them. During the planned economic period, when something was shortage, such as food, clothing and housing, people would turn for people with power to get coupons. This is also the reason why all leaders are willing to control everything.
Venezuela started by restricting food prices. Bread made from flour is cheaper than flour. In the end, no one makes bread any more, and you can’t buy bread in the market any more. You could still buy bread when the price was high. but If the price is controlled and forced to reduce, no one could have anything to eat. But Maduro is happy. If you vote for me, he will give you something to eat, and he will use this to attract people to vote for him.
In the future, CCP China will be a mixture of North Korea and Venezuela. It will not be totally like North Korea that all areas are controlled by Kim Jong Un. It will be like Venezuela in some areas, but prices will soar. Prices are very high, flour is more expensive than bread because no one makes them. Just like Venezuela, although there is so much oil, it still has to import oil from foreign countries because it produces oil at a loss. The CCP will also rule China in this way. If you oby me, vote for me, support me, I will give you something to survive, and CCP would boast it that “You are voluntary to vote, we have democracy.”
There is now coal shortage, and it won’t take long for coupons for coal. After that, there will be coupons for meat if there is a lack of meat. When a food crisis occurs, there will also be coupons for different food, and all kinds of coupons will re-emerge.
Is it what we are expecting, my fellow Chinese?
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