A dangerous new rise
Lan Xinzhen

CHINA is attempting to dig its way out of the trap of inflation. Standing in its way is the rising price of power-generating coal. In mid-December 2007, coal producers and power plants came to an agreement that the price of power-generating coal would rise 10 percent in 2008, adding 42 billion yuan ($5.7 billion) in additional costs for the power plants. What actually lies behind this new agreement is the power plants’ reluctance to bear the escalating cost, since their profit margins will take a further hit after already absorbing a difficult 9-percent rise in 2007. To preclude their fears from materializing, the five large power groups of China had turned to the National Development and Reform Commission (NDRC) before the agreement, asking for a hike in the price of electricity in order to take the pressure off their companies. This was the third request of theirs for price rise submitted to the NDRC in 2007.
Current electricity prices represent a delicate problem for China. Once electricity prices rise, the cost of other products could rise as well. Caught in a difficult decision due to inflationary pressures, the NDRC shelved making a decision on the price hikes. However, as relevant policies stipulate, the electricity price is allowed to rise in reaction to anything over a 5-percent rise in the power-generating coal price within a period of six months. This is termed the “coal and electricity price linkage mechanism” by insiders. Its implementation has occurred in China twice, in 2005 and 2006, respectively.
As a result, the price hike of electricity in tandem with coal has become an irrefutable fact, in defiance of the NDRC’s silence. Yang Linjun, Secretary-General with the Fuel Branch of the China Electricity Council, spells no doubts over the future trend. “The electricity price is bound to rise,” Yang said. “But the growth range and time depend on the ability of society to bear the cost and the macroeconomic controls of the government.” A cautious line Tightening its grip on the macroeconomic situation, the Central Government is striving to relieve pressures on the market in hopes of fostering steady and balanced development. To put a damper on the overheating economy, the 10-year-old “prudent monetary policy” was replaced by a tightened one at the recently concluded Central Economic Work Conference. Because of this, the NDRC is taking a cautious line on possible inflationary pressures arising from higher electricity prices.
According to Han Meng, a researcher with the Research Office of Macroeconomics under the Chinese Academy of Social Sciences, electricity, as a pivotal energy source, can exert direct influence on the production costs of many industries. Soaring electricity prices could be the trigger, possibly further igniting prices of consumer products to collectively swirl out of control. In the aftermath could be inflation of salaries, interest rates and rents, and an overall higher cost of living. Undoubtedly, standing at the end of this disaster chain could be severe inflation. The five power groups asked to bump the electricity price up by another 0.2 yuan from the current basis of 0.5 yuan per residential electricity unit and 0.9 yuan per industrial electricity unit. The Consumer Price Index (CPI) would skyrocket at least 1 percent following a 0.2-yuan spike of the electricity price (1$=7.3 yuan).
In 2007 the CPI continued to soar, striking an 11-year high by surging 6.9 percent in November year on year, far in excess of the prescribed growth range of 3 percent. In a vigorous effort to steady the economy, the central bank raised the reserve requirement ratio 10 times and lifted the interest rate six times in 2007, mirroring the tightened monetary policy. “To elevate the electricity price at present will offset the effect of these measures, obviously something detrimental to China’s economy,” Han noted.
Self-help
Thermal power currently constitutes 80 percent of China’s total installed capacity, and coal contributes 60-70 percent to the total cost of power generation. In 2007, the thermal power plants of over half of the major domestic power groups and energy investment corporations ran at a low profit or a deficit. This also served as a reason for the five power groups to ask for a price rise. Others say the pressure on the power plants was overrated. As the NDRC revealed, the power plants are netting swelling profits. In the first five months of 2007, the electricity industry raked in 63.7 billion yuan ($8.6 billion), up 57.6 percent over the previous year. The thermal power plants saw their profits rise 55.4 percent.
Slashing energy consumption is also instrumental in lowering the costs beside the price realignments, Han pointed out. Currently, domestic power plants report an energy consumption rate of 40 percent, which dwarfs their overseas counterparts, whose rate stands at 10 percent. In this case, China still has room to make strides in energy conservation. A variety of energy-saving measures have been enacted to improve energy efficiency, but these are still not forcible enough. Most thermal power plants are engaged in low technology, low added-value production. Large-volume and high-parameter thermal power generators only have a measly 20-percent presence in the power plants.
Recommended solutions
Liang Dunshi, Deputy Secretary-General of the China Coal Transportation and Marketing Association, pointed to the supply-demand relationship as the major factor determining the power-generating coal price. China posted an 8-percent jump in coal output in 2007, still far behind the 17-percent growth rate of power plants. Moreover, the strained transport capacity of major coal-producing areas further constrained the newly added coal production capacity. So coal used for power is bound to become more expensive. Behind the scenes, the inadequate pricing mechanism was found to be the culprit.
Since 2006, the price of power-generating coal has floated in line with market demand, free from the control of the NDRC. Lingering well short of the market price in the past, the price immediately leapt up to par with the market. Since electricity prices are still set by the government and rising coal prices cannot be linked with the overall electricity price quickly, the rising costs are shouldered by the power plants themselves. Faced with continuously growing power-generating coal prices, the failure to correct the electricity price will further aggravate the industry’s existing problems. Han noted that relevant departments should pay attention to straightening out the pricing mechanism of coal and elelctricity and stepping up the market-oriented reform of electricity price. But, he added, these are insubstantial.
In China, coal and electricity industries are interdependent, but mired in ceaseless price brawls. When the power-generating coal supply falls short of demand, huge pressures pile up on the electricity industry. But when the demand for electricity goes anemic, coal producers suffer from plunges in prices and an oversupply of power. China’s economic boom in recent years has buoyed electricity demand, shoring up the price of coal-produced electricity. Under such circumstances, the power plants have been struggling under the strain of power generation, power transport and power sales. The best solution is to break the barriers between coal and electricity industries and hasten their integration, according to Han. “Coal producers should be encouraged to acquire power plants, and vice versa,” he said. “All problems will be gone if the two become one”.

(The Daily Mail-Beijing Review Articles Exchange Item)




Europe’s new addition — A Muslim country without a veil
Claude Salhani

MAPMAKERS will need to update Europe’s maps once again. As of this week Europe has a new country, Kosovo, a former province of Serbia, made up of a Muslim majority of ethnic Albanians and a Serb minority. The latter, backed by Belgrade, refuse to recognise Kosovar independence, as do other countries that fear that it will set a precedent other minorities will wish to emulate. Such is the case with Spain, worried by a move by Basque separatists, or Russia, who faces similar problems with Chechnya, among others. The United States, Britain and France are supporting Kosovo’s move to independence.
Kosovo, population around 2 million according to a 2005 survey by the Statistical Office of Kosovo, is made up of 92 per cent of ethnic Albanians; 4 per cent of Serbs (who are Orthodox Christians), the remaining include Bosniak Muslims (1.9 per cent), Roma (1.7 per cent), and Turks 1 per cent. The ethnic Albanian population can in turn be divided into roughly 93 per cent Muslim, with the rest composed of Catholics and a tiny minority of Protestants. Kosovars are ethnic Albanians, not to be confused with Albania, the former Stalinist nation next door, and with whom they share a border, a language, and a religion, Islam. To those who believe that a milder, kinder form of Islam cannot exist, allow me to paraphrase former US president John F Kennedy by saying, “Let them come to Pristina.”
Standing in the shadow of the Berlin Wall in June 1963, at the height of the Cold War, Kennedy said: “There are some who say that communism is the wave of the future. Let them come to Berlin.” Years later, in 1987, another US president, Ronald Reagan, also stood in Berlin, pointed at the wall that cut the city in two – foremost symbol of the East-West divide – and challenged the Soviet Union’s last leader before its collapse: “Mr Gorbachev, tear down this wall.” Today, communism is defeated, the Cold War is over, and all that remains of the Berlin Wall are a few relics and bad memories. However, the Cold War has been replaced by a scorching conflict being waged by radical fanatics whose brand of Islam has replaced communism as the greatest threat to democracies around the world. And while the Berlin Wall eventually came down, a far more formidable one is rising; only this time dividing cultures and civilisations. Much as Berlin stood as a symbol of resistance against the spread of communism, so too has the former Serbian province of Kosovo – which on Monday declared its independence – proved that there is a moderate form of Islam capable of resisting the attempted spread of radicalism. Kosovo has been struggling against serious odds, trying to mature into an independent nation. Unemployment hovers around a whopping 60 per cent, while some put it as high as 70 per cent. Corruption and crime are rampant. The average income is around 1.5 euros, or one dollar, a day.
As a country in the heart of Europe with an overwhelming Muslim majority, Saudi Arabia and a number of Islamic governmental and non-governmental organisations quickly jumped in after the war in the late 1990s to help out. Among them were groups believed to have links to fundamentalist organisations, as was the case in neighbouring Bosnia. Kosovars however, many people in Pristina say, resisted being enticed into following a stricter Islam, despite financial incentives to do so. Unlike Bosnia, another Muslim and former Yugoslav republic, Kosovars have refused offers to build madrassas, demanding instead that the donations be allocated towards building hospitals, secular education facilities, and “more useful institutions.”
Kosovars have also strongly resisted offers from extremist groups to “behave in more Islamic ways,” such as their demand that women adopt the traditional veil and men grow beards, as some groups have tried to impose on Kosovars, according to officials from the Organisation for Security and Cooperation in Europe. “We are European Muslims,” Fatmire Terdevci, a Kosovar journalist working for Koha Ditore, a daily Albanian language newspaper told this reporter about two years ago. “I am a Muslim, but in my own way,” she said. “We belong in Europe. But still, I consider myself a Muslim.” Terdevci, and other Muslims in Kosovo, stress they want Islam, but not on hard line terms. One could compare their belonging to Islam in the way a large number of French belong to the Catholic Church. They “belong” but rarely venture into one. “Religion is part of the identity and culture of Kosovars,” said Sven Lindholm a senior Press officer with the OSCE mission in Kosovo at the time, “but it is not always practiced.”

—Khaleej Times





Hounded by US, Castro survives to say goodbye
David Wood

WHAT the CIA couldn’t do with exploding seashells, poison cigars and chemicals to make his beard fall off, Fidel Castro has done alone. He removed himself from a world stage that he seemed to dominate for nearly 50 years. So compelling was this Jesuit-trained lawyer that he inspired and drove revolutionary movements across Central America and Africa. He twisted American policymakers into such awkward knots that the United States has maintained severe economic sanctions against Cuba and, at the same time, a naval station on the island’s southeastern tip, housing the most notorious alleged terrorists in captivity at Guantanamo Bay. “He survived paramilitary invasions; assassination attempts; trade embargoes; travel bans; diplomatic isolation. He stood up to 10 American presidents, all of whom to some degree were dedicated to doing him in,” said Peter Kornbluh, a Cuba specialist with the nonpartisan National Security Archive in Washington.
Castro has been at the center of some of the most notable US adventures and misadventures of the past half-century: The 1961 Bay of Pigs invasion fiasco and the Cuban missile crisis, which brought the world to the edge of nuclear war in 1962; proxy wars in Central America and Africa; the 1983 US invasion of Grenada against Cuban defenders; the Iran-Contra affair and the CIA’s long and unsuccessful obsession with using underworld gangsters to assassinate him. If there is an emblematic image of the Cold War, it might well be the beard, military cap and jaunty cigar of Castro. Seizing power from the tottering dictatorship of Fulgencio Batista in 1959, Castro, sworn in as the prime minister of Cuba, initially was seen as a Robin Hood figure who sought to eradicate Cuba’s extremes of wealth and poverty. But his socialist goals clashed with powerful American economic interests in Cuba and the Caribbean Sea region. “The American government became an obstacle to some of the changes he wanted to make,” said Warren Cohen, professor of US foreign relations at the University of Maryland.
When Castro turned to Moscow for economic and military support, the Russians were at first suspicious. But Castro, who was master only of a small Caribbean island, played his hand well. “Sure, Cuba’s only a little island, but it’s 90 miles off the Florida coast, a very important strategic position for the Soviets and a very dangerous position for the United States,” said Mircea Munteanu, a Cold War scholar at the Woodrow Wilson International Center in Washington. The Kremlin wasn’t looking to stir things up in the early 1960s, but “they were dragged into it by Castro,” Munteanu said. “The Russians were not necessarily looking for trouble, but the Cubans were saying, ‘If you don’t want to help us, the Chinese will.’ “ When it became clear that Castro was joining the Soviet orbit — and soliciting Soviet military support — the US response “was pretty close to hysterical,” Cohen said.
According to investigations led by the late Sen. Frank Church, D-Idaho, in 1975, the CIA launched at least eight plots between 1960 and 1965 to assassinate Castro. Working through reputed mobsters Johnny Rosselli, Salvatore Giancana and Santo Trafficante, the CIA struck out on each attempt. These included the inventive use of poison cigars; dusting Castro’s shoes during a UN visit with a chemical that would cause his beard to fall out; sending a sniper with a high-powered rifle to Havana, and contaminating Castro’s diving gear with tuberculosis germs. The CIA also schemed to rig an exotic seashell with explosives and place it on the sea floor where Castro was fond of diving, an idea that proved impractical, according to the 1975 report of the Senate Permanent Subcommittee on Investigations.

—Arab News