Welcome to the oil edition. A larger picture of the side picture - a queue at a petrol station in Dongguan, China’s Guangdong province - as well as others can be found at Bingfeng Teahouse. China is facing an energy shortage. Imagethief posts an Asian Wall Street Journal article that has useful background on the situation in the South.

It isn’t just high international prices that’s causing China’s energy shortage, Mark Thoma at the Economist’s View points to two NY Times items explaining how the shortages relate to China’s transition to an overregulated market economy from an overregulated command economy.

The diesel and power shortages have one thing in common: they are
largely the result of the clash between China’s Communist past and its
increasingly capitalist present. The government has set retail prices
too low for diesel and electricity. So businesses, facing high world
oil prices, are supplying less of both.

Simon, with his always excellent Daily Linklets, covers much of the discussion, saving Asiapundit the trouble.

The oil shortage in China is getting global attention: Brad DeLong reproduces a NYT article, Gateway Pundit (via Instapundit, who is taking more of an interest in China these days…part of China’s rise?) and Bingfeng have photos, Economists View talks about China’s oil price controls, Barcepundit dregs up a 1998 article on a sex/oil swap in Ningxia.  As I noted in yesterday’s linklets, the SCMP puts
some of the blame on supply bottlenecks as well as the price control
system. Article below the jump.

(UPDATE 18:34) Sun Bin, as always, has worthwhile insights.:

1. The phenomenon in Guangdong showed that the oil oligarchs,
   although state owned, are rebelling by hoarding the gasoline. This is
   good evidence to rebuff China bashers in the CNOOC/Unocal incidence.
   Yes, the GM is indirectly appointed by the government, but P&L is
   definitely becoming a higher priority. This will likely set precedence as one of the crucial baby steps for the SOEs (state owned enterprises) to break free from state control.
2. Chinese gov’t will eventually have to give in to market force, by liberating gas price soon. Can’t think of other option
3. Well,
   there is a bad solution to the current mess. It could work in short
   term, provided oil price moves down in the international market. Not a
   good option. Anyway, this is the bad solution: subsidize the oil
   companies on a per-liter-sold base (sort of a negative sales tax). This
   is bad because it is easy to circumvent. And when it comes to finding
   loopholes against unsound policies, Chinese are genetically adapted and
   practically trained. e.g. a) parallel export /smuggling oil out of
   China (HK trucks have always been filling as much as they could before
   return to the border - now the risk is for regions outside HK and in a
   more organized scale); b) oil oligarchs can fraud higher sales # for
   more rebate from government; to name but a few. I am sure they are more
   creative than me
4. The better and easiest option is, of cource, let RMB appreciate a bit more (thanks Brad for
   reminding me the obvious). There are pros and cons, the oil price has
   risen by a percentage much larger than any feasible RMB appreciation
   could counter, but by feeding all numbers into a formula, there must be
   a solution as to what is the best percentage RMB should appreciate vs
   subsidy needed.

Mark Thoma also looks at alternative measures of growth and an article that questions China’s record of human development.:

Better news comes from the economies of China and most of the OECD
(Organization for Economic Cooperation and Development) countries: they
have grown in terms of both GDP per capita and wealth per capita. … It
would seem, therefore, that during the past three decades the rich
world has enjoyed sustainable development, while development in the
poor world (barring China) has been unsustainable. One can argue,
however, that the above estimates of wealth movements are biased. Among
the many types of natural capital whose depreciation do not appear in
the World Bank figures are freshwater, soil, ocean fisheries, forests
and wetlands as providers of ecosystem services, as well as the
atmosphere, which serves as a sink for particulates and nitrogen and
sulfur oxides. Moreover, the prices the World Bank has estimated to
value the natural assets on its list are based on assumptions that
ignore the limited capacity of natural systems to recover from
disturbances. If both sets of biases were removed, we could well
discover that the growth in wealth in China and the world’s wealthy
nations has also been negative.

At the Shanghaiist, Dan Washburn talks trade, investment and takes a piece out of Senator Charles Schumer.:

foreign investors’ complaints have almost always been related to
restrictions on the size of investments allowed — percentage of foreign
ownership — when it comes to Chinese companies and joint ventures. We
have heard of deals going awry with Chinese partners running off,
illegally, with intellectual property. (China also has a history of
obtaining, illegally and legally, and subsequently squandering
technology, never actually building upon this know-how to develop its
own advanced technology.) But we can’t imagine that any American
companies in industries involving technology would ever come to China
if giving up all of their trade secrets was required to do business
here … especially not companies in the aviation industry where
sensitive technology could have implications for China’s own military
capabitilies.

The New Economist notes that, for some, Europe’s textile quotas are economic suicide.:

As an armada of Chinese cardigans and trousers
lies stranded in European ports (by some estimates, around 60 million
items), some European politicians are finally starting to oppose this
madness. This morning’s Financial Times (subscribers only) features an article by Swedish, Dutch, Finnish and Danish ministers attacking the import ban.
Karien van Gennip, Bendt Bendtsen, Thomas Östros and Paula Lehtomäki
argue that the import quotas "were introduced, without proper regard
for the realities of modern commerce." The ministers don’t pull many
punches; these quotas will cost jobs.

(18:43) Logan Wright compares the strategic investment plans of foreign banks in China.

To close as we began, with a look at China’s energy situation, National Geographic (via Boing Boing) has a short item on power shortages in rural China.:

August 16, 2005—Speeding from the scene of the crime, a
Chinese boy tows a floating plastic bag of stolen natural gas last
week. Flouting a government ban, farmers around the central Chinese
town of Pucheng frequently filch gas from the local oil field.