China Acts to Address Power Shortage

China has set up a high-level task force to cope with its worst power shortage in four years, and a top energy official pledged that big cities such as Beijing and Shanghai won't be affected even as other regions struggle with blackouts and electricity rationing.

Analysts have pointed to energy bottlenecks as a major threat to China's economy. China's growth rate remains strong, but its power shortage is contributing to economic jitters already exacerbated by high inflation and commodity prices and a weakening global economy.

The task force would look for ways to increase coal output, to improve coal transportation and to encourage greater energy conservation by end users, especially among government institutions.

The task force will coordinate the coal, electricity, oil and transport industries, he said. The task force is under China's State Council, the equivalent of its cabinet.

Chinese officials say the shortfall adds up to about 2% of demand, but that small figure masks the steeper problems in some areas because electricity isn't easily transported across the national grid.

The shortages in electricity have already started to hurt big energy consumers such as smelters and metal miners.

In eastern Shandong province, officials in the capital of Jinan have asked companies with extra coal to help supply power plants. Shandong's shortfall approaches one-third of its capacity.

Part of the problem stems from a disconnect between coal and electricity prices. Coal prices had been liberalized while state-set electricity prices have failed to keep up, leading power producers to complain they were losing money.

Mr. Zhang pointed to another problem: Power demand is growing faster than coal supply. China's installed electricity capacity has more than doubled since 2000 to 713 gigawatts, but he said utilization rates have been declining.

China's price controls have insulated its consumers from the worst of the rise in global energy prices, giving consumers few incentives to cut back.

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