China’s ban on Aussie coal backfires badly with blackouts and the fallout could be far reaching

China is suffering blackouts and residents are without power after a decision to ban Australian coal. But the worst could be yet to come.

China’s plan to inflict “maximum pain” on Australia could be backfiring in more ways than one.

Dozens of Chinese cities and at least four provinces are suffering through a brutal start to winter with new rules imposed on electricity use that include residents and businesses cutting how much power they use.

Skyscrapers are shutting off lights, streets are dark and factories are cutting back work hours dramatically to deal with an unprecedented electricity crisis brought on, in part, by a decision from Beijing to ban Australian coal.

As news.com.au reported on Tuesday, the dumping of one of Australia’s most valuable trade commodities backfired on China and coal prices have skyrocketed since October.

The tense stand-off shows no signs of easing anytime soon but experts say China may want to reconsider its stance before more damage is done.

Residents wait to be tested for the coronavirus in northeastern China. Picture: AFP

Residents wait to be tested for the coronavirus in northeastern China.

Zhou Xin, political economy editor at the South China Morning Post, wrote an editorial on Tuesday warning the Community Party was shooting itself in the foot.

“Beijing’s trade measures targeting Australia ... could be seen as China using its trade power through its huge domestic market as a weapon to serve political purposes,” he wrote.

“This perception will not help Beijing’s effort to be viewed as a believer in, and supporter of, free trade, nor advance its goal of joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a regional 11-member trade deal in which Australia is a member.

“It could also undermine China’s own efforts in seeking closer trade and economic ties with regional trade partners. After all, who would want to cultivate a closer relationship when it could be used as a tool of punishment in the future?”

Therein lies the problem for China. In a bid to send a message to Australia over perceived insults, it is showing the world that there are risks involved in partnering.

Xi Jinping takes a public oath of allegiance to the Constitution in the Great Hall of the People in Beijing. Picture: Ju Peng/Xinhua

Xi Jinping takes a public oath of allegiance to the Constitution in the Great Hall of the People in Beijing.

Dr Jeffrey Wilson, research director at the Perth USAsia Centre, told the Center for Strategic and International Studies’ China Power podcast on Tuesday that China’s dumping of Australian exports was “massive and unjustified”.

“We’ve seen what’s been a political dispute boiling away for two or three years over issues a lot of people recognise, then suddenly turn into this quite hostile and now very highly valued trade dispute,” he said.

But, interestingly, Dr Wilson also pointed out a weakness for Beijing – its dependence on Australia.

“These are surgically-targeted sanctions. There was a particular targeting, attempting to maximise the pain. They’ve almost run out of targets now. Almost everything has been hit.

“Only three products have been spared. Iron ore and natural gas have been spared largely due to China’s dependence. There’s no alternative supplier. And bizarrely, one other product is Australian dairy.

People wearing face masks walk at a mall in Beijing on December 21, 2020. Picture: Noel Celis/AFP

People wearing face masks walk at a mall in Beijing on December 21, 2020.

“A hypothesis I’d offer is that it would be to do with the politics of baby milk formula which is a hot-button issue with families.”

The decision by Beijing to cut Australian coal exports in mid-December followed a months-long feud that has seen China ban exports from seafood to wine and timber.

It is linked to a list of 14 grievances China filed with Australia. At the top of the list is the Morrison Government’s calls for an independent inquiry into the origins of the coronavirus which emerged from Wuhan in early 2020 and spread worldwide.

China viewed Australia’s stance as an insult and took action. President Xi Jinping has not spoken with Prime Minister Scott Morrison since, despite repeated attempts by Australia to end the tense stand-off.

The New York Times reported the ban on Australian coal was having an unexpected impact as the relationship between the two countries goes “into free-fall”.

Chinese President Xi Jinping waves from a vehicle as he reviews the troops at a military parade marking the 70th founding anniversary of the People's Republic of China. Picture: Thomas Peter/Reuters

Chinese President Xi Jinping waves from a vehicle as he reviews the troops at a military parade marking the 70th founding anniversary of the People's Republic of China.

“Australia has, among other things, demanded an investigation into the origins of the coronavirus, which first emerged in China. China in turn has banned imports of Australian coal – leaving huge ships stranded at sea,” the Times reports.

China denies the situation is being exacerbated by a ban on Australian coal but a Chinese energy insider told The Australian: “You cannot pretend that bad relations between China and Australia haven’t contributed to this situation.”

Speaking with news.com.au earlier this month, Professor James Laurenceson, the director of the Australia-China Relations Institute at UTS, touched on the current predicament facing China and said the more restrictions that were imposed, the more Beijing risked hurting its own interest.

“For example, iron ore would hurt Australia the most, but if China hit that, it would shoot itself in the foot even more,” he said at the time.

Australia on Monday officially listed a complaint with the World Trade Organisation about the export ban on barley.

In its filing, Australia accused China of failing to uphold WTO rules.

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