(Bloomberg) -- China’s industrial heartland is looking to reduce electricity prices in a move that will help embattled exporters while shifting some economic pain to power plants.
The southern province of Guangdong, which has a bigger economy than Australia, is taking the lead in China’s efforts to liberalize its power markets. Cutting electricity rates for next year would lower costs for factories threatened by US President-elect Donald Trump’s proposed tariffs on the exports that drive the region’s growth.
The new annual contracts, which are still being negotiated, could see rates in Guangdong fall to an average of 0.4 to 0.42 yuan (6 cents) per kilowatt-hour, according to a report from Caixin, which cited unnamed people.
That’s below this year’s 0.46562 yuan/KWh. Crucially, it’s also less than the thermal power benchmark of 0.453 yuan/KWh, which is set by local governments after assessing various costs and effectively establishes the break-even point for power generators.
China Southern Power Grid Co., which manages the province’s electricity supplies, didn’t respond to a request for comment.
Manufacturing profits in China have shrunk this year as a slowing economy has taken its toll. Power plants have performed better because of cheap coal and the expanded availability of renewables, although the government’s drive for energy security has delivered a surfeit of generating capacity in many places.
That’s shown up in Guangdong’s spot market for electricity, which is more highly developed than the rest of the country. Spot prices have averaged 0.3372 yuan/KWh so far this year, sharply below the annual rate, causing complaints from suppliers forced to sell at a loss.
But manufacturers probably have the upper hand at this point. Their exports have been vital to keeping a sputtering economy at least within reach of the government’s growth targets. A hawkish Trump administration could deliver a hammer blow to the sector’s prospects if it follows through on the threat of 60% tariffs.
Zhejiang, another export-oriented province, has cut its power bill for industry this year by more than 4 billion yuan, and rates are expected to keep falling in 2025, according to a report from China Energy News earlier this month.
On the Wire
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US LNG exports to China could be vulnerable if President-elect Donald Trump goes ahead with a threatened 60% tariff on Chinese goods, BI said.
China has an opportunity at the COP29 climate summit to score points with the European Union, potentially easing trade tensions over its green exports to the bloc by helping to secure agreement on the key unresolved issue at the two-week negotiations.
The Week’s Diary
(All times Beijing unless noted.)
Tuesday, Nov. 19:
- China Intl Lithium Conference in Chengdu, Sichuan, day 2
- China Intl PV and Storage Conference in Chengdu, Sichuan, day 3
Wednesday, Nov. 20:
- China sets monthly loan prime rates, 09:00
- China’s 3rd batch of Oct. trade data, including country breakdowns for energy and commodities
- CCTD’s weekly online briefing on Chinese coal, 15:00
- China Car Charging and Battery Swapping Conference in Taiyuan, Shanxi, day 1
- China Intl Lithium Conference in Chengdu, Sichuan, last day
- China Intl PV and Storage Conference in Chengdu, Sichuan, last day
Thursday, Nov. 21:
- China Car Charging and Battery Swapping Conference in Taiyuan, Shanxi, day 2
Friday, Nov. 22:
- China’s weekly iron ore port stockpiles
- Shanghai exchange weekly commodities inventory, ~15:00
- China Car Charging and Battery Swapping Conference in Taiyuan, Shanxi, last day
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