By Tyler Durden
China is officially panicking.
Now that the global energy crisis has slammed China’s economy, leading to the first contractionary PMI since March 2020 as a result of widespread shutdowns of factory and manufacturing, not to mention hundreds of millions of Chinese residents suffering from periodic blackouts, Bloomberg reports that Chinaâs central government officials “ordered the countryâs top state-owned energy companies to secure supplies for this winter at all costs.”
Translation: Beijing is no longer willing to risk social anger and going forward China will be subsidizing coil and nat gas, which will lead to even higher prices, which will lead to even higher prices for other “substitute” commodities such as oil, which is why oil surged on the news.
The news follows a report on Wednesday that China will allow soaring coal prices to be passed on to factories in electricity prices. But prepare for a surge in PPI, which will likely not be allowed to be passed on to CPI due to âcommon prosperityâ. Which logically means margin collapse, and shutting down â so even more structural shortages. Unless we get state subsidies of some sort, or differential pricing for the foreign and domestic market. There used to be a name for that kind of economy. Wall Street used to pretend it didnât like it.
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