May 15, 2006

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Great moments in markets

Chaos hit the Shenzhen border late last week, all thanks to a sub-market subsidy and canny traders. Picture below the jump, report from the SCMP:

Fuel shortages in Shenzhen brought chaos to the Huanggang border checkpoint yesterday, with a queue of container trucks several kilometres long all but bringing traffic in the area to a standstill. A Shenzhen government spokesman denied there was a fuel shortage, but truck drivers complained they could not fill up in Shenzhen or Dongguan.

"It has been like this for two weeks. But today it is particularly serious because it is a Friday and many container drivers returned to work after the May 1 holiday," Cheung Man-shing, a container driver from Hong Kong, said. Another container driver said the service station at Huanggang was rationing drivers to 50 yuan worth of diesel. "Some drivers have to queue up twice to fill up," he said.

Tse Long, vice-president of the Container Transportation Employees General Union, said long-distance drivers had encountered the same problem a month ago.

Service station operators had been limiting drivers' purchases because the government would not let them raise prices in line with increases in wholesale fuel prices. "The service stations have enough fuel for drivers. But they figured that they would rather keep the fuel than sell it at a loss," said Mr Tse.

The government is claiming there is no shortage, and they're right. There's enough fuel, but thanks to the cap on pricing the station owners are refusing to sell. Just chalk it up to another lesson in markets for our Communist friends.


posted by Simon on 05.15.06 at 08:37 AM in the China economy category.


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Forget our communist friends, I wish this lesson would reach a few of our (US) congress friends.

posted by: Stephen Macklin on 05.15.06 at 09:45 AM [permalink]

This was happening in Guangzhou about 8 months ago. LONG lines all over the city, as everyone was vying for a tank of gasoline. Same issue...stations were selling at a loss, so they were rationing the amount anyone could purchase at any given time.
I had read somewhere that fuel subsidies in China are a significant part of the national budget...and the government has been trying to figure out how to get out of paying for the cost of fuel...especially with oil at $70 a barrel.

posted by: GZ Expat on 05.15.06 at 09:09 PM [permalink]

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