(Startribune, Sep 04, 2006) - In outlying provinces of China, local officials sometimes thumb their noses at edicts from faraway Beijing. If they want a new airport, cement factory or power plant, they call in the bulldozers first and seek approval later.
That's what happened in Fengzhen, amid the rolling plains of Inner Mongolia, where local officials ordered up a $365 million power plant two years ago.

From Day One, the Xinfeng plant had no approval from officials in Beijing, but officials in Fengzhen forged ahead. They rounded up investment and began round-the-clock construction, trying to get the 600-megawatt plant up as quickly as possible.

Across China, local officials are building highways, industrial parks, airports, steel plants and other mega-projects, often to the dismay of authorities in Beijing, who want to slow the country's galloping economic growth -- 11.3 percent in the second quarter.

Some monster projects are generating friction between China's central leaders and outlying regions. In some cases there's a debate about whether the projects are needed or are the result of easy loans, corruption and provincial officials' desire for prestige.

China is a one-party, Communist state, but that doesn't necessarily mean that the central government has firm control over the economy. In fact, the center and the provinces tussle constantly over development. As foreign capital pours into the provinces, regional officials call many of the shots on large-scale projects.

A new fracas erupted last month when Beijing ordered work to stop on the Xinfeng plant and other mega-projects in the provinces. Still, about a week later, construction workers were on the job.

"It was stopped not because of an overheating economy but because it didn't get proper approval from the central government. It challenged the authority of the central government," said Liu Fuyuan, the deputy director of the Macroeconomic Institute of the State Development and Reform Commission.

Liu said local governments earned windfalls from leasing land they controlled, allowing them to undertake image-enhancing projects such as new stadiums and hotels.

"How do the cities change so fast? It's like magic. I can tell you it's because of land development," Liu said.

Plant's need is uncertain

On a sunny summer day, the Xinfeng plant shone brightly on the horizon, painted in blue and white. It was already three-quarters finished.

Whether there was a rationale for the project is under debate. Inner Mongolia, which lies near big coal deposits, is known for building power plants without central approval. News reports say the region has more than 10 unauthorized plants with a total power capacity of 8,600 megawatts. Yet the power gets used.

China adds the equivalent of Canada's entire power-generation capacity every two years.

"One should not believe that these plants will be shut down permanently," said James Brock, an independent energy consultant in Beijing. "These guys are not building plants for the fun of it. There's a need."

Brock described the Inner Mongolia officials involved in power generation as "a fairly sophisticated group" that sought "to jump the rules."

Others aren't so sure. In July, the Paris-based International Energy Agency said in a report that China is building too many power plants, wasting energy and contributing to air pollution. It called for more competition in the power sector to rationalize costs, including the environmental fallout from burning dirty coal.

Some economists said the true reasons for shutting down some provincial mega-projects usually were murkier than the stated reasons. Song Guoqing, an economist at Peking University's China Center for Economic Research, said Beijing's accusation that the provinces built unneeded projects, such as highways and power plants, was unsound.

"This is a high-growth economy. If you see few cars on the road this year, in three years the road will be too busy," Song said. "The so-called overcapacity issue is just a short-term problem."

Song said that price distortions in China's economy offered huge opportunities for officials to enrich themselves and that bureaucratic spats sometimes hid corruption.

"One explanation is that they didn't give the necessary bribery to the central government. Who knows? That's just one possibility," Song said.

Almost escaped notice

The Xinfeng plant might have passed under the radar except that in July 2005, a partial collapse at the construction site killed six workers and injured eight.

That brought it onto the hot seat. Construction supposedly was halted, but it went on for another year. The nation's executive arm under Premier Wen Jiabao, known as the State Council, issued a blistering report last month saying it had reprimanded the two most senior officials in the Inner Mongolia Autonomous Region.

The two "illegally approved land use, filed false reports and did not follow proper bidding procedures" for the plant, the state-run Xinhua News Agency said, adding that building "continued even after state departments deemed it illegal and ordered a stop."

It said a new halt had been imposed. But there seemed some problems in the follow-through. More than a week after the stop-work order, bulldozers plowed through soil at the Xinfeng plant and hard-hatted welders toiled on the superstructure.

A lower-ranking official, Ge Zhongwen, greeted visitors and said he didn't see how work could be stopped.

"It's really a pity," Ge said. "Some projects without authorization should be stopped. But our project is almost finished. It's impossible for the state to halt it."
Source:Startribune
tag:China energy