Economic Daily:

It is widely believed that energy enterprises that sign and honor medium- and long-term energy contracts play a crucial role in keeping stability in energy supplies. However, according to some enterprises, the medium- and long-term energy contracts they signed were not able to fully cover their demands, and some of these contracts could not be fulfilled. What will be done to further promote the signing and honoring of the medium- and long-term energy contracts? Thank you.

Lian Weiliang:

Thank you for your question. As has been mentioned, medium- and long-term energy contracts have served as both a ballast and an anchor for keeping energy supplies and prices stable. It is also an important institutional innovation based on China's national conditions to ensure stability in energy supplies and prices. Medium- and long-term contracts are of great significance for stabilizing supply and demand-side expectations, locking resources, controlling costs, and ensuring supplies. Just now, you mentioned some specific cases. After an in-depth investigation, we found that behind these cases exist, to varying degrees, the problem that enterprises did not sign medium- and long-term contracts or the contracts they signed did not fully cover their demands. Therefore, the role of medium- and long-term energy contracts should be given better play to ensure energy supplies. The problem of fulfilling contracts, as you mentioned, still exists. This year, we will take stronger measures to help solve these problems. To be specific, we will ensure that all contracts that should be signed will be signed and that enterprises will be punished for the breach of contracts.

First, we will ensure that all contracts concerned will be signed. In some medium- and long-term energy contracts, whether to include some contents in the contracts is utterly decided by market entities through their negotiations. However, concerning the contents that relate to public interests, people's livelihoods, and ensuring energy supplies, enterprises should officially sign medium- and long-term contracts under the guidance of the government in a well-regulated way. For example, we have made it clear that when it comes to coal for electricity power generation and heating supplies and gas supplies for household use, medium- and long-term contracts should be signed in a well-regulated way under the guidance of the government. It should also be ensured that all contracts concerned are signed. The goal we put forward in this regard is full coverage of 100%. At present, some small-scale heating and gas supply enterprises lack enough knowledge of the medium- and long-term contract system and fail to make full use of it. Some enterprises exist in special stages and are unwilling to sign medium- and long-term contracts. In response to that, we will guide various functional departments at all levels within the government to make greater efforts to publicize and explain the system to enterprises. Some enterprises have stated that they can't get medium- and long-term contracts. Coordination mechanisms to ensure the supply of coal, electricity, oil, gas, and transportation services at all levels will therefore work to solve the problems enterprises encounter when signing these contracts.

Second, we will ensure that enterprises will be punished for the breach of contracts. A credit system is the base of a market economy. Honoring contracts in good faith is the fundamental responsibility of enterprises. While signing contracts is important, fulfilling contracts is more important. Now, as there is a certain gap between prices in the medium- and long-term contracts and those in the market, there are some cases where some enterprises do not perform well in honoring contracts. The government will therefore tighten regulation of all medium- and long-term energy contracts. As of last year, over 300 complaints have been received regarding enterprises failing to follow or fulfill contracts. We have promoted relevant enterprises to rectify their problems, and most of these problems have been corrected. Concerning medium- and long-term contracts designed to ensure energy supplies, especially in contracts relating to coal for electricity power generation and heating supply, a punishment and constraint mechanism has been established to require enterprises that fail to fulfill their contracts offer three times the quantity and the price of resources as prescribed in the contracts. There are five cases where enterprises have failed to abide by their contracts. Since these enterprises refused to rectify their problems, we have taken measures to punish them in accordance with the punishment and constraint mechanism. We have also put these enterprises on a list of severely dishonest enterprises and will continue to monitor their credit. For government-led medium- and long-term energy contracts, especially contracts concerning people's livelihoods, we will ensure that all contracts concerned are signed and fully implemented. We welcome friends from the media and all sectors of society to strengthen oversight and report clues to us about enterprises that fail to abide by contracts, and we will strictly urge them to fully rectify their problems.

Thank you.

Shou Xiaoli:

Thank you to all the speakers and to the friends from the media for your presence. Later we will hold the next press conference. You are welcome to join us then.

Translated and edited by Zhang Liying, Wang Qian, Huang Shan, Zhou Jing, Liu Stiong, Yan Bin, Zhang Junmian, Qin Qi, He Shan, Zhang Rui, Wang Wei, Gong Yingchun, Ma Yujia, Xu Kailin, Li Huiru, David Ball, Daniel Xu, Tom Arnsten, and Jay Birbeck. In case of any discrepancy between the English and Chinese texts, the Chinese version is deemed to prevail.