Here in Fooldom, when we talk about corporate social responsibility, we're typically referring to practices that ensure sustainable profit growth over the long haul. In China, that notion of social responsibility has been turned on its head.
Over there, it's become akin to a civic duty for companies to provide an uninterrupted flow of goods and services at below-market prices. To do otherwise would further stoke inflation, which was galloping at about an 8% clip in the first quarter. For the companies operating at a loss, the best one can hope for is either a buyout by a more politically favored competitor, or the sort of subsidy recently awarded to China Petroleum & Chemical
Another company feeling the pinch is Huaneng Power
A lot of smart Fools view this squeeze as temporary. And it is, of course. Either coal prices will cool (not looking very likely this year), or the government will allow utilities to raise their prices somewhat.
Speculation about the latter was prevalent in the business press yesterday. That chatter, combined with news of a Chinese tax reduction on stock trading that looks to have lifted shares of everyone from Aluminum Corporation of China
Huaneng is, by all accounts, one politically favored company that will emerge from the current coal crisis intact. Between this knowledge and the company's delicious dividend, that may be enough to assuage investors during this tumultuous time.
As for me, I prefer companies with a little more control over their own destiny.
Related Foolishness:
- This Chinese biodiesel player is plenty profitable, for now.
- What's China chewing on?
- Forget emerging markets. Try exploding markets.
