Thursday , October 28 2021

‘Unprecedented’: The force is suffocating China’s next big economic shock


China is in the midst of a critical electricity crisis that has slowed down production in factories and threatened economic growth.

“Unprecedented” power outages in China have shut down factories and made it difficult for companies to supply Apple and Tesla.

Rising coal and gas prices – as well as strict regulations from Beijing to reduce emissions – are blamed for the shock of power supply.

Aluminum plants, textile manufacturers and soybean processing plants have ordered to slow down or close down completely, Bloomberg reports.

Many parts of China have missed energy consumption targets set by Beijing, including Jiangsu, Zhejiang and Guangdong.

And China’s thermal coal inventory – used to generate electricity – is at a record low.

China’s total coal inventory stands at 11.31 million tonnes, according to South China Morning Post. It is enough just to meet the demand for only about two weeks.

Power outages threaten to further disrupt the tense global supply chains of semiconductors and other essential commodities Wall Street Journal Reported.

Goldman Sachs estimated that up to 44% of China’s industrial activity was affected. It lowered its annual economic growth forecast for China, expecting a 1 percentage point decline in annual GDP growth in the third quarter, and a 2 percentage point decline from October to December.

Analysts at Nomura said on Monday a number of factories were forced to cease operations due to the nature of the government mandate to meet carbon targets or rising prices and carbon shortages.

It lowered its annual GDP growth forecast to 7.7 percent.

The power outage comes amid reports that Beijing has asked state-backed companies to collect heavily indebted Evergreen assets.

The state-owned Global Times reported by Beijing called the power outage “unexpected” and “unprecedented.”

The breaks sparked public outrage, turned off traffic lights and killed phone reception in some areas.

“The power outage eight times a day, four days in a row … I have no words,” wrote a man from Liaoning on the Chinese micro-blog site Weibo.

Another said shopping centers are closing early and a convenience store is using candles, Al Jazeera reported.

“It’s like living in North Korea,” they wrote.

Extensive breaks

At least 17 counties and regions – which make up 66 percent of the country’s gross domestic product – have announced some sort of power outage in recent months, mostly to heavy industrial users, according to Bloomberg Intelligence data.

Nearly 60 per cent of the Chinese economy is powered by coal, but supply has been violated by the epidemic, has been triggered under pressure by severe emissions targets and is squeezing a decline in coal imports amid trade with Australia.

Earlier this month, coal prices peaked, with restrictions imposed on businesses and homes during the supply crisis.

However, China’s electricity demand in the first half of the year exceeded pre-epidemic levels, according to the National Energy Administration.

Goldman Sachs said the power outage caused heavy industries to reduce output, leading to “substantial pressures.”

Large companies have made an impact

Apple supplier Unimicron Technology said factories in two areas said they would stop production from Sunday noon to Thursday.

Dozens of other companies, including parts supplier to automaker Tesla, have said they will stop production this week, according to stock exchange announcements.

And in Beijing, service giant State Grid told AFP on Tuesday that a series of power outages soon in the capital – sometimes lasting nearly 10 hours – were part of “planned maintenance,” a statement that seemed to downplay state media reports. Because they are derived from national electricity consumption.

The northeast rust belt, with thousands of power-hungry cement stoves and steel smelting, was among the areas hardest hit.

A plant in northeast Liaoning was forced to evacuate 23 workers to a hospital due to carbon monoxide poisoning after souls abruptly stopped operating during a power outage, state broadcaster CCTV reported.

Photos in local media Beijing News showed cars traveling on a busy highway in Shenyang City in complete darkness with no traffic lights or streetlights.

– with AFP

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