China’s power rationing to expand

China's power rationing to expand

China’s power rationing to expand

The expansion of China’s power shortage has forced some factories to shut down, including Apple and Tesla suppliers. Some businesses in the northeast region do business under candlelight, and shopping malls close early. Power shortages are causing more and more damage to the economy.

China's power rationing to expand

Since last week, some parts of Northeast China have implemented power curtailment measures during peak hours. State-owned media reported that residents of Changchun and other cities said that the power outages were not only earlier, but also longer.

State Grid Corporation today promised to maintain a basic power supply and avoid power cuts.

Analysts pointed out that the power shortage in China is mainly due to the shortage of coal supply and the increase in emission standards. This wave of power curtailment measures has affected industrial production in many parts of the country and dragged down China’s economic growth prospects.

The implementation of power rationing when the night temperature in extreme northern cities drops to almost freezing will have an impact on both domestic and non-industrial users. The National Energy Administration of China has told coal and natural gas companies to ensure a safe energy supply so that household users can keep indoors warm during the cold winter.

Liaoning Province said that since July, power generation has been greatly reduced, and the power supply gap expanded to a severe level last week. Last week, Liaoning Province expanded the scope of power outages from industrial users to residential areas.

Huludao City urged residents not to use high-energy appliances such as hot water boilers and microwave ovens during peak hours. A resident in Harbin, Heilongjiang Province, told Reuters that many shopping malls closed early at 4 pm.

China, the world’s second-largest economy, has shown signs of slowing growth, and now there is a power shortage that has caused anxiety among investors in the Chinese stock market.

China’s economy is currently facing the impact of the government’s real estate and a crackdown on the technology industry. Coupled with the outbreak of the debt crisis of the real estate giant Evergrande Group, the future is worrying.

● Impact on production
The Beijing authorities have pledged to reduce energy intensity by about 3% in 2021 to meet China’s climate targets. In the first half of this year, when only 10 of the 30 regions in mainland China met their energy targets, the provincial government has strengthened the implementation of emission restrictions in recent months.

In recent weeks, power shortages have affected manufacturers in major industrial towns in the coastal regions of East China and South China.

Some factories of several important suppliers of Apple and Tesla have suspended production.

At least 15 Chinese companies announced in the Stock Exchange’s announcement that power curtailment measures have caused production interruptions. At the same time, more than 30 companies listed in Taiwan must suspend production because of China’s power curtailment measures.

Analysts at Morgan Stanley (Morgan Stanley), commonly known as “Morocco”, wrote in today’s report that industries such as steel, aluminum, and cement have suffered severe damage. About 7% of aluminum production capacity was suspended, while 29% of China’s cement production capacity was affected.

Morgan Stanley pointed out that the paper and glass industries will be the next industries that will face supply disruptions.

Manufacturers of chemicals, dyes, furniture, and soybean meal have also been affected.

●Domestic gross production shrinks
Market analysts revised downwards China’s economic growth forecast for 2021 on the grounds of power shortages.

Nomura lowered China’s economic growth forecasts for the third and fourth quarters, from the previous estimates of 5.1% and 4.4%, respectively, to 4.7% and 3.0%, and revised China’s 2021 full-year economic growth forecast from 8.2%, down to 7.7%.

Nomura analysts mentioned in a report on September 24: “The shortage of power supply in this world’s second-largest economy and the manufacturing country will spread, which will have an impact on the global market.” Nomura analysts also warned that global textiles, The supply of toys and mechanical parts may be affected.

Morgan Stanley pointed out that if the manufacturing suspends production for too long, it may cause China’s economic growth in the fourth quarter to shrink by 1 percentage point.

China’s major coal producers have already met last week to try to solve the problem of coal shortages and curb coal prices.

China is the world’s largest energy consumer and a major greenhouse gas emitter. Beijing authorities stated that China’s goal is to peak carbon emissions by 2030 and drop to net-zero by 2060.

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