Cape Times E-dition

China power crunch spreads, shutting factories and dimming growth outlook

SHIVANI SINGH AND MIN ZHANG

WIDENING power shortages in China have halted production at numerous factories, including many supplying Apple and Tesla, while some shops in the north east operated by candlelight and malls shut earlier as the economic toll of the squeeze mounted.

Rationing has been implemented during peak hours in many parts of north-eastern China since last week, and residents of cities, including Changchun, said cuts were occurring sooner and lasting for longer, state media reported.

Yesterday, State Grid Corporation pledged to ensure basic power supply and avoid electricity cuts.

China's power crunch, caused by tight coal supplies and toughening emissions standards, has hurt production in industries across several regions and is dragging on the country's economic growth outlook, analysts said.

The power squeeze is unnerving Chinese stock markets at a time when the world's second-largest economy is already showing signs of slowing.

The Chinese economy is grappling with curbs on the property and tech sectors and concerns around the future of cash-strapped real estate giant China Evergrande.

Tight coal supplies and toughening emission standards have driven the power shortages across China.

China has vowed to cut energy intensity by around 3 percent in 2021to meet its climate goals.

Provincial authorities have also stepped up the enforcement of emissions curbs in recent months after only 10 of 30 mainland regions managed to achieve their energy goals in the first half of the year.

The power pinch has been affecting manufacturers in key industrial hubs on the eastern and southern coasts for weeks. Several key suppliers of Apple and Tesla halted production at some plants.

At least 15 Chinese companies have said in exchange filings that production had been disrupted by power curbs, while more than 30 Taiwan-listed firms with China operations had stopped work to comply with the power limits.

The steel, aluminium and cement industries have also been hard hit by the output curbs, with about 7 percent of aluminium production capacity suspended and 29 percent of national

cement production affected, Morgan Stanley analysts wrote in a note yesterday. They said paper and glass could

be the next industries to face supply disruptions. Producers of chemicals, dyes, furniture and soy meal have also been affected.

The fallout of the power shortage has prompted some analysts to downgrade their 2021 growth outlook.

Nomura cut its third and fourthquarter gross domestic product (GDP) growth forecasts to 4.7 percent and 3 percent, respectively, from 5.1 percent and 4.4 percent previously, and its full-year forecast to 7.7 percent from 8.2 percent.

“The power supply shock in the world's second-biggest economy and biggest manufacturer will ripple through and impact global markets,” analysts at Nomura said in a September 24 note, warning that global supplies of textiles, toys and machine parts could be affected.

Morgan Stanley analysts said production cuts, if prolonged, could knock one percentage point off GDP growth in the fourth quarter.

Last week, major coal producers in China met to try and resolve shortages and curb price increases.

China, the world's biggest energy consumer and source of climate-warming greenhouse gas, has said it aims to bring carbon emissions to a peak by 2030 and to net-zero by 2060. |

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2021-09-28T07:00:00.0000000Z

2021-09-28T07:00:00.0000000Z

https://capetimes.pressreader.com/article/282003265578071

African News Agency