Lagatar24 Desk
Beijing: China’s energy crisis is shaping up to be the latest jolt to global supply chains, as manufacturers in the world’s largest exporter are compelled to reduce output in order to conserve electricity. Producers and shippers are scrambling to meet demand for everything from clothing to toys for the year-end holiday shopping season, dealing with supply lines that have been disrupted by rising raw material costs, long delays at ports, and shipping container shortages.
Chinese manufacturers warn that tight measures to reduce electricity use could reduce output in economic powerhouses like Jiangsu, Zhejiang, and Guangdong provinces, which account for over a third of the country’s GDP, and possibly raise prices. Local governments are ordering the power outages to prevent falling short of their energy and emissions reduction targets, while some residents are without power.
“From textiles to toys to machine parts, global markets would feel the pressure of a supply constraint,” said Lu Ting, chief China economist at Nomura Holdings Inc in Hong Kong. “China’s trendiest subject will quickly transition from “Evergrande” to “Power Crunch.”
The power outages follow recent port disruptions in China, which wreaked havoc on global supply systems. Following a Covid outbreak, a portion of Ningbo port, one of the world’s busiest, was shut down for weeks last month, while Yantian port in Shenzhen was closed in May.
The energy shortage will impact on China’s economy at a time when it is already weakening due to reasons such as tougher virus control measures and housing market restraints. Because of the power outages, Nomura Holdings Ltd., China International Capital Corp., and Morgan Stanley have either lowered their GDP growth predictions or warned of reduced growth.
With the power crisis spreading from the factory floor to people’s homes, China’s State Grid Corporation stated on Monday that it will do everything possible to avoid power outages in order to meet basic residential demand.
According to analysts, power shortages will certainly affect heavy industries such as aluminum and steel, as well as downstream businesses. The provincial energy authority in Guangdong published a warning on Sunday stating that large-scale factory cuts had already been imposed.
