China goes into blackout and growth estimates worsen

China cuts off electricity in some industrial areas of the country. What is happening in the second world economy? While the energy crisis scares the world, Beijing collapses in estimates.

China at risk of blackout ? The world’s second largest economy is squeezed in the grip of a growing energy crisis , which threatens to hinder growth and further tangle global supply chains.

The dragon has awakened in a very complicated situation: the industrial heart of Northeast China is shaken by electricity in fits and starts.

Citizens are alarmed and are demanding to increase coal imports consistently and quickly in order to keep the lights on, factories open and even water supplies.

Meanwhile, analysts are beginning to seriously doubt Chinese growth, so much so that they have started to worsen their estimates. What’s going on in China ?

China without electricity? There is the alarm, what happens

China in grip of an energy crisis as shortages of coal supplies, tightened emissions standards, and strong demand from producers and industry have pushed coal prices to record highs and triggered widespread restrictions. on the use of electricity.

Specifically, at least 20 Chinese provinces and regions, accounting for over 66% of GDP, have announced some form of power outages, mostly aimed at heavy industry users.

The reasons are twofold: record coal prices are forcing power generators to cut production despite rising demand, while some areas have cut off electricity flows to meet emissions targets.

Power shortages in the Northeast shut down traffic lights, residential elevators and 3G cell phone coverage, as well as trigger factory closures, local media reported today.

Guangdong province, the southern industrial center with an economy larger than Australia’s, has reduced up to 15 gigawatts of power, according to the Economic Information Daily .

Cities such as Shenyang and Dalian, which are home to over 13 million people, have been affected, with disruptions in the industries of suppliers from companies such as Apple and Tesla.

Since March, the provincial authorities of Inner Mongolia have ordered some heavy industries, including an aluminum smelter, to limit the use of electricity so that the province could meet its energy consumption target.

This is a theme that is rather felt by the Chinese government . The National Development and Reform Commission announced in mid-September tougher punishments for regions that fail to achieve their goals and said it will call local officials to answer.

Governments in the provinces of Zhejiang, Jiangsu, Yunnan and Guangdong have asked factories to limit energy consumption or to curb production.

The impact on industries is not small and includes energy-intensive sectors such as aluminum smelting, steel production, cement production.

The least 15 publicly traded Chinese companies that produce a wide range of materials and goods, from aluminum to chemicals, dyes to furniture, have reported that their production has been halted to limit power use.

Less natural gas available, due to the global crisis, pressure for climate targets and a drop in coal production (which meanwhile has skyrocketing prices) are causing a bomb ready to go off in China .

One of the now main short-term challenges for Beijing is the ongoing trade dispute with Australia, the second largest coal exporter in the world, which has significantly reduced shipments to China , even as local authorities have stepped up safety standards that they slowed production in Chinese coal mines.

Estimates on Chinese GDP worsen

Goldman Sachs estimated that up to 44% of Chinese industrial activity was affected by energy shortages , potentially causing a 1 percentage point drop in annualized GDP growth in the third quarter and a 2 percentage point drop from October to December.

In a statement, he said he was reducing his 2021 GDP growth forecast for China to 7.8% , up from 8.2% previously.

For Nomura, the dragon will stop at 7.7% of the Gross Domestic Product in 2021 and Fitch sees the advance of the Dragon down from 8.4% to 8.1%.

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