Power shortages in China threaten to worsen supply chain chaos and could affect GDP
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China’s State Grid Corporation said on Monday it would “do everything it can to fight the tough battle for electricity supply,” doing everything to secure residential consumption.
China was hit by a similar power crisis in June, but the situation is getting worse due to a perfect storm. Its industries are facing enormous pressure from soaring energy prices and from Beijing to curb carbon emissions.
The world’s biggest polluter is trying to keep its promise that its carbon emissions will peak before 2030. This forces its provinces to use less fossil fuels for each unit of economic output, for example by burning less coal to produce electricity. ‘electricity. At the same time, the demand for products made in China has increased as the global economy emerges from the pandemic. Result: not enough power to do the trick.
Major international vendors are gearing up to impact businesses already facing delays caused by global shipping shortages and delays.
Failures in areas where smartphone modules are typically assembled could cause short-term delays.
There is “probably some delay in the components for about a week,” Gai said. “Which is still manageable, but it’s a delay.”
Downward growth forecasts
The shock even prompts economists to revise downward growth forecasts this year for the world’s second-largest economy.
Nomura analysts cut their forecast for Chinese growth in 2021 by half a percentage point to 7.7% on Friday, citing the “growing number of factories” that have had to “go out of business” either because of Local mandates of energy use or power outages due to rising coal prices and shortages.
Goldman Sachs analysts followed Tuesday, lowering their GDP growth forecast for 2021 to 7.8% from 8.2%, citing “recent sharp cuts in production in a range of energy-intensive industries.”
The focus on infrastructure and construction pushed China’s carbon emissions to record highs in the first quarter of 2021, according to a study released in May by the Energy and Clean Air Research Center (CREA ). The agency said it was the fastest growth rate in more than a decade.
“The economy is driven much more by the industrial sector than by the consumer sector,” Macquarie economist Larry Hu wrote in a research note on Monday. “Unfortunately, the energy intensity of the industrial sector is much higher than that of the consumer sector.”
Ambitious climate goals
Hu pointed out that the Chinese government is targeting a 3% drop in “energy intensity” per unit of GDP this year.
In August, China’s National Development and Reform Commission (NDRC) called almost all major regions in China and asked them to reduce or monitor their energy consumption and intensity for the rest of the year.
Ten other provinces, including Heilongjiang and Liaoning, were not meeting energy needs, the NDRC said in its August announcement.
“Beijing’s unprecedented determination to enforce limits on energy consumption and intensity could lead to invaluable long-term gains, but the short-term costs to the real economy and financial markets are substantial,” wrote Nomura analysts.
Keep control
Some Chinese state media have also called for a balance to be struck between meeting climate goals and letting the electricity crisis run out of control.
“As it concerns the development of the economy and society, they have to determine where they should work and keep a balance,” the article read. âOtherwise, it will catch people off guard, especially for some industries, where they might be forced to shut down production on short notice. “
– Lauren Lau, Eric Cheung, Laura He and the Beijing office of CNN contributed to this report.
Correction: An earlier version of this article incorrectly characterized the actions taken by Pegatron in response to the Power Crisis.
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