Coal shortages are causing unprecedented power outages in parts of China ahead of the winter season, affecting the country's economy and increasing global supply chain chaos. It's estimated that around 44% of China's industrial activity is affected by outages. With nearly 60% of the Chinese economy powered by coal, entire power grids in parts of the country are now facing collapse.
Nationwide power curbs, caused by many factors including a steep jump in coal prices and surging demand, have led to side effects at Chinese factories of all kinds, with some cutting output or halting production entirely.1
Industry insiders predict that the situation may worsen before it gets better, as the inventories of some power plants are inadequate while the winter season rapidly approaches.
According to Goldman Sachs estimates, as much as 44% of China’s industrial activity has been affected by power shortages, potentially causing a 1-percentage-point decline in annualized GDP growth in the third quarter, and a 2-percentage-point drop from October to December.2
Andy Mok, a senior research fellow at the Centre for China and Globalisation, described the outages as a 'short-term cyclical problem' and said he expected the Chinese government to step in to fix the issue.3
"In the northeast of China it can get bitterly cold and as winter comes on, ensuring adequate heat and electricity for the people there is a top priority," Mok told Al Jazeera.
In Dongguan, the world-class manufacturing hub in South China's Guangdong Province, power shortages have put companies such as Dongguan Yuhong Wood Industry in a tough situation, placing caps on electricity use in the company's wood and steel processing factories.
"Production is banned from 8 – 10 pm, and electricity should be reserved for sustaining the daily life of the public," an employee surnamed Zhang told the Global Times Sunday.1 "Our total capacity had been decreased by about 50%," Zhang said.
Power rationing in China's northeastern industrial heartland began on September 23 and the entire power grid in the region is in danger of collapse, the Beijing News reports.3
Power rationing there took place without advanced warning, according to the Global Times, sparking public anger as the outages shut down traffic lights and 3G mobile phone coverage in some areas.2
1 China's power supply tightens as winter dawns – Global Times
2 China energy crunch triggers shutdowns, pleas for more coal – Reuters
3 ‘Unprecedented’ power cuts in China hits homes, factories – AlJazeera
Featured image credit: UniversityBlogSpot
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