Power Cuts Threaten China’s GDP in 2021

Power Cuts Threaten China's GDP in 2021

China’s economy is facing the brunt of excess energy consumption, tightened coal supplies, real estate fall-outs and the coronavirus.

After the Evergrande crisis, another issue may threaten China’s GDP. This holiday season, some of us across the world may not get to buy smartphones and other goods for our loved ones. That’s because China’s state-mandated power cuts have forced factories to shut down and halt production. This will affect the supply of some sought-after products, like Apple and Tesla

The cuts come as China aims to meet its official energy use targets and its climate goals. The nation has vowed to cut its energy consumption by around 3% in 2021. Another reason behind the power cuts is the high cost and tight supply of coal. China is home to numerous manufacturing plants for top companies around the world. These power cuts might prove detrimental for these companies, especially with the peak sales season approaching.

Around 15 Chinese companies have blamed the power shortages for disrupting production. In light of this, banks have changed their economic forecast for China too. Goldman Sachs cut its forecast for China’s 2021 economic growth to 7.8% from 8.2%. In 2022, the bank expects it to fall further to 5.5%. For Chinese startups, this also acts as a lesson in energy management and navigating through abrupt stressors.

What prompted the power cuts?

As per economists and environmentalists, China’s manufacturers have exhausted this year’s energy quota faster than planned. This comes with the increasing demand for exports as the spread of Covid slows. 

Additionally, China is set to attend a U.N. environmental conference between October 12 and October 13, 2021. That puts pressure on the Chinese government to meet its targets and show the world that the country is being energy-efficient. 

What are the consequences of this power shortage?

For one, it is worsening the existing supply chain issues around the world. With factories shutting down and production slowed, companies like Apple, Tesla and more have to delay the sales of their products. This will affect the global economy. Nomura’s analysts noted, “The power-supply shock in the world’s second-biggest economy and biggest manufacturer will ripple through and impact global markets.”

Many companies have already declared that rationing energy could affect production and hurt them financially. Nomura’s economists Ting Lu, Lisheng Wang and Jing Wang echo this sentiment. They said in a report, “Beijing’s unprecedented resolve in enforcing energy consumption limits could result in long-term benefits, but the short-term economic costs are substantial.”

Goldman Sachs bankers feel that, besides the power shortages, the government’s approach to the Evergrande crisis and the record-high coal prices are harming the economy. 

Besides factories, households are facing power cuts too

In North-east China, residents are having to ration power during peak hours. Plus, Changchun residents noted that these cuts were happening sooner and lasting for a longer duration than informed. In Huludao, citizens were asked not to use energy-intensive appliances, including water heaters and ovens, during peak periods. In Harbin city, shopping malls were closing earlier than usual to save electricity. 

Many of these residents are not pleased with this move. They are appealing to the government on social media, asking them to restore all power supplies.

Header Image by Unsplash

SHARE THIS STORY

Share on facebook
Share on twitter
Share on linkedin
Share on email
Alinda Gupta
I am a professional journalist and gourmand with an inexplicable love for caffeine. I admire old architecture and find comfort in fiction books. I am also an A1-level certified French speaker—bonne journée!

RELATED POSTS

Why Crypto Markets Crash and 5 Ways Investors Can Deal

Why Crypto Markets Crash and 5 Ways Investors Can Deal

With more and more people holding cryptocurrencies today, the crypto crash of May 2022 has had severe financial consequences. Reliable currencies, including Bitcoin and Ether, met a terrible fate, as did stablecoins, amounting to losses of over US$300 billion.

How Lemi Is Helping Small Businesses Reach Their Customers

How Lemi Is Helping Small Businesses Reach Their Customers

Starting a business isn’t easy. From finding raw materials and making your products to actually reaching the right customer base, everything takes a lot of time and energy. Even though this process is so hard, a lot of people venture out and start their own businesses, so much so that small business enterprises (SMEs) make up 90% of the world’s businesses.

What Is CateCoin and Is It Legit

What Is CateCoin and Is It Legit?

At a time when meme coins, like Dogecoin and Shiba Inu, are enjoying immense popularity, another cryptocurrency has been laying the groundwork to compete with them: CateCoin.

Companies that Might Accept Crypto Payments in 2022

Companies that Might Accept Crypto Payments in 2022

The cryptocurrency industry is growing rapidly, and with that growth comes increased interest from companies looking to accept crypto payments. While there are already a few major companies that accept cryptocurrency payments, like Microsoft and PayPal, many more are considering following suit.

Top 5 Personal Finance Books That You Need to Read

Top 5 Personal Finance Books That You Need to Read

When it comes to financing and budgeting, most of us have to learn everything all by ourselves. From figuring out the right kind of investments to learning how to manage your spending habits, we all need to know more about handling our personal finances.