Northeast hit with power shortages . . .
China is experiencing unprecedented electricity cuts in the three northeastern provinces of Liaoning, Jilin, and Heilongjiang, with millions of homes and dozens of factories without power. Many factories had to stop production, including suppliers of Apple and Tesla, sparking concerns about potential impacts to supply chains. One company said in a now-deleted post that this was the “new normal” and that it expects the power shortages to last until the spring. Other experts said there is no way to know how long the shortages will last. Yesterday, however, the State Grid Corporation of China vowed to ensure a basic power supply and avoid power cuts.
The story behind the shortages . . .
There are various reasons for China’s current electricity shortage. As much of the world opens up after COVID-19 lockdowns, demand for exports has increased – including aluminum and steel, two electricity-heavy exports for China. The New York Times reports that demand for electricity in China is growing at twice the normal pace. This increase has raised coal prices, which has led to curbs on coal usage and widespread rationing of electricity. Another factor is China’s emission standards. The country pledged to cut its emissions by three per cent in 2021, and provincial authorities have been increasingly enforcing cuts as the year comes to an end and certain regions scramble to meet their targets.
Potential impact on China’s economic growth . . .
Almost 60 per cent of China’s economy is powered by coal, leading many to worry about the economic impact these shortages could have. Goldman Sachsestimates these shortages have affected approximately 44 per cent of China’s industrial activity. As a result, the company is decreasing its 2021 GDP growth forecast for China from 8.2 per cent to 7.8 per cent. However, the World Bank also released its East Asia and Pacific Fall 2021 Economic Update on Monday, which predicts that China’s economy will expand by 8.5 per cent in 2021, compared to the previous World Bank prediction of 8.1 per cent – meaning the economy could still recover despite its current electricity woes.