China’s State Grid Corporation of China said on Monday that it will “go all out to fight the tough battle for power supply” and make every effort to protect residents’ consumption.
China suffered a similar power crunch in June, but the situation is getting worse due to a perfect storm. Its industry is facing soaring energy prices and huge pressure from Beijing to cope with carbon emissions.
The world’s largest polluter is trying to fulfill its promise that its carbon emissions will peak by 2030. This requires their provinces to use less fossil fuels per unit of economic output, for example by reducing the burning of coal to generate electricity. At the same time, as the global economy recovers from the pandemic, demand for Chinese-made goods has surged. Result: There is not enough power to operate.
Major international suppliers are preparing to deal with the impact of companies that are already facing delays due to shortages and global shipping delays.
Power outages in areas where smartphone modules are usually assembled may cause some short-term delays.
Gai said, “The components may be delayed by about a week.” “It’s still manageable, but it’s a delay.”
Cut growth forecast
This shock even prompted economists to lower their growth expectations for the world’s second largest economy this year.
Nomura analysts on Friday lowered their forecast for China’s economic growth in 2021 by 0.5 percentage points to 7.7%, citing that “more and more factories” have to “stop operations” or because of local energy consumption requirements. Either it was due to a power outage. Coal prices are rising and shortages.
Goldman Sachs analysts followed suit on Tuesday, lowering their 2021 GDP growth forecast from 8.2% to 7.8%, citing “recent production cuts in a series of high-energy-intensity industries”.
According to a research report issued by the Center for Energy and Clean Air Research (CREA) in May, the focus on infrastructure and construction prompted China’s carbon emissions to hit a record high in the first quarter of 2021. The agency said this is the fastest growth rate in more than a decade.
Macquarie economist Larry Hu wrote in a research report on Monday: “The economy is more driven by the industrial sector than the consumer sector.” “Unfortunately, the energy intensity of the industrial sector is much higher than The consumer sector.”
Ambitious climate goals
Hu Jintao pointed out that the Chinese government’s goal is to reduce the “energy intensity” per unit of GDP this year by 3%.
In August, China’s National Development and Reform Commission (NDRC) convened almost all major regions in China and asked them to control or monitor energy consumption and intensity for the rest of the year.
The National Development and Reform Commission stated in its August announcement that another 10 provinces, including Heilongjiang and Liaoning, did not meet energy requirements.
“Beijing’s unprecedented determination to enforce energy consumption and intensity restrictions may bring valuable long-term gains, but the short-term costs of the real economy and financial markets are huge,” wrote Nomura analyst.
Some Chinese state media have also called for a balance between meeting climate goals and allowing the power crisis to run out of control.
“This is related to economic and social development, and they must be clear where they should work and maintain a balance,” the article wrote. “Otherwise, it will catch people off guard, especially for certain industries, where they may be forced to stop production in a short period of time.”
— Lauren Lau, Eric Cheung, Laura He and CNN Beijing Branch contributed to this report.
Correction: An earlier version of this article incorrectly described the measures Pegatron has taken in response to the power squeeze.