China’s power squeeze prompts foreign companies to invest in factories elsewhere

Read Time:2 Minute, 42 Second


View of the power tower in Beijing, China, September 28, 2021.

Gong Wenbao | Vision China Group | Getty Images

BEIJING-Sudden power outages in parts of China are prompting some foreign companies to invest in other countries.

In the past few days, many local governments in China have restricted electricity consumption, restricted or even stopped factory production. The latest restrictions come as the country faces a shortage of coal for power generation, and local authorities are facing increasing pressure to comply with the central government’s call to reduce carbon emissions.

“Some companies are taking a wait-and-see attitude towards investing in China. They are choosing not to continue now,” said John Annel, a partner at Asia Perspective, a consulting firm that mainly works with Nordic companies operating in East and Southeast Asia.

These plans Foreign business investment Anel said it was worth tens of millions of dollars.Although China is still a “very strong destination” for manufacturing, he said that companies are now Hope to invest in Southeast Asia, especially Vietnam.

“Uncertainty-no one really knows the overall situation, how it will develop, how it will be implemented [in] In the next few months, your city and your province,” he said, citing the company’s conversations with about 100 companies.

Large-scale blackout

Last week, the Chinese city from Guangdong, the southern export center, to Shenyang, the capital of Liaoning Province, ordered restrictions on electricity consumption with little notice.The sudden move prompted Some Chinese economists arrive Downgrade their GDP forecast year.

In terms of background, according to official data obtained by Wind Information, Guangdong Province is the province with the most exports in China, accounting for about 23% of the total exports as of August this year. The export value of Liaoning Province ranks 16th, accounting for 1.6% of the country’s total.

“This kind of uncertainty in the short term is something you can handle for a week or so and catch up over time,” said Aniel. “The bigger problem is this uncertainty. This situation is likely to continue in the next two quarters.”

Leaders of American and European business associations confirmed that the latest power outages are affecting the investment decisions of foreign companies in China.

Read more about China from CNBC Pro

“The company relies on policy stability and predictability,” said Matt Margulies, vice president of the US-China Business Council for China.

“They need to notify the power supply interruption in advance to ensure safety and business continuity,” he said. “They also need to be consulted to find subtle solutions that meet the needs of all stakeholders. A one-size-fits-all approach will be disruptive, increase costs, and undermine market confidence.”

China’s Ministry of Commerce postponed its request for comment to a weekly press conference scheduled for Thursday afternoon.

Reports and anecdotes of power restrictions, especially in southern China, have been circulating in the past few months, especially as China is trying to reduce carbon emissions.

The local power grid is also facing pressure from coal shortages and strong demand for electricity from factories to meet the strong global demand for Chinese goods.According to reports, insufficient power has prompted Some cities and factories had power outages as early as last winter.

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