Recently, there have been many signs of an electricity crisis in Mainland China. The Beijing regime’s electricity control policy has been stringent recently. Some media described this move by the authorities as unprecedented.
At least five provinces have implemented measures to limit electricity use by suspending or reducing production. Many companies listed on the stock market were also forced to stop production, with some businesses taking a break until after the Oct. 1 holiday to resume production.
Companies in many provinces, including Guangdong, Anhui, Jiangsu, Zhejiang, and Shandong, have implemented production cuts to cope with restricted power distribution, causing power outages. Among them, Dongguan, home of the furniture industry in Guangdong province, is greatly affected.
According to a report by China Business News, on Sept. 22, the Houjie Power Supply Branch of Dongguan Power Supply Bureau of Guangdong Power Grid decided to stop power consumption of industrial production loads at all times of the day from Sept. 22 to 26, 2021. Houjie town hosts nearly 20,000 large production factories, including 500 of the world’s leading companies such as Samsung and Tyco. Industrial clusters that produce electromechanical, and metal products, furniture, shoes, gold processing, etc., are all affected.
In addition, according to the report of “Caixin,” many steel companies and aluminum factories in Jiangsu province were also forced to cut power and suspend production, among them, the Jiangsu Huachang aluminum factory, with an annual production capacity of 50,000 tons. They received notices on Sept. 16 and Sept. 18. Production will be suspended until Jan. 30; Jiangsu Xugang Iron and Steel Group, which has an annual production capacity of 3 million tons, also announced a half-month halt of production.
Massive shutdown of factories
“Yisheng Precision” is a major supplier of mechanical components to Apple and Tesla. It stopped production from noon on Sept. 26 until Sept. 30. In addition to Yisheng, Apple’s leading suppliers, including printed circuit board manufacturers “Xinxing Electronics” and speaker components supplier “Kangerfu” will also suspend production for five days until noon on Sept. 30.
Both Yisheng Precision and Kangerfu are located in Suzhou, Jiangsu province. The companies said they would use their inventory products to support demand and slow down the production capacity of other factories to reduce production to minimize impact.
According to Cailian News Agency, on Sept. 21, it was reported that high energy consumption enterprises in Zhejiang province would be closed from Sept. 21 to Sept. 30. The shutdown affects printing and dyeing factories, sewage treatment plants, chemical plants, chemical fiber plants, etc. In addition, in the energy sector, related businesses in the Khaqiao district of Shaoxing city, where printing and textile businesses are concentrated, will be put on hold.
The economy is struggling
Nearly half of China has failed to meet its energy consumption control target set by Beijing and now face pressure to control electricity consumption. The most severely affected areas are the three major industrial provinces of Jiangsu, Zhejiang, and Guangdong. These three provinces account for nearly a third of China’s economy.
Experts said that power cuts, severe production restrictions in powerful economic provinces such as Jiangsu, Zhejiang, and Guangdong, are likely to put pressure on the Purchasing Managers Index (PMI) of China’s manufacturing industry due to be set by the authorities in September. This will bring the index down further to 47.0 from 50.1 last month.
Nomura Holdings analysts predict that China’s economy will contract this quarter. “Due to the power shortage, China’s economic growth forecasts for the third and fourth quarters of the year have been downgraded to 4.7% and 3%, compared with previous estimates of 5.1% and 4%. Growth forecast for the full year, has been cut from 8.2% to 7.7%. This estimate still faces many downside risks.”
Japan’s Sankei Shimbun reported that the world’s largest iPhone assembler, “Foxconn,” Otsumori Precision Co., said from Sept. 26 to Oct. 1, has suspended production in response to the policy “stop production of industrial electricity” in Kunshan, the company’s base in China.
According to the New York Times, power cuts and even blackouts have slowed or closed factories across China in recent days, adding a new threat to the country’s slowing economy and potentially impacting global supply chains ahead of the busy Christmas shopping season in the West.