China’s economic boom leaves manufacturing centers running out of power
China’s galloping economic recovery has been so successful that it has led to power cuts in dozens of its manufacturing and industrial centers in the south of the country.
Factories in cities such as Guangzhou, Foshan and Dongguan, known to produce global and high-tech consumer products some products, were ordered to use less energy and even to shut down between one and three days a week to alleviate the shortfall.
Klaus Zenkel, president of the EU Chamber of Commerce in southern China, said around 100 companies in the organization were affected and further shortages could negatively impact investment foreigners in the region.
“After the post-pandemic economic recovery, businesses are very busy and have lots of orders. . . Now some have been asked to close three days a week. It is completely unreasonable, ”said Zenkel. “It’s an infrastructure problem that needs to be addressed immediately.
As other economies struggle to return to growth, record demand for electricity from factories and industry has exceeded supply in Guangdong Province, where the cities are located. The problem has been exacerbated by high temperatures as well as low rainfall in Yunnan, on which Guangdong depends in part for hydropower.
Analysts said the central government carbon emissions targets had also made local governments reluctant to increase their dependence on coal power, forcing authorities to ration electricity instead.
“With China’s carbon plan. . . local governments are very nervous about their use of coal and thermal energy, ”said Shan Guo, partner at Plenum China Research.
Lara Dong, from data provider IHS Markit, said limits on coal imports and domestic production was also a contributing factor to the shortages.
Factories fear they will not be able to fill their orders on time after the China Southern Power Grid Company said on Saturday that 21 cities and regions in Guangdong would be included in rationing or use restrictions. Businesses must limit the power supply or their electricity will be cut off.
Mike Wang, manager of an electronics factory in Dongguan affected by the shortages, said staff “sweated profusely” for 36C days because they could not turn on air conditioners and fans without breaking power consumption limits. .
“I’m really worried now. I don’t know how to explain to customers [that their orders would be late]He told the Financial Times. He said power shortages had hampered the efficiency of his plant by 20 to 30 percent.
China experienced one of the fastest economic recoveries in the world after Covid-19, driven mainly by its industrial and manufacturing sectors. Its economy has grown 18.3% in the first quarter of 2021 compared to the same period last year, although the growth rate was boosted by a weak base in early 2020.
From January to April, the total electricity consumption of a group of cities in Guangdong, across the Hong Kong-Macao border, known as the “Big Bay area”, increased by. nearly 30% year-on-year, the power company said.
Chinese provinces are under pressure to reduce their energy intensity – carbon dioxide emissions per unit of GDP – as part of central government efforts reach peak carbon emissions by 2030 and achieve “carbon neutrality” by 2060.
Dong said there was a risk of increased rationing as the province neared its expected peak in demand in July or August.
Additional reporting Qianer Liu in Shenzhen and Emma Zhou in Beijing