Many signs of an electricity crisis emerged in mainland China. Beijing’s power control policy is very strict and unprecedented. Several factories have closed, significantly impacting on the Chinese economy.
The Nikkei Asian Review reported Apple and Tesla suppliers stopped production at some factories across the Asian country on Sept. 26.
Yisheng Precision supplies key mechanical components to Apple and Tesla, and paused production from noon on the 26th until the end of this month. Apple’s main suppliers, including printed circuit board manufacturers Xinxing Electronics and speaker components maker Kangerfu, also suspended production for five days until noon on Sept. 30.
Japan’s Sankei Shimbun reported one of the world’s largest iPhone assemblers, Foxconn, Otsusen Precision Co., suspended production for the last five days of September in response to the Chinese Communist Party’s (CCP’s) policy to curb industrial electricity use.
Intel, Qualcomm, Huida and other major chip suppliers received notice from Jiangsu factories they will suspend production for several days. Changhua Technology, a chip packaging material manufacturer that supplies NXP, ASE and Infineon, also announced it would stop work until the end of the month.
Aluminum smelters, textile manufacturers, soybean processing plants and other major manufacturers were the first to bear the brunt. Factories had to limit production and, in some cases, shut down altogether.
Power cuts and severe production restrictions in Jiangsu, Zhejiang and Guangdong are likely to put pressure on the economic health benchmark. Chinese officials amended the nation’s manufacturing PMI to drop 3.1 points to 47 in past month.
PMI predicts the national state of economy and currency. If benchmark falls below 50 points investors could respond by reducing capital market exposure. This is because the economy is on the decline.
Nomura Holdings analysts predict China’s economy will contract this quarter due to the power shortage. Growth forecasts for the third and fourth quarters of the year were downgraded to 4.7% and 3%, compared to previous estimates of 5.1% and 4% respectively.
Growth forecast for the full year has also been cut from 8.2% to 7.7%. Goldman Sachs revised down its China third-quarter growth forecast to flat from the previous quarter’s 1.3%.
Why cut power?
Electricity supply is “limited” in many places due to the significant gap between supply and demand.
China is a large energy consumer and relies heavily on coal power generation. Between 2006 and 2020, consumption jumped from 2.86 billion tons of standard coal to 4.98 billion tons of standard coal. China’s energy consumption per gross domestic product unit was 1.5 times greater than the global average at the time of publication.
The No.1 Economic Finance newspaper in Mainland China reported a lack of electricity is causing tension across Guangdong’s power grid.
“The thermal power plant has not yet operated at full capacity, one unit has stopped working, [and] the other unit only provides half the amount of electricity compared to normal levels,” an insider said according to the paper.
Coal imports drop
The volume of imported coal significantly decreased.
From January to June 2021 Chinese coal imports totaled nearly 14 million tons, down 19.7 percent year-on-year. During the previous corresponding period Chinese provinces imported coal from Australia for more than 30% of their total requirements–nearly 35 million tons. However, “War Wolf diplomacy” stopped these imports.
The CCP separately considers Russia to be a “comprehensive strategic cooperation partner.” However, the InterRAO electricity company still reduced supply despite China’s electricity shortage.
Hydroelectric hurts environment
The CCP’s total hydropower capacity is estimated to be 600 gigawatts according to the IHA Hydropower Status Report 2020.
However, few know why multiple hydroelectric projects are failing to solve China’s electricity needs. Construction activity also destroys the marine and ecological environment, causing floods in both summer and winter.
Last decade Beijing’s Yongding River canal diversion supply was exhausted for an average of 316 days a year. Water also became increasingly polluted.
A Hunan hydropower plant worker revealed renewable energy sources are not advanced enough to replace conventional fossil fuels.
“Unlike the summer flood season, it is difficult for Hunan hydropower to increase production during the dry season in winter, where hydropower accounts for more than 30% of the total installed capacity of Hunan province,” the employee said. “Wind and solar power production is not stable, relying on these two types of electricity alone cannot meet the peak-hour electricity load.”
Nuclear safety risk
Nuclear power has many safety risks. After more than a month of delays, China announced plans to close a reactor at the Taishan nuclear power center, Guangdong province on July 30, 2021.
CGN Group, which owns 70% of capital at Taishan nuclear power plant, said it decided to “suspend the operation of the No. 1 reactor to find out the cause of damage to fuel rods and replace them.”
Although the government has implemented reforms and policies to speed up transitioning to clean energy, CCP leader Xi Jinping further increased wind and solar power targets to 25% of total energy produced.
This equates to 1,200 megawatts by the year 2030. Renewable energy will still be insufficient to satisfy national electricity grid demand.
Economy, people victimized
The Chinese people will ultimately suffer. They have no electricity for daily life and cannot keep themselves warm.
People living in Liaoning, Jilin and Heilongjiang provinces have spoken out on social media about the lack of heating, elevators, and working traffic lights. Businesses are closed and workers are struggling to earn an income.
“Early in the morning the electricity is cut off, water is cut off [and] there is no water in the house. [I] cannot cook breakfast for the children, and there is no water to flush the toilet,” one resident said.
“My whole family has not washed their faces, hair, [or] showered for three days now,” another resident said.
“I am studying online at home and, every once in a while, the power goes out. The internet goes out [and] there is no way to learn,” a third resident added.