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China blackout threatens growth and supply chain

In the south, factories are rushing to meet Christmas orders, and in the north, more cautious residents are buying candles. and that is China suffers from blackouts that threaten the growth of the second world economy and affect the global supply chain.

The confluence of factors has led to blackouts in a country where coal runs on 60% of its economy.

High coal prices, state control of electricity prices, and stringent emissions targets have conspired to jeopardize the electricity supply.This has forced many regions to take measures to contain energy consumption in recent months.

In Guangdong, a manufacturing hub that largely produces everything from electronics to clothing that China exports around the world, entire supply chains have suffered from blackouts or restrictions for weeks.

Some devices with a high level of electricity consumption have been disconnected and working hours have been reduced to relieve stress on local networks.

“We need suppliers to meet deadlines, we’re asking them to work night shifts or use their own generators to ensure production,” Sherman Chan, deputy director of TV manufacturer Express Luck, told AFP.

He said costs have gone up because suppliers have had to invest more to fill orders.

Companies such as Chinese food producer Toly Bread or Tesla suppliers are warning of production delays as the crisis deepens.

Meanwhile, in Dongguan, an industrial center in Guangdong, workers were pressured to work to the best of their abilities.

“Yesterday we worked all night and today we will work all night again,” said Cui, an employee at a shoe factory who had to shut down part of its production during the day due to a power outage.

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“Of course we are not happy, but we go according to the times when the electricity goes out,” added the man, whose full name was not revealed.

Christmas on the horizon

Xu, a worker at a metal pipe-cutting plant, told AFP that the unexpected power outage had cut production by 40% this month.

“We cannot do production normally,” he told AFP.

Across Weibo, complaints of air-conditioning shortages have spread in the hot south, with the Chinese press reporting increases in orders for candles.

For their part, authorities in Beijing and Shanghai are trying to portray the blackout as “routine maintenance”.

The state power grid held an emergency meeting on Tuesday in which leaders pledged to ensure the provision of power for residential uses, describing it as the “most urgent political task”.

The power shortage comes at a time when the country’s electricity demand has grown to pre-pandemic levels, with supply tight due to restrictions on importing coal from Australia due to a political dispute.

“The main culprits are global energy shortages and Chinese controls on electricity prices,” Julian Evans-Pritchard, an analyst at Capital Economics, said in a note.

At the same time, China’s strict regulations on electricity prices put coal prices up at power plants.

The crisis prompted ratings agencies Goldman Sachs and Nomura to cut Chinese growth forecasts this week.

For their part, factory owners say the next few weeks will be critical to meet Christmas export orders, which have already been affected by rising shipping costs.

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