Power shortages across at least 10 Chinese provinces risk weighing on the country’s gross domestic product as factories crucial to the global supply chain were forced to cut production, investment banks have warned.
Power supply problems in China’s manufacturing and industrial hubs have intensified this month as provinces struggled to meet the central government’s strict carbon emissions targets at the same time as coal prices have risen.
Bruce Pang, from China Renaissance, an investment bank, said the electricity squeeze could result in a cut to GDP growth of 0.1 to 0.15 percentage points in the third and fourth quarters.
“We think that the power crunch, together with . . . production halts as winter dawns, and a steep jump in energy prices, are presenting challenges to China’s manufacturing activities,” Pang said.
“We think the year-on-year growth of industrial output in September could be dragged to around 4 percent to 4-5 percent.”
Nomura, the Japanese investment bank, said it was “unrealistic” to expect China to maintain stable growth rates given the government’s tough emissions targets.
Rising prices have also made power generation less profitable. The benchmark coal price was Rmb1,086 ($168) a tonne last week, a 56 per cent increase since the start of the year, according to the China Electricity Council.
Factories have been ordered to use less power and even close for a few days a week to mitigate the shortfall.