The power supply shock that has hit China is the next crisis the Communist country finds itself in after the financial crisis over Evergrande. The crisis is caused by a crackdown on power consumption which is driven by rising demand for electricity and surging coal and gas prices.
The country’s manufacturing industries, from aluminum smelters to textiles producers and soybean processing plants, are being ordered to curb activity. Half of China’s regions missed energy consumption targets set by Beijing and are now under pressure to curb power use.
With focus on solving the Evergrande crisis, the Chinese government neglected the generation, distribution and usage of power. Lifting of lockdown restrictions boosted demand from households and businesses but the country’s power sector was unable to meet the demand.
Mismanagement of the demand and supply of power for months led to severe shortage of coal and gas. The crisis aggravated when President Xi Jinping imposed curbs on industries to show the international community he’s serious about decarbonizing the economy.
Further, China banned shipments of coal from its top supplier Australia after disputes over trade and origins of COVID-19.
The power crisis is affecting homes as well as businesses with residents relying on natural light, while power has been cut to factories. Many have turned to diesel generators to plug the shortages of power from the electricity grid leading to increase in air pollution.
Analysts predict that China’s economy will shrink this year owing to the twin crisis in the finance and power sectors.