Since Sep. 2021, the ration on power consumption has been driven by rising demand for electricity and surging coal and gas prices as well as strict targets from Beijing to cut emissions. It’s coming first to the country’s mammoth manufacturing industries: from aluminum smelters to textiles producers and soybean processing plants, factories are being ordered to curb activity or — in some instances — shut altogether.
Almost half of China’s 23 provinces missed energy intensity targets set by Beijing and are now under pressure to curb power use. On the list are Jiangsu, Zhejiang and Guangdong — a trio of industrial powerhouses.
The economy is under a severe shortage of coal and gas — used to heat homes and power factories — this winter. It’s had to ration power in the colder months before but it’s never had to do it with global prices of these fuels at the levels they are now.
The worsening power crunch in China reflects extremely tight energy supply globally that’s already seen chaos engulf markets in Europe. The economic rebound from COVID-19 lockdowns has boosted demand from households and businesses as lower investment by miners and drillers constrains production.
But China’s energy status is partially of its own making as President Xi Jinping tries to ensure blue skies at the Winter Olympics in Beijing next February and show the international community he’s serious about de-carbonizing the economy.
As with Europe’s energy ructions, the squeeze poses a challenge for policy makers: how to pursue environmental goals without damaging still-fragile economies. Beijing is targeting full-year growth of 6% after expansion of 12.7% in the first half. Policy makers seem to be willing to accept slower growth in the rest of this year in order to meet the carbon emissions target. The GDP goal of more than 6% is easily achievable, but emissions targets are not easy to hit given robust growth in the first half.
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