IN FOCUS
By Dincy Adlakha 

China's power shortage may disrupt global supply chains, says a Wall Street Journal report

On 1 October, the Wall Street Journal published an article highlighting the upsetting effects of the Chinese power shortage on global supply chains. The article cited numerous power outages in many Chinese cities over the past week and linked them to the larger disruption of global supply chains.

The report stresses the problems surrounding the coal-based production of electricity which is responsible for 60 per cent of China's power. Citing Ting Lu, chief China economist at Nomura Holdings, the article also hinted at the resultant inflation in developed economies such as the United States. The global supply chains are still quite largely dependent upon China, and the shortage of semiconductors is just one case of global loss. More similar cases are about to follow, as per the WSJ report.

The power shortage in China

China is facing a crisis to fulfil its power demands. Despite dramatic efforts from the authorities to curb heavy industrial power usage, there have been multiple power outages for long hours throughout cities. China has not seen such severe blackouts in 15 years. Last, such long hours of power outages were recorded when China was newly industrializing.

Provincial authorities of Inner Mongolia, Zhejiang, Jiangsu and Guangdong have ordered industries to reduce electricity usage, including energy-intensive industries like aluminium smelting, steel making, cement manufacturing, and fertilizer production. Post-pandemic recovery has been hard on these industries. Around ten provinces have failed to attain the energy efficiency targets. Furthermore, these industries have been asked to halt production during peak hours of power usage, which can last up to 16 hours, or shut down entirely for two to three days. Some plants have been shut since 22 September until further notice. Within the previous week, approximately 100 companies have notified the stock markets regarding a production halt. Chinese factory activity was at its lowest in September 2021 ever since the pandemic hit the economies in February 2020.

Reasons behind China's power shortage

The power crisis has been triggered due to a pool of factors like tough emissions targets, high coal prices, record electricity prices, an upsurge in demand for power, and increased overseas recovery from COVID-19 slump. China has pledged to become carbon neutral by 2060. However, it is still far from the targets, and the latest regulations have not helped in improving energy efficiency. There is also an increased demand for energy in the factories. This is caused by the global reopening of economies and a rebound of demand for Chinese goods. Greater demand for goods requires higher production, dependent upon constant energy supply. However, as China has unofficially banned coal imports from its largest supplier Australia, production from coal-fired plants remains low. The state has maintained a strong control on electricity prices leading to many coal plants reducing their outputs instead of operating at a loss. The prices of thermal power continue to rise, with a record-breaking price of 212.92 USD per tonne on 29 September. Additionally, the domestic output of renewable energy has also remained low during the year due to droughts and bad weather disrupting hydropower and wind power supplies, respectively. This further entangles the domestic fuel supply in China. 

Effect on global Supply Chains

Many suppliers located in China are largely affected due to the power shortages and have not been able to continue the productions. Many manufacturing companies that supply electronics and other components to auto companies such as Ford Motor co. and Volkswagen AG have been affected, and the vehicle production has suffered, in turn. Chipmakers and semiconductors are the forerunners in struggling industries interrupted in their final stages of production. Many suppliers to Apple Inc. and Tesla have also been caught up.

Besides, investment banks Nomura and Goldman Sachs have acted to this power shortage by downgrading their forecasts for growth in China since they expect further disruptions in the production and supply chains.

In perspective

Based on the current power crisis in China and the analysis of the Wall Street Journal Report, the blocking effects on global supply chains can be counted on. Also, the response from Chinese authorities on assuring basic power supply are bleak. The goal of maintaining an energy-efficient economy seems farfetched for China.

References

China's Power Shortfalls Begin to Ripple Around the World, Wall Street Journal, 01 October 2021

 https://www.wsj.com/articles/chinas-power-shortfalls-begin-to-ripple-around-the-world-11633101100

IN BRIEF
By Keerthana Nambiar and Avishka Ashok

INTERNAL
China's biggest lenders pledges for more green projects
On 1 October, the Bank of China, China's biggest lender have pledged to boost credits supporting green projects from the period of 202lender The bank promises to provide 1 trillion yuan (154.2 billion dollars) for the green industry parallel to the BOC action plan to reach China's carbon neutrality goals. According to the plan, the overall domestic corporate loans exceed 1 trillion yuan, 15 percent over the beginning of this year which is faster than the bank's average loan growth. (Bank of China plans more green loans, XinhuaNet, 1 October 2021)

China celebrate 72nd National Day
On 1 October, China celebrated the 72nd anniversary of the establishment of the People's Republic of China. A few days before the National Day, the Chinese government also released a series of white papers on China's economic prosperity and the demography in Xinjiang. The people participated in flag hoisting ceremonies, spent time with their families and engaged in community activities as they began a long weekend while also following the pandemic prevention measures. A grand flag hoisting ceremony also took place in Tiananmen Square, which was attended by over 1,30,000 people. The National Day was celebrated with great enthusiasm by the Chinese citizens as the country marks 100 years of the Communist Party of China's existence. (National Day celebrated across China amid jubilation, hopes for better future, Xinhua Net, 02 October 2021)

Chinese economy observes a minute slowdown as economic challenges create obstacles to growth 
On 1 October, Xinhua Net reported that numerous obstacles were challenging the Chinese economy. Some of these challenges include climbing prices of commodities, the spread of COVID-19 in parts of China, a slump in consumer consumption and the slowing down of industrial output. The larger picture however, depicts a slow but definite growth of the economy. The purchasing managers' index also slipped down marginally in the last month to 49.6 from 50.1 in August. (Economic Watch: Pressure and perseverance: China's economy maintains resilience, Xinhua Net, 1 October 2021)

Chinese media reports international media bias and discrimination 
On 2 October, Xinhua Net published an article regarding the international media bias against China. The Chinese media outlet lashed out at the western media for continuously painting it in a negative light. According to the report, Western media and journalists consistently portrayed China as the enemy and silenced those who called out the lies. Subsequently, the report spoke about the resignation of Javier Garcia, the head of the EFE News Agency of Spain in China, who explained that "flagrant information manipulation by Western media "has taken a good dose of my enthusiasm for this profession" according to Xinhua. (Xinhua Commentary: Western media bias against China deplorable, dangerous, Xinhua Net, 2 October 2021)

INTERNATIONAL 
Australia's first fleet of nuclear-powered submarines, a threat to Chinese submarines
On 2 October, South China Morning Post published an editorial on the new security partnership between Australia, the United States, and the UK as Australia acquired its first fleet of nuclear-powered submarines. The editorial focuses on the risks of military conflicts in the disputed South China sea. An associate professor of international studies at Renmin University says that the Australian submarines poses threat to Chinese ones with accidental collisions in the Indo-Pacific regions. He also points out the "with more nuclear submarines and alliance system, the US and Australia may advance an offensive naval strategy in the future." (Australia getting nuclear subs via Aukus' ups risk of conflict near China', South China Morning Post, 2 October 2021)

Xi Jinping addresses China Pavilion of Expo 2020 Dubai
On 1 October, Chinese President Xi Jinping addressed the China Pavillion of Expo 2020, Dubai via a video message under the theme, "Connecting Minds, Creating the Future". Xi Jinping said, "Where should the future of humanity be headed? China's answer is to call on the people of all countries to work together, respond to the call of the times, strengthen global governance, pursue innovation-driven development, and advance the building of a community with a shared future for mankind." He concluded his note wishing "full success" on the expo and added that China is open for exchanges and cooperation with other countries. (Xi sends video message for China Pavilion of Expo 2020 Dubai, Global Times, 1 October 2021)

China's Great Wall Motor planning to acquire Spain's Nissan plants
On 1 October, Reuters reported on the talks that will happen between Spanish authorities and Nissan with China' Great Wall Motor over a possible takeover of the Japanese carmaking plant in Barcelona. The Spanish regional and national authorities along with Nissan and Spanish electric motorcycle manufacturer Silence and local engineering firm QEV Technologies come together to negotiate the future of the two smaller Nissan plants. According to the Reuters sources Great Wall has shown interested in larger plants (Spain to negotiate with China's Great Wall Motor to take over Nissan plant, Reuters, 1 October 2021)

Chinese representative to the UN calls for global solidarity in vaccine equity
On 1 October, China and 74 other countries called for global solidarity for vaccine equity at the General Debate of the Third Committee of the United Nations General Assembly. The Chinese representative to the UN Zhang Jun said: "We call on all states and stakeholders to strengthen solidarity and international cooperation to contain, mitigate and overcome the pandemic and its consequences, ensure protection for those most affected, including women, children, youth, the older persons and persons with disabilities, and take measures to counter misinformation, disinformation, stigmatization, racism and xenophobia." (75 countries including China call for global solidarity for vaccine equity, Xinhua Net, 2 October 2021)