The authorities in China are trying to cope with the widespread power crisis in the country. The power shortfalls in Beijing might impact the supply chains around the world. China’s power crunch may ripple through the world economy, reshaped by the COVID pandemic, reported The Wall Street Journal. The power shortage in China has added to the ‘global energy squeeze’ that might affect the post-pandemic recovery.
Power shortage in China
The international supply chain might be affected due to China’s power crisis as the price for raw materials and essential components might increase.
Mike Becham, Co-founder and CEO of Simple Modern, told The Wall Street Journal that “there will be a cascading effect”. He added that the effect was bigger than what he has seen in his business career. One of Beckham’s suppliers, based in Quzhou city in China, was directed by the authorities to work for four days a week instead of six days. Beckham has expected that the retail price for many products in the United States will increase by 15% next spring.
According to The Wall Street Journal, Ting Lu, chief China economist at Nomura Holdings, in a note to the clients, informed that the international market will face a shortage of supplies of different products like textiles, toys, machine parts. Furthermore, he added that the supply issues will cause the prices of products to rise, which could lead to inflation around the world, mainly in developed markets like the United States. Moreover, he revealed that the shortage of semiconductors is already being faced by carmakers and other industries.
While Speaking to The Wall Street Journal, Steve Cooke, Managing Director of Crea8tive Brand Ideas Ltd. (An England-based distributor of promotional merchandise like branded bags), revealed that he depends on the suppliers who source approximately 80% products from China. He added that the supply chain has already increased the price and delivery time for the products have also increased for his customers. Cooke anticipated the power crisis to further affect the supply chain.
China directs coal mines to boost production
In order to mitigate the power crisis, Beijing has ordered China’s coal mines to increase production. Several provinces across China have been suffering from blackouts since mid-September, reported CNN. The power shortages have led to increasing demand for electricity and forced the Chinese government to ration electricity during peak hours. Chinese officials in Inner Mongolia have asked 72 mines to boost production by a total of 98.4 million metric tons.