This production disruption comes as manufacturers and shippers race to fill demand for everything from clothes to toys, for the year-end shopping season.
Chinese manufacturers warn that these stringent electricity-use cuts will reduce output in economic hubs such as Jiangsu, Zhejiang and Guangdong, which account for a third of China’s total GDP. Country. This can cause commodity prices to escalate.
Local governments in China are aggressively taking measures to cut electricity consumption when their electricity-saving and emission-reduction targets are not met. Meanwhile, some places are still facing actual power shortages.
Clark Feng, owner of Vita Leisure, which imports furniture from Chinese manufacturers to sell abroad, told Bloomberg that limiting electricity consumption in Zhejiang, where his company is based , told Bloomberg. , dealt a new blow to businesses.
According to him, fabric manufacturers who have stalled production in this province have started to increase their selling prices and stop accepting new orders from abroad.
"We’ve been struggling with overseas shipments, now with production restrictions, the situation is bound to be chaotic," Feng said, adding that the delivery of orders, especially during the festive season, it will be even more difficult.
Yiwu Huading Nylon - a synthetic nylon producer in Zhejiang - has stopped half of its production capacity since September 25 following a power cut order from the local government. The company expects output to recover from October 1 and said it is looking to mitigate the impact of the production restrictions.
The power crisis comes after recent disruptions at ports in China impacted global supply chains. Last month, the port of Ning Ba - one of the busiest ports in the world - was partially closed for weeks due to the Covid-19 outbreak. Previously, Yantian port in Shenzhen was also temporarily closed in May.
According to Bloomberg , the power shortage will weigh on the Chinese economy as the country’s economy is slowing down due to strict virus control measures as well as Beijing’s move to tightly control the real estate market .
Both Nomura Holdings, China International Capital and Morgan Stanley have lowered growth forecast for China’s GDP in the remaining period of the year and warns lack of electricity can cause the growth of the 2nd largest economy the world lower.
"Global markets will feel the shortage of supply from fabrics, toys to machine components. The hottest topic about China will soon shift from Evergrande to lack of electricity," said Lu Ting - home said chief economist at Nomura Holding in Hong Kong.
