China suffers from electricity shortage

Rising electricity demand combined with soaring coal and natural gas prices and strict emission reduction regulations are leading to power cuts in many parts of China. Manufacturing is bearing the brunt of the impact: from aluminum smelters to textile companies to soybean processing plants have been ordered to limit production, or in some cases stop production. There could eventually be supply shortages in everything from textiles to electronic components, disrupting supply chains and eroding the profits of many multinational companies. China could face another power shock head-on, battering Asia's largest economy.

China's growing power supply crunch also reflects an extremely tight global energy supply situation, even including European markets. The economic recovery from the pandemic has boosted demand from households and businesses, while the drop in investment by mining and gas companies has limited production.

But China's energy crisis is partly related to itself. China must ensure the blue sky and white clouds during the Winter Olympics next February, and at the same time demonstrate to the international community its determination to reduce carbon emissions. At present, nearly half of the regions have not reached the total energy consumption control target and are facing the pressure of electricity limitation. The hardest hit are the three major industrial provinces: Jiangsu, Zhejiang, and Guangdong, which account for nearly a third of China's economy. 

Analysts at Nomura expect China's economy to contract this quarter.