Goldman Sachs Group Inc yesterday lowered its annual economic growth forecast for China as nationwide power cuts hit millions of homes and halted production at factories, including some supplying Apple Inc and Tesla Inc.
At least 17 provinces and regions — accounting for 66 percent of the country’s GDP — have announced some form of power cuts in the past few months, mainly targeting heavy industrial users, Bloomberg Intelligence data showed.
Nearly 60 percent of the Chinese economy is powered by coal, but supply has been disrupted amid the COVID-19 pandemic, put under pressure by tough emissions targets and squeezed by a drop in coal imports amid a trade dispute with Australia.
Earlier this month, coal prices hit a record high, with restrictions imposed on businesses and homes amid the supply crunch.
Still, China’s power demand in the first half of the year exceeded pre-pandemic levels, the Chinese National Energy Administration said.
In Beijing, utility giant State Grid Corp (國家電網) yesterday told reporters that a series of upcoming power outages in the capital — which are to last nearly 10 hours at times — are part of a “planned maintenance,” a statement that appeared to downplay state media reports that they are due to the nationwide power crunch.
The energy situation is shaping up as the latest shock to global supply chains as factories in the world’s biggest exporter are forced to conserve energy by curbing production.
The disruption comes as producers and shippers race to meet demand for everything from clothing to toys for the year-end holiday shopping season, grappling with supply lines that have been upended by soaring raw material costs, long delays at ports and shortages of shipping containers.
Goldman Sachs said it expects growth to come in at 7.8 percent, down from 8.2 percent, citing power cuts that led heavy industries to cut output, leading to “significant downside pressures.”
It is the second bank to downgrade forecasts in as many days.
Analysts at Nomura Holdings Ltd on Monday said that a surging number of factories had been forced to cease operations due to either Chinese government mandates to meet carbon targets or surging prices and coal shortages.
It cut its annual GDP growth forecast to 7.7 percent.
“The hottest topic about China will very soon shift from ‘Evergrande’ to ‘power crunch,’” Nomura lead China economist Lu Ting (陸挺) said in Hong Kong, referring to financial woes at property developer Evergrande Group (恆大集團).
Additional reporting by Bloomberg
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