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September 28, 2021

Anna Murray 

China is in the grip of a deepening power crisis, which threatens to stifle economic growth and further entangle already tangled global supply chains. Despite rising demand, the world's second-largest economy has announced that at least 20 provinces and regions, accounting for more than 66 percent of the country's GDP, will be without power, primarily affecting heavy industries.

The main cause of China's electricity shortages is that 60 to 70 percent of coal power plants are losing money as a result of high spot prices and miners' failure to meet long-term supply contracts. Coal prices have risen to all-time highs, forcing power plants to cut output. To avoid losses, some plants reduce generation or schedule maintenance.

Some areas have proactively halted electricity flows in order to meet emissions and energy intensity targets. Analysts believe Beijing's unprecedented commitment to enforcing energy consumption limits will result in long-term benefits; however, the short-term economic costs may be significant.

As manufacturers race to meet foreign demand, China's energy consumption and industrial emissions have increased. Manufacturers, including iPhone suppliers and Toyota Motor, are experiencing processor chip shortages in China and elsewhere as a result of the country's power outage, as a result of recent sharp cuts in production.