Despite China having relatively fewer COVID-19 cases and fewer movement restrictions, its economy has slowed down in 2021. Moreover, the pace of contraction quickened over the last two months. The major reason for this downturn seems to be the incessant power cuts and blackouts that have significantly impacted the output of manufacturing units. The power crisis was due to issues in both demand and supply . As economies opened up, the demand for finished goods surged, pushing China’s factories to produce more. This increased the demand for electricity, which China was not able to meet. Also, as coal prices surged, thermal power plants in China could not operate sustainably and reduced their supply. Moreover, due to tight emission norms following a resolve to reduce greenhouse gases, mining output has been restricted and factories have been asked to scale back to achieve targets.
The graph shows the manufacturing purchasing managers’ index (PMI) of China. A PMI that is above 50% shows that the manufacturing economy is expanding; if it is less than 50%, it shows that the manufacturing economy is shrinking.
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Demand vs supply
The graph shows the y-o-y change in consumption and generation of electricity in China in 2021. In August 2021, the gap between the growth in generation and consumption widened considerably. The demand and consumption of electricity is depicted in terawatt-hour.
Prices up, output low
The graph shows China’s coal futures price ($ per tonnes) on the right axis and the output of coal from China’s mines (in million tonnes). The output has sharply come down in recent months while the price has surged.
Tighter green norms
The graph shows the sector-wise consumption of coal in China. Consumption by the industry sector reduced from 2014 due to China’s aggresive push to reduce emissions.
Source: National Bureau of Statistics of China, China Electricity Council, Zhengzhou Commodity Exchange, IEA