Beijing has warned China’s state-backed energy firms that blackouts will not be tolerated this winter as power shortages triggered the first slide in manufacturing activity since the pandemic struck.
The vice-premier, Han Zheng, has ordered energy companies to find more supplies at any cost after many factories were temporarily closed by the rationing of energy usage as coal shortages bite.
The order to suppliers was issued during an emergency meeting earlier this week, Bloomberg reported.
It came as China’s manufacturing purchasing managers’ index slipped to a 19-month low in September after Beijing placed restrictions on energy usage in its industrial heartlands.
Economists warned ripples from the shortages will hit Europe’s economy after the gauge fell from 50.1 in August to 49.6. Any reading above 50 signals growth with September the first contraction since February 2020.
Outages threaten to worsen global supply chain chaos as shortages dampen the post-pandemic recovery and send the cost of goods soaring.
Swathes of factories supplying companies including Apple and Tesla have curbed production after the power squeeze caused by a shortage of coal sent fuel prices to record highs.
Beijing is coming under growing pressure to boost coal imports to help restart production with China’s north east particularly affected. However, the deteriorating manufacturing figures came as the China Coal Industry Association warned it was “not optimistic” about supply in the run-up to peak demand over winter.
Hao Zhou, an economist at Commerzbank, said China’s slowdown points to lower demand and prolonged supply bottlenecks given its importance in exporting goods.
He said: “By and large, this means a double-whammy for the European firms.
“The power shortage has dampened the production and further boosted the upstream goods prices. Overall, the Chinese manufacturing sector is facing strong headwinds ahead.”
Factory output suffered the biggest deterioration in the official PMI survey while employment also dropped. A separate survey by Caixin, a Chinese media outlet, suggested that factory activity accelerated but economists cautioned that the sector will weaken further in the coming months.
Craig Botham, an economist at Pantheon Macro, said: “Until energy woes are resolved, further weakness seems likely.
“The improvement in the Caixin survey was driven by an upturn in total sales even as output remained in contractionary territory; we would not view this as inconsistent with an energy-led slowdown.”
