China's 'Unprecedented' Power Crunch May 'Ripple Through' Global Economy

The authorities of several provinces in China, mainly in the northeast of the country, are still trying to cope with the consequences of major power shortfalls, reportedly caused by the high cost and dearth of coal, as well as an increase in natural gas prices.

China's latest power crunch may "ripple through" the world economy, earlier reshaped by the COVID-19 pandemic, The Wall Street Journal (WSJ) has reported.

The newspaper claims that the power meltdown will most likely worsen "a global energy squeeze", which may then damage the post-pandemic economic recovery.

The power crunch in China also reportedly risks putting more pressure on global supply chains by increasing prices for raw materials and essential components.

Ting Lu, chief China economist at Nomura Holdings, wrote in a note to clients that global markets "will feel the pinch of [China's] shortage of supply from textiles, toys to machine parts".

He was echoed by Mike Beckham, co-founder and CEO of the Oklahoma-based company Simple Modern, who said that "there'll be a cascading effect" from the recent power shortfalls in China.

"As we started to comprehend the ramifications of what's happening, we realised that this is potentially bigger than anything we've seen in our business careers", Beckham argued referring to China's power meltdown.

He suggested that as a result of this crunch, US retail prices for many products could increase by as much as 15% next spring amid a "strong appetite" from retailers.

Steve Cooke, managing director of Cre8tive Brand Ideas Ltd., an England-based distributor of promotional merchandise such as branded bags, clothing, pens, and computer accessories, told the WSJ about the "incredible" situation pertaining to the power meltdown. According to him, the company mainly relies on suppliers who source about 80% of their products from China.

The comments come as Chinese authorities are trying to tackle the repercussions of what the state-run tabloid Global Times described as an "unexpected and unprecedented" power cut that hit a number of China's northeastern provinces in late September.

The power shortfalls in the provinces of Heilongjiang, Jilin, and Liaoning, as well as the southern province of Guangdong, a major industrial and shipping hub, reportedly "resulted in major disruptions to the daily lives of people and business operations". The power outages occurred as Beijing actively seeks to reduce carbon dioxide emissions, the use of coal, and develop a green economy.

The developments unfold amid turmoil on the European gas market, where the price of fuel soared to a record high of more than $1,900 per 1,000 cubic metres earlier this week, before falling by $740 and temporarily stabilising at about $1,200.