China’s electricity crisis threatens struggling manufacturing industry, PMI data shows
A government survey of manufacturing activity released Thursday fell to 49.6 in September, from 50.1 in August. Any reading below 50 indicates a contraction – and in this case, it was the first time the official investigation has shown a decrease in activity since the start of the Covid-19 pandemic.
Factories are plagued by skyrocketing energy costs, according to China’s National Bureau of Statistics, which added Thursday that high-energy companies have not thrived.
“The big picture is that the industry was coming out of the boil even before the latest power shortages,” wrote Julian Evans-Pritchard, senior Chinese economist at Capital Economics, in a research note Thursday.
The deepening electricity crisis has triggered blackouts for households and forced factories to cut production – a threat to the country’s vast economy that could put even more pressure on supply chains global.
Businesses in the industrial heartland of the country have been urged to limit their energy consumption in order to reduce demand for electricity, according to state media. The problem prompted China’s State Grid Corporation to declare this week that it will “do everything it can to fight the hard battle for electricity supply”, doing everything possible to secure residential consumption.
Evans-Pritchard noted that the latest polls took place before most of the effects of the latest blackouts were felt.
“Since then, power shortages have intensified,” he added, noting that media reports suggest factories in more than 20 provinces have had to cut production.
Thursday’s data weren’t all bad. A private survey of manufacturing activity, the Caixin Purchasing Managers Index, fell from 49.2 to 50, indicating stable activity levels in September compared to a decline in August.
And an official index of non-manufacturing business activity rose to 53.2 from 47.5 in August, a sign that the service sector is recovering. Weaker consumer demand has been a concern in China this year.
“There is still some leeway for further resumption of service activity as the disruption from the pandemic eases,” Evans-Pritchard wrote. “But the industry looks poised for yet another weakness.”
– CNN’s Beijing office contributed to this report.