EDITORIAL: Reinvesting during blackouts in China
Over the past two or three decades, Taiwan’s lukewarm economy has been regularly compared to China’s rapid growth. Young Taiwanese have been criticized for their lack of “wolf spirit” – for being less ambitious than their Chinese peers. China’s continued growth has led some to believe it will leave rivals, including the United States, far behind.
However, China’s tighter industry regulation has stunned global players in the financial markets and investment services sector, hence the need for a reassessment. Last week, as markets questioned which industry would be next to come under scrutiny by the Chinese government, large-scale power cuts across the country created new uncertainty about the market. Mondial economy.
About 16 of China’s 31 provinces experienced power rationing last week, media reported, adding that some manufacturers in the economic powers of Jiangsu, Zhejiang and Guangdong provinces experienced significant disruption. In the coming months, businesses in some cities are facing rationing of three days and four days off, or two days and five days off, while businesses in some areas face irregular blackouts.
In peak season for manufacturers, Beijing has had to resort to power rationing due to power shortages in parts of China. The Communist Party of China not only implemented energy consumption controls and carbon neutrality in various provinces, but also blocked Australian coal imports earlier this year, which caused coal prices to skyrocket. thermal and lower financial incentives for national utilities to generate more electricity.
Outbreaks of COVID-19 infections in countries in South and Southeast Asia have also increased manufacturing activity in China, which has boosted demand for electricity and contributed to its electricity shortages.
It takes time and money for the Chinese government to tackle this energy challenge. At the end of last week, Beijing allowed utilities to raise prices and make more use of coal-fired power generation, but it takes weeks for the effects to be noticeable. It remains to be seen whether the electricity crisis in China will be the norm over a long period as the markets fear.
Beijing announces an industrial transformation to come. The country plans to shift from energy-intensive industries – such as the production of chemicals, steel, cement and textiles – to low-energy ones to meet emissions targets, but the transformation is doing so. fear that the pressure on private companies will intensify. and that Beijing is making another attempt to revive its bloated public sector.
Whatever its goals, Beijing’s unexpected rationing of power has not only affected Chinese industries, but also foreign companies, including those in Taiwan. Its actions are likely to harm the Chinese economy and damage global supply chains. In recent years, inflationary pressures have increased due to rising freight rates and commodity prices. If manufacturing disruptions and component shortages at Chinese factories persist, price hikes are likely to spill over into global supply chains, making China-induced inflationary pressure a new target for the world. .
The business environment in China – from tighter regulation and financial turmoil at the Evergrande group to recent power rationing – is deteriorating, increasing investment risks. If Beijing can purge tech giants like Alibaba Group Holding and Didi Global overnight, how can foreign companies, including Taiwanese companies, escape?
As a result, it is once again time – just like during the peak of US-China trade tensions – for Taiwanese companies to rethink how their assets are deployed globally and realign their supply chains in the post-pandemic era. .
Comments will be moderated. Keep comments relevant to the article. Comments containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned. The final decision will be at the discretion of the Taipei Times.