Chinese Factory Production Slows Amid Energy Crisis

Amid coal shortages and new energy usage goals, factories in China have been forced to limit or completely halt production to comply with energy use limits.  A new report shows just how these hurdles have impacted the nation’s overall production capabilities. 

On Thursday, a new report showed that Chinese factory production contracted in September for the first time since the Covid-19 pandemic took a grip in February 2020. This contraction was due in part to a noted slowdown in industries that are notorious for consuming a lot of energy, such as metal and oil processing. The report also noted a fall in new orders, employment, and new export orders. 

Most analysts had expected the manufacturing purchasing managers’ index to remain steady at 50.1, just above the point of contraction. In reality, the official results saw the index fall to 49.6.

Compared to other nations, China experienced a rapid recovery from the Covid-19 slump which caused massive economic and manufacturing drops. However, as the energy crisis worsens, and material cost and scarcity continue to rise, the manufacturing sector has been experiencing tighter and tighter bottlenecks. 

In an attempt to relieve this energy shortage, China has reportedly reached out to the Russian state electric company Inter RAO to increase their electrical output to their nation. Russia can supply up to 7 billion kilowatt-hours of power to China every year, but these exports fell last year by 7.2%. When asked about the request, an Inter RAO spokesman only said the company was “considering” a significant increase in electric supply.

These manufacturing issues come as China is also gripping with a serious crisis in their property sector. Property behemoth Evergrande raised eyebrows last week when it seemed they may default on the $305 billion they owe to homebuyers, contractors, and investors, and is still struggling to meet repayments due this week.