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China Further Restricts Power Use Amid Widening Energy Crisis

In a widening energy crisis, China is expanding power use restrictions to at least 20 regions and provinces that contribute more than half to the Chinese economy, adding a bearish risks-off sentiment on global markets, including in the oil market.

Twenty regions that account for over 66 percent of the gross domestic product (GDP) of the world’s second-biggest economy have already announced some forms of restrictions on electricity use, especially in heavy and energy-intensive industries, Bloomberg reports.

The power outages have spread from factories to homes, with residents in northeast China impacted by hours-long unexpected blackouts, Caixin Global reports.

Amid tight power supplies and soaring coal prices, power outages in China have started to hit factories of various energy-intensive industries, sparking renewed fears about larger disruptions to global supply chains on top of the COVID-related issues.

As coal prices surge amid a global energy crunch, Chinese authorities are mandating restrictions in energy use, which have led to outages at factories and homes. 

The power crunch has reached the automotive industry and workers at GAC Aion, the electric vehicle unit of the largest state carmaker, Guangzhou Automobile Group, have been told to turn off air conditioning, lights, printers, and other office equipment when not in use, in order to conserve energy that’s not critical for car manufacturing, Bloomberg reports.

Toyota, one of the world’s largest automakers, has not been spared the fallout from the power crisis, either. Toyota’s operations in China are suffering the electricity rationing, spokeswoman Shiori Hashimoto told Bloomberg on Tuesday. 

At Chinese factories, the power cuts have affected manufacturing sites that supply Apple and Tesla, among others, Reuters reported on Monday. Some suppliers of the two large U.S. companies have halted production in China amid the power crisis.

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Apart from the automotive and semiconductor manufacturing industries, Chinese producers of steel, aluminum, furniture, toys, and dyes are also hit by the outages.

By Tsvetana Paraskova for Oilprice.com

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