Coal supply has soared, easing the electricity crisis that has held back output in China’s large manufacturers, and the country’s economy is finally receiving some positive news.
National Bureau of Statistics (NBS) data shows that manufacturing activity in November rose from 49.2 in October to 50.1 in November, increasing by 0.1 percentage points. It was the first time in three months that the reading was over 50, indicating growth rather than contraction. Additionally, this was the first time since March that the index has risen.
On Tuesday, the Chinese capital ascribed the uptick to “recent governmental measures” to stabilize energy prices and increase supplies. Zhao Qinghe, a senior statistician for the National Bureau of Statistics (NBS), said in a statement that “power shortages alleviated and the prices of several raw commodities decreased considerably” in November.
Extreme weather, soaring demand for energy, and stringent limitations on coal use have wreaked havoc on China’s electrical infrastructure for months.
To cut electricity demand, firms were advised in September to minimize their energy use. In other cases, individuals were allegedly stranded in elevators because of a power outage.
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Industrial production fell sharply in September and October due to the energy shortage and rising raw material prices. The government has eased its efforts to reduce carbon emissions and instructed coal mines to increase output to solve the situation.
It was a significant outcome. NDRC statistics show China established a new daily record for coal output in mid-November. China utilizes more than half the world’s coal supply and is already the greatest carbon emitter (NDRC). According to Citi analysts, the agency’s “strong interventions” relieved the “overall power shortfall” and “cost constraints” on certain businesses. Aluminum, steel, and other raw materials have increased in price due to power outages, causing ripple effects across automobile manufacturing and construction sectors.
As a result of a power crisis, the government decided to adopt a new tack on coal development. According to a CNBC translation of the Mandarin-language statements made by the People’s Bank of China in mid-October, financial institutions should not “blindly” shut off financing for coal projects. China’s State Administration of Coal Mine Safety estimated that coal production might rise by 600 tons per day to 55 million tons in the fourth quarter, bringing the total output to 55 million tons.
China also purchased coal to meet the shortage in supplies. In September, the US imported more fossil fuel than in August. Imports of thermal coal from Russia and Indonesia have surged dramatically.
China’s preparation for the Winter Olympics, the ongoing real estate crisis, and the possible effect of the novel Omicron version of the coronavirus might all influence industrial production in the coming months. According to Citi analysts, the Chinese government is trying to “guarantee blue skies for [the] Beijing Winter Olympics” by restricting the production of raw materials in northern China. As China’s housing market continues to decline, there is still another danger.
According to the latest figures, new orders received by companies recovered somewhat on Tuesday, indicating that domestic demand is still sluggish.
The housing crisis has placed a severe strain on aggregate demand, according to Citi analysts. Thirty percent of Chinese GDP is accounted for by real estate and associated businesses. Data released on Tuesday indicated a slightly worse non-manufacturing PMI of 52.3, which gauges the performance of the service and construction sectors.
Analysts believe that the Omicron variety might be a problem for the service sector in the future. Because of its rapid expansion in South Africa, the World Health Organization has classified the novel coronavirus type as a “concern” virus. Several nations have rushed to put travel restrictions on the new model, despite the lack of concrete facts.
China has historically had the world’s strictest border restrictions. Economists at Capital Economics predicted Tuesday that “unless there are fresh outbreaks, most of the decline in services should rebound in December,” unless there are new outbreaks of Omicron. That would need harsher measures from the government.