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Power crisis in China forces top companies to shut down factories

Acute power crisis now hits several Chinese provinces

China, which is already staring at multiple economic challenges, now has another problem. An acute power outage driven by an intense heatwave in the country’s southwest region. This has forced a many factories to shut down temporarily, which could further dent the supply chain network.

For example, Chongqing municipality is home to a host of factories that produce automobiles and computers. But the local government has now ordered suspending production with a view to conserving power. Similarly, factories in Sichuan province, also a manufacturing hub, have been shut.

According to reports, the move will impact companies such as Foxconn Technology, Toyota Motor Corp, Volkswagen and Tesla’s battery supplier CATL among others. While several provinces are in the grip of a heatwave, there are others which have been swept by floods. 

Xi's rising worries

This will further impact the economy at a time when the 69-year-old Chinese President Xi Jinping, is hoping to extend his tenure by another five years at the 20th national congress meet slated in October-November. “Though Xi will remain in power, as anticipated, there are voices of dissent,” an analyst who has worked in China told India Narrative.

He however said that the Chinese machinery will now be directed to churn data which would reflect a situation that is not as gloomy.

The national congress meet of the Communist Party is held every five years where major decisions and changes in leadership are announced. The 20th Party Congress, held in Beijing in the second half of 2022, is expected to see new faces promoted to senior positions and mark the start of President Xi Jinping’s unprecedented third term in power.

“The shutdowns add to challenges for the ruling Communist Party as Xi, the country’s most powerful leader in decades, prepares to try to break with tradition and award himself a third five-year term as leader at a meeting in October or November,” news agency AP reported.

Xi and his team have stepped in and local authorities have been directed to resolve the issue at the earliest. But sources said that the situation is not easy to resolve.

Xi’s persistence with the zero Covid policy has already come under the spotlight. The National Bureau of Statistics (NBS) data revealed that the country’s urban youth unemployment rate touched 19.9 per cent in July– the highest since January 2018 when record keeping of the same was launched. Not just that China’s manufacturing output measured in terms of purchasing managers' index (PMI) dropped to 49 in July from 50.2 in June. Any reading above 50 is considered as growth while a sub 50 score indicates contraction.

Also read: Youth unemployment in urban China surges to nearly 20 per cent

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