Power crunch in parts of China is a blip

As fear of a possible worsening of the power crunch in parts of China, especially in the country's northeast piles up, it is necessary to keep a cool head as the condition is temporary and does not warrant panic.

A number of provinces and regions including Liaoning, Jilin, Guangdong and Zhejiang have been recently in the grip of power outages, triggering speculation abroad about disruption of the global supply chain and even a slowdown in the world's second largest economy.

Actually, structural and cyclical factors explain the power crunch. As insiders have pointed out, power demand surged quickly after the developed coastal areas of China saw strong recovery momentum. Data provided by the State Grid Corporation of China (SGCC) showed that in the first six months, total electricity consumption increased 15.83 percent from the same period a year ago.

The global demand for Chinese goods has been strong as supply from some countries has been affected by the COVID-19 pandemic, according to Yang Fuqiang, a researcher with the Institute of Energy, Peking University.

In addition, coal-fired power producers suffer losses due to an overwhelming rise in the cost of coal. The prices of thermal coal have hit a record high.

Steps to curb the blackout have been immediate. The National Development and Reform Commission has taken measures to ensure that coal supply to major power plants are guaranteed through long-term contract with coal mines. The National Energy Administration has sent work teams to Beijing, Tianjin, Hebei, Inner Mongolia, Heilongjiang and Hunan to arrange for increasing coal and natural gas supply.

The SGCC said it would firmly safeguard the bottom line of power supply to meet people's basic needs. The company will strengthen distribution across its network, carefully organize network operation and ensure that all available generators of power companies are connected to the grid. It will also enhance monitoring of electricity consumption and ensure supply to homes.

Local governments are also going all out to guarantee power supply. In northeast China, authorities have asked the power sector and related enterprises to try their best to reduce power cuts. In south China's Guangdong Province, the energy department has told power stations to coordinate the increase of transmission from the country's western regions to Guangdong.

As decisive and prompt moves show effect gradually, the power crunch would be short-lived. The implications of the power shortage to the economy will be reduced to the minimum.

The Chinese economy has withstood the "tempest" brought by the COVID-19 epidemic and shown reasonable resilience. It is evident that the world's second largest economy is on the road to achieve high quality development with optimized economic structure, higher efficiency and better governance. The power crunch is not a stumbling block for the country's economy, but could be a catalyst to improve structural reform.