- China’s electricity crisis negatively affected the economy of the world.
- Technology, Automaking, Food, etc, have also suffered a lot from this situation.
- Though China is the largest exporter of Vietnam, our country has been still safe during this crisis.
The power crisis occurs when the transportation industry is facing serious congestion that slows down deliveries for the year-end shopping season. In addition, China is the largest exporter in the world, thus, this crisis not only negatively affects the country’s growth rate, but it also affects the global supply chain.
Slowing economic growth
According to the National Bureau of Statistics of China (NBS), the Purchasing Managers Index (PMI) in September, 2021 of this country only reached 49.6 points, 0.5 points decrease compared to August and 0.4 points lower than expectations.
*The Purchasing Managers Index (PMI) is an indicator that measures the economic “health” of the manufacturing industry.
According to Citigroup, exporters and manufacturers of special goods are at high risk of being affected, especially some neighboring territories such as Taiwan and South Korea. Or metal exporters such as Australia, Chile and major trading partners Germany will also be affected somewhat.
According to Bloomberg, Beijing is trying to control electricity supply by all means. Many factories in China have reduced output for the “Golden Week” (National Day holiday). The reduction in output and the risk of slow deliveries could put a strain on already tight global supply chains.
The technology industry could also be hit hard, because China is the world’s biggest technological devices manufacturer from iPhones to gaming consoles. This is also a major center for the packaging of semiconductors used in autos and appliances.
Some companies had to suspend production in China to comply with energy-saving measures. Pegatron Corp., a key partner for Apple, announced it began to adopt energy-saving measures last month. Meanwhile ASE Technology Holding Co., the world’s biggest chip packager, halted production for several days.
Bloomberg commented that some big companies such as Dell and Sony could not suffer from another supply shock anymore after being hit by the chip shortage situation which is estimated to last until 2022.
Automakers have struggled with production cuts due to chip shortages recently. So any further downturn in the semiconductor market will put them in a bad situation.
The affection to the auto industry so far has been trivial. But, there are some special cases like Toyota, which has capacity of more than one million vehicles per year in China, had to halt some of its production operations because of power shortages.
The harvesting and cultivation has become challenging due to power shortage, especially with corn, soy and cotton. Meanwhile, the global food price is rising significantly.
Prices for fertilizer are skyrocketing, which has put a lot of pressure on farmers of this country.
Moreover, Rabobank analysts forecasted power cuts could disrupt the operation of milking machines. While pork suppliers will face pressure from power tightening for cold storage.
Has Vietnam been affected by this crisis?
Wide impact of power shortage has occurred in some sectors such as aluminum, steel, cement and fertilizer production. These products are imported with large volumes by Vietnam. According to the General Statistics Office, in the first nine months of 2021, China is Vietnam’s largest import market with a turnover of $81.3 billion, up 41.1% over the same period last year.
Specifically, iron and steel import volume reached more than 4 million tons in the first 8 months of 2021, which is relevant to the value of about $3.5 billion.
However, there was still not any feedback from enterprises about the materials lack. The reason was supposed to be manufacturing suspension due to the Covid epidemic.
Also, Vietnam can produce some kinds of products by domestic companies such as construction steel. Furthermore, temporary change in the China market has not affected Vietnam much.
Power shortage in China – a danger to the global supply chain