Heat wave threatens power shortages and higher pork prices in China

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Dozens of cities have faced record high temperatures at a time when the economy is still trying to recover from the bruising of Covid-related lockdowns. The heat wave also comes as consumer inflation hits a 23-month high, mainly driven by rising food prices.

As many as 84 cities across the country issued their highest red alert warnings on Wednesday — meaning temperatures are expected to rise above 40 degrees Celsius (104 Fahrenheit) in the next 24 hours — according to the National Meteorological Administration. Shanghai reported 40 degrees Celsius for the first time this year on Sunday.

China’s heat wave has pushed the demand for electricity to extreme levels in many regions as people turn up the air conditioning.

On Tuesday, Zhejiang Province – a major export and manufacturing powerhouse on the east coast — urged its 65 million inhabitants and companies to save energy.

“In order to guarantee the electricity supply for residents and companies… we call for joint actions by the entire society to save electricity,” the energy agency of the province and the national network said in a joint statement.

The Zhejiang Energy Bureau has also rationed power for some energy-intensive companies, such as polyester manufacturers and textile printing and dyeing companies in the cities of Hangzhou, Shaoxing and Haining, according to analysts from several Chinese brokerage firms.

The latest shortages come just months after China emerged from an energy crisis that was the cause of widespread power cuts in the second half of last year. The power outages were attributed to a shortage of coal, which China uses to produce about 60% of its electricity, and strong demand for electricity.
The current heat wave and resulting power rationing pose yet another challenge to China’s massive manufacturing industry, which is still recovering from months of strict Covid lockdowns.
China releases GDP data for the April-June quarter on Friday and growth is expected to decline to about 1% in the second quarter from 4.8% in the first three months of the year.

Inflation worries

High temperatures also affect Chinese crop production and threaten to push up food inflation.

The Central Meteorological Observatory has warned that high temperatures could adversely affect corn, soybean, wheat and pasture production in many northern provinces such as Ningxia, Inner Mongolia and Hebei.

Residents spend time in a bomb shelter to escape the summer heat amid a heat wave warning in Nanjing, Jiangsu province, China on July 12, 2022.
Rising food prices on both the domestic and global markets have had an impact on the feed industry and pig farming in recent weeks.

Earlier this month, a number of major feed makers, including New Hope Group, warned customers that they would raise the prices of pig, poultry and fish feed amid the rising costs of soybean meal, corn and wheat. Most price increases started last week.

Pork, the main meat in China, has been particularly hard hit as soybeans and corn are the main ingredients used in the pork industry.

In the week ending July 1, pig prices had since risen by 46% March, according to the latest data from the National Development and Reform Commission, the country’s leading economic planner.

The commission said last week it was considering tapping into the country’s strategic pork reserves to stem the rapid rise in prices. It also pledged to address any price-gouging behavior by pig farms.
According to China’s most recent CPI data, the consumer price index rose 2.5% year-on-year, up 2.1% in May and the highest in nearly two years. Pork prices, which rose nearly 3% in June from May, added to the upward pressure, the National Bureau of Statistics said in a statement.

— CNN’s Jessie Yeung and Shawn Deng contributed to the coverage.



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