Electricity outages and “rationing” at peak hours in most of northeast China would contribute to global inflation, an expert warned on Tuesday.
“Coal and gas prices have skyrocketed just as the government has instituted new environmental standards for power generation,” Einar Tangen, a Beijing-based China analyst said.
Electricity "rationing" has been in effect since mid-September, causing concerns among the general public and impacting businesses.
The provinces of Heilongjiang, Jilin, and Liaoning are the three most affected.
Tangen said the Chinese authorities have been releasing reserves of gas and oil to meet the demand.
“But they will probably have to allow energy prices to rise, to keep manufacturing stable. Overall, it will add to global inflation,” said Tangen.
Reports emerging from China suggest several reasons behind the power outages including the supply-demand gap.
The ongoing crisis is being caused by a decline in wind-generated electricity and a decrease in coal-generated electricity owing to rising costs, while industry insiders strive to convince the people that the electrical supply will be restored.
China’s National Grid has said it was strengthening the “unified dispatch of the entire power network.”
It is exploiting the inter-regional and inter-provincial power transmission capacity.
The power breakdown has affected industrial production.
Tangen said consumers will have to pay more money “which will reduce disposable income and will have a downstream effect on inflation.”
According to the Chinese daily Global Times, an electrical outage in areas of Liaoning province lasted at least three days, and mobile phones had no signal.
Additionally, traffic lights were out of service, and escalators in malls and residential complexes were not working.