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Published on Thursday, September 30, 2021

China | What’s behind the recent electricity crunch?

All eyes on China's electricity crunch. We analyze the reasons, the authorities' possible actions and economic impact of the recent power shortage.

Key points

  • Key points:
  • The most direct reason relates to the incentive problem between power plants and coal mining companies.
  • The authorities' aggressive carbon neutrality target and its assignment to local governments is an important reason behind.
  • The current electricity ration is more like an alarming call for China on its way to meet its carbon neutrality promise.
  • The problem can be fixed given Chinese governments' super powerful intervention capability.
  • The economic impact is all about inflation transmission, domestically and globally as well as production capacity reduction.

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