The Straits Times says

Inflation risk from China's energy crunch

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After disruptions to production caused by a resurgence of the Covid-19 pandemic, followed by port closures, China's energy crisis is the latest shock to hit global supply chains this year, and it could be the worst. With 20 out of 31 provinces in China facing drastic power cuts and several cities experiencing rolling blackouts, thousands of factories have been forced to shut down production for hours on end each day and millions of households have had their electricity supplies interrupted. Part of the production cuts is the result of energy consumption caps imposed on industrial facilities to meet the government's targets on carbon emissions. But much of the disruption is the result of severe supply-demand imbalances for energy, mainly coal, which accounts for around 60 per cent of China's energy supply.

As economies around the world start their slow recovery from the pandemic, demand for goods from China has rebounded. But coal production there has been unable to keep up with the resulting surge in energy demand - which is true not only of China but also other major coal-consuming countries such as India, Japan and South Korea. Supplies have been curtailed by a lack of investment in coal production partly because of policies to phase out the use of coal to meet climate goals. As a result, coal prices have soared more than threefold compared with the start of the year. Prices of oil and natural gas have also risen although to a lesser extent.

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