China is often regarded as the factory of the world. It has the largest number of industries which not only cater to the demands of the Indo-pacific region but that of the entire world. Despite the pandemic crisis, China exported goods worth USD 300 billion. But these days the world's largest exporter is undergoing serious energy crisis.
Experts have time and again warned us about the shortage of non-renewable resources like coal, natural gas etc. Because of their cheap availability, nations have a high dependency on these scarce resources to fulfil their energy needs. In countries like China and India, around 65% of energy demand is fulfilled by coal and natural gas. Dependency on these resources is to such a large extent that sudden rise in demand because of economic recovery and resuming of industrial activities has pushed China into deep energy crisis. The government is forced to ration electricity, orders have been released to turn off elevators and street lights. People have experienced blackouts and power cuts in Jilin, Liaoning, and other northeast provinces. As per the recent report by Goldman Sachs, 40% of manufacturing activity is affected due to energy crises.
India imported goods of around USD 65 billion from China in the fiscal year 2020-21 despite border tensions and pandemics. India is highly reliable on China for Telecom and electronic hardware, Computer and machinery, organic chemicals, toys, and apparel. Cross-border energy crises can result in supply chain disruption in India as well. The most affected are mobile phone and automotive manufacturers as they mostly procure semiconductors from China. This shortage has forced the manufactures to operate under-capacity. It can also have a worse effect on the agro and food industry in near future, as the largest food manufacturer is forced to cut down production of various essential commodities. Production of packaging material like corrugated and duplex boards is also affected which can disrupt the entire packaging material logistics chain. The prices of local chemicals and fertilizers have also soared to new heights because of the shortage of imported substitutes. Smaller commodities like footwear and toys are also facing a crunch just before the festive season.
Chinese administrative body- National Development and Reform Commission has formulated various reforms to tackle the problem. They are ensuring the full supply of coal to power plants and rationing of electricity to productive sectors. “If the electricity shortages and production cuts continue, they could become yet another factor causing global supply-side problems,” said Louis Kuijs, An Oxford UK professor. Our country can have large-scale implications if these supply chain crises are not solved as we are already low on coal reserves and are fighting local energy crisis.
BY:- Sushant Banga
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