China Energy crisis:Stagflationary shock for manufacturing

China's energy crisis is hitting throughout the globe, hurting everyone from auto industries  to Australian sheep farmers and makers of cardboard boxes. Not only is the extreme electricity shortage in the world's largest exporter set to hurt its own growth, the knock-on impact to supply chains could crimp a global economy struggling to emerge from the pandemic. Chinese shipping industry already facing congested supply lines that are delaying deliveries of clothes and toys for the year-end holidays. It also comes just as China starts its harvest season, raising concerns over sharply higher grocery bills.

"If the electricity shortages and production cuts continue, they could become yet another factor causing global supply-side problems, especially if they start to affect the production of export products," said Louis Kuijs, senior Asia economist at Oxford Economics. Economists have already warned of slower growth in China. At Citigroup, a vulnerability index indicates that exporters of manufactured goods and commodities are particularly at risk to a weakening Chinese economy. Neighbors like Taiwan and Korea are sensitive, as are metal exporters such as Australia and Chile, and key trading partners such as Germany are also somewhat exposed.

"This is looking like another stagflationary shock for manufacturing, not just for China but for the world," said Craig Botham, chief China economist at Pantheon Macroeconomics. "The pri Beijing has been scouring for power supplies as it tries to stabilize the situation. The impact on the global economy will depend on how quickly those efforts bear fruit. Many Chinese factories reduced production for this week's "Golden Week" holiday, and economists are closely watching whether power shortages will return as they ramp up again. ce increases by now are pretty broad-based -- a consequence of China's deep involvement in global supply chains."