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Montevideo, March 29th 2024 - 08:58 UTC

 

 

Energy crisis looms over China.

Friday, June 18th 2004 - 21:00 UTC
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China's industrial production in May grew at a lesser pace, the lowest in seven months although still an extraordinary annualized 17,5%. In April the index was 19,1%.

The announcement is good news for the Chinese government's efforts to cool the overheated economy that has been growing at a nerve breaking rate forcing distortions upon domestic and international resources with a strong impact on prices and interest rates. "It's a good figure, this definitively could be anticipating a soft landing, brushing aside fears of a stormy landing", said economist Tim Condon from ING Financial Markets in Hong Kong.

However Chinese authorities have warned that the country could face this summer the worst energy crisis in decades because of the jump in demand.

Zhao Xizheng Manager of the country's main electricity company said "it's possible we will face a 30 million kilowatts shortage" meaning that current power cuts and brown outs could extend further.

Currently in 24 of the 31 Chinese provinces electricity is restricted given the booming demand from the automobile and steel industries, inefficient equipment, while line and air conditioner sales plus over stretched supply.

This week electricity rates were significantly increased in most of the country. Only agriculture and fertilizer factories were exonerated.

The strong industrial production plus fears of inflation and higher interest rates decided Beijing authorities at the end of the first quarter of this year to dampen growth mainly by credit restrictions and demanding tougher lending and recovery practices from the banking system.

Analysts however believe that the "cooling" could be insufficient and interest rates might have to be raised for the first time in a decade to contain inflation.

With the US in recession and the European Union stagnant, China became the world's economy locomotive during the last three years.

Categories: Mercosur.

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