What does the huge drop in energy demand in China mean for its economy

The fallout from China’s zero-COVID policy is spreading as the economic downturn and social unrest intensify across the country. The Chinese government has scratched the surface of the decision to completely eradicate COVID — a feat experts agree is impossible because the virus is already circulating, highly contagious and continuing to mutate. In what is by all accounts a misguided attempt to quell COVID, China has imposed partial or complete lockdown on dozens of cities, including the major economic hub in Shanghai. This move made the nation industrial production and consumer activity drop to its lowest level Since the first wave of the epidemic in early 2020.

Instead of relaxing its overly stringent non-proliferation policies in the face of a severe economic downturn, China is doubling down on its policy and directing more resources toward its goal of eradicating the virus. China New plan for zero COVID It includes the construction of permanent quarantine facilities, and the development and dispatch of dedicated teams to conduct large-scale testing. Beijing’s decision to redouble its efforts contrasts starkly with growing global criticism of what is seen as a costly, foolish task. last week, World Health Organization Leader Tedros Adhanom Ghebreyesus is a losing cause due to the incredibly high portability Variable Omicronwhich now prevails all over the world. As a result, many economic and industrial sectors in China have collapsed, including the domestic power industry. Last month in the country electricity production It “fell” due to strict restrictions that kept residents largely indoors. “Electricity generation fell in April from the previous month to 608.6 billion kWh, down 4.3% from the same period last year,” Bloomberg. mentioned Sunday. “Thermal power production declined further, down 12% for the largest decline since 2008, as the share of renewables increased at the expense of coal, gas and China’s solar installation more than expected in the first quarter.”

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The dramatic drop in energy demand, while indicative of an unhealthy economy, comes with some silver lining. The timing of the decline in China’s vast energy needs in general comes amid a global energy supply crisis that has driven up electricity and fuel prices. Economic sanctions against Russia, one of the world’s largest exporters of fossil fuels, Exacerbated an already severe energy crisis Energy supply chains have proven unable to recover from the pandemic in time to meet rapidly recovering global demand. China’s lower energy needs will ease pressures on the global energy market, and hopefully, de-escalate the global energy crisis that is currently hurting consumers around the world. Moreover, lower energy demand translates into reduced greenhouse gas emissions. In recent months, the global economy has ramped up its consumption of dirty fossil fuels, most notably coal, in order to close the energy gap at the expense of national and international emissions and climate goals.

While China’s zero-COVID policy gives the country a fighting chance to achieve its emissions targets, it is pushing the country’s lofty economic goals out of the way. At this point, it seems more and more unlikely that the nation will be able to meet its needs It targeted 5.5 percent economic growth in 2022Which was an ambitious goal even without such a major setback.

All this economic turmoil combined with severe crackdowns on personal freedoms and mobility has led to major social unrest in China. Student protests erupted across the country while other activists and opponents have suggested that the severity of government shutdown policies will lead to escalation of the demographic crisis. However, not everyone is unhappy with the zero-sum COVID measures. For many industries weakening under harsh policies, others are getting richer from the measures described by The Economist.China COVID-free industrial park. “

By Haley Zarimba for Oilprice.com

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