BEIJING (BLOOMBERG) - The hit from China's energy crunch is starting to ripple throughout the globe, hurting everyone from Toyota 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 Covid-19 pandemic.
The timing could not be worse, with the 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 Oxford Economics senior Asia economist Louis Kuijs.
Slower growth
Economists have already warned of slower growth in China. At Citigroup, a vulnerability index indicates that exporters of manufacturers and commodities are particularly at risk to a weakening Chinese economy.
Neighbours such as Taiwan and South Korea are sensitive, as are metal exporters such as Australia and Chile, and key trading partners such as Germany are also somewhat exposed.
As for consumers, the question is whether manufacturers will be able to absorb higher costs or will pass them along.
"This is looking like another stagflationary shock for manufacturing, not just for China but for the world," said Pantheon Macroeconomics chief China economist Craig Botham.
"The price increases by now are pretty broad-based - a consequence of China's deep involvement in global supply chains."
Beijing has been scouring for power supplies as it tries to stabilise the situation. The impact on the global economy will depend on how quickly those efforts bear fruit.
As for consumers, the question is whether manufacturers will be able to absorb higher costs or will pass them along.
"This is looking like another stagflationary shock for manufacturing, not just for China but for the world," said Pantheon Macroeconomics chief China economist Craig Botham.
"The price increases by now are pretty broad-based - a consequence of China's deep involvement in global supply chains."
Beijing has been scouring for power supplies as it tries to stabilise the situation. The impact on the global economy will depend on how quickly those efforts bear fruit.
Wool
Outside of China, Australian sheep farmers are bracing for weaker demand just as they seek to sell their wool at auctions.
The industry saw Chinese mills reduce production by up to 40 per cent due to power cuts last week, Australian Broadcasting Corp reported.
Tech
The tech world could also see a dramatic hit, given that China is the world's biggest production base for gadgets from iPhones to gaming consoles, and a major centre for the packaging of semiconductors used in vehicles and appliances.
Several companies have already experienced downtime at their Chinese facilities to comply with local restrictions.
Pegatron, a key partner for Apple, said last month that it began to adopt energy-saving measures, while ASE Technology, the world's biggest chip packager, halted production for several days.
The overall impact on the tech sector has so far been limited because of customary shutdowns around the week-long holiday. Should the energy crunch worsen, it could hit production ahead of the crucial year-end shopping season.
Industry giants including Dell and Sony can ill afford another supply shock after pandemic-induced turmoil fomented a global chip shortage that will extend well into next year and beyond.
Automakers
Any further deterioration of the semiconductor market would also add headaches for vehicle-makers, who have already seen production crunched by the chip shortage.
The industry, which is high on the list of protected sectors in times like these, has thus far largely been spared from the effects of the power crisis.
Still, there have been some isolated instances. Toyota, which produces more than one million vehicles a year in China at plants centered around Tianjin and Guangzhou, has said some of its operations have been impacted by the power shortages.