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Heat wave threatens China’s energy shortages and rising pork prices | CNN Business

Hong Kong
CNN Business

A scorching heat wave in China has forced a major manufacturing region to call on businesses and households to use less energy, while fears of crop failure are sending pork prices soaring.

Dozens of cities have been experiencing record temperatures at a time when the economy is still trying to recover from harsh Covid-related lockdowns. The heat wave also comes as consumer inflation hits a 23-month high, driven mainly by rising food prices.

As many as 84 cities across the country issued their highest-level red alert warnings on Wednesday, meaning temperatures are expected to exceed 104 Fahrenheit (40 degrees Celsius) in the next 24 hours, according to the National Weather Administration. Shanghai reported 40 degrees Celsius on Sunday for the first time this year.

from China The heat wave has pushed electricity demand to extreme levels in many regions as people turn on air conditioning.

On Tuesday, Zhejiang province, a major export and manufacturing powerhouse on the East Coast – urged its 65 million residents and companies to save energy.

“In order to ensure the supply of electricity for residents and businesses… we call for joint actions by the entire society to save electricity,” the province’s energy office and State Grid said in a joint statement. .

The Zhejiang energy bureau has also rationed power supply for some energy-intensive enterprises, such as polyester producers and textile printing and dyeing companies in the cities of Hangzhou, Shaoxing and Haining, according to analysts from several firms. Chinese brokerage.

The latest shortages come just months after China emerged from an energy crisis that caused Widespread power outages in the second half of last year. The blackouts were blamed on a shortage of coal, which China uses to produce about 60% of its electricity, and rising energy demand.

The current heat wave and resulting power rationing present another challenge for China’s massive manufacturing industry, which is still recovering from months of strict Covid lockdowns.

China releases GDP data for the April-June quarter on Friday and is expected to show a drop in growth to around 1% in the second quarter from 4.8% in the first three months of the year.

High temperatures are also affecting China’s agricultural production, threatening to increase food inflation.

The Central Meteorological Observatory warned that high temperatures could negatively affect the production of corn, soybeans, wheat and grass in many northern provinces, including Ningxia, Inner Mongolia and Hebei.

Residents spend their time in a bomb shelter to escape the summer heat amid a heat wave warning in Nanjing, Jiangsu province, China on July 12, 2022.

Rising feed prices on domestic and global markets have started to affect the feed industry and pig farming in recent weeks.

Earlier this month, several major feed producers, including New Hope Group, warned customers that they would raise prices for hog, poultry and fish feed due to the rising cost of soybean meal, corn and the wheat. Most of the price increases started last week.

Pork, the staple meat in China, has been hit particularly hard, as soybeans and corn are the main ingredients used in the pork industry.

For the week ending July 1, hog prices had risen 46% from March, according to the latest data from the National Development and Reform Commission, the country’s top economic planner.

The Commission said last week it was considering tapping into the country’s strategic pork reserves to contain rapidly rising prices. He also vowed to clamp down on any price gouging behavior by pig farms.

According to the latest CPI data from China, the consumer price index rose 2.5% from a year earlier, up from 2.1% in May and the highest in nearly two years. Pork prices, which rose almost 3% in June from May, added to the upward pressure, the national statistics office said in a declaration.

— CNN’s Jessie Yeung and Shawn Deng contributed reporting.

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