Guangdong factories face power shortage

Guangdong manufacturers should expect to suffer shortages of electricity, diesel and coal this year as energy supplies fail to keep pace with the province's surging economic growth.

Economic and Trade Commission deputy director-general Yang Jianchu said supply had fallen short of demand since January 1 and the shortfall was set to continue. Guangdong is considered the factory floor of the mainland, with its economy accelerating 13 per cent last year, faster than the forecast 10 per cent.

But rising fuel and other costs threaten earnings at thousands of factories that produce everything from toys to cars. Record oil prices and robust demand for other fossil fuels had left too many users chasing limited supplies of diesel, petroleum products and coal, Mr Yang said.

That has increased the burden on tens of thousands of Hong Kong-owned manufacturers across the border, already facing a government edict to move up the value chain or migrate to underdeveloped areas in the west of the country.

'Shortages of electricity and petroleum products will continue this year,' Mr Yang said on the sidelines of the 11th Guangdong Chinese People's Political Consultative Conference yesterday. 'We have measures in place to avoid massive electricity blackouts and ensure stable supplies of petroleum products.'

Power-hungry Guangdong was forecast to be hit by an undersupply of 6.6 billion kilowatt-hours of electricity this year, while demand for oil was estimated to soar 8 per cent to 23.5 million tonnes this year.

Blaming reduced supplies from western parts of the mainland and the Three Gorges hydro scheme in Hubei brought on by increased consumption and drought, Mr Yang said Guangdong would first feed residential demand and accelerate the construction of nuclear power plants and power transmission and distribution networks.

Dennis Ng Wang-pun, president of the 1,300-member Hong Kong Chamber of Small and Medium Business, said the energy shortages were a manufacturer's nightmares.

'Blackouts are a headache,' Mr Ng said. 'Combined with higher labour, processing trade and tax costs, the survival of manufacturers is getting more and more difficult.'