Large parts of north-east China are facing power cuts for several hours each day, hitting traffic lights and cell phone masts. Yicai Global warned of power outages and water shortages until next March.
Guangdong in the south is to halt the use of lifts in office blocks below the third floor. Air conditioners should not be set lower than 26 degrees at businesses and households. Electricity is being rationed for cranes at the port of Tianjin.
Dozens of plants processing soybeans, feed and vegetable oil have been suspended. The steel, cement, aluminium and chemical sectors are under restrictive orders to varying degrees, facing staggered production to avoid peak hours.
Several large firms in the Zhejiang textile hub have been shut until the end of this month. Others are facing de facto triage based on relative energy use.
“With market attention now laser-focused on Evergrande and Beijing’s unprecedented curbs on the property sector, another major supply-side shock may have been underestimated or even missed,” said Ting Lu, China strategist at Nomura.
The Japanese bank expects China’s economy to contract by 0.2pc this quarter and barely eke out any growth over the rest of the year. That is a double-dip recession with Chinese characteristics.
It is puzzling that global markets have been so insouciant about a power crisis in Asia’s anchor economy. The slowdown is happening just as fiscal stimulus fades in Europe and America, and as Western central banks start to tighten in the face of incipient stagflation and a rapidly rising misery index.
What can possibly go wrong in global equity markets still at nosebleed P/E ratios?
While this column does not give investment advice, as a personal precaution I have liquidated most of my modest salaryman’s portfolio and intend to ride out the early autumn with 80pc in cash until risk and reward come back into plausible alignment.
Nor am I buying Anglo-Saxon or eurozone “safe-haven” bonds, given rising structural deficits and the imminent retreat of the chief buyers amid so much debt issuance. The auction of two-year US Treasuries last night was a shocker, the worst cover ratio since December 2008.
Talk of a Chinese “Lehman Moment” as developer Evergrande collapses with $309bn of debts has obscured the greater danger. Xi Jinping has deliberately precipitated a crunch in China’s encephalitic property sector via his Three Red Lines, deeming a purge necessary to safeguard social order and prevent the further misallocation of resources.
Construction accounts for a quarter of Chinese GDP and half of the world’s diggers, cranes, and cement mixing. It diverts funds from the green, hi-tech, robotics, AI, cloud computing, and advanced semiconductors sectors, where the struggle for superpower mastery is really taking place.
“Beijing’s determination to suppress the whole property sector, not the fallout of Evergrande, is what represents the major near-term risk to China’s growth and financial stability,” said Ting Lu. Land sales were down 64pc in August from a year earlier. They are the leading indicator of the building industry.