MNI INTERVIEW: China Power Surge Unlikely to Hit Industry

Significant investment in China’s energy infrastructure over the past two years has helped reduce chances of widespread industrial disruptions this summer despite record-breaking temperatures, an energy policy expert told MNI, adding that the overall impact on manufacturing and economic activity is likely to remain limited.

“Current grid conditions remain relatively relaxed, making large-scale disruptions unlikely,” said Lin Boqiang, dean of the China Institute for Energy Policy Studies at Xiamen University, comparing this summer to 2022, when a severe drought in hydropower-reliant Sichuan province triggered extensive factory shutdowns.

Authorities have since implemented infrastructure upgrades to improve the grid’s resilience to extreme weather, Lin noted. However, he cautioned that building a system capable of fully withstanding rare events, such as the 2022 drought – which occurs roughly once every 50 years – is not economically viable. He also warned that prioritising residential electricity consumption could still lead to localised, short-term industrial power curbs.

“If extreme weather occurs, it will still be difficult to avoid localised and temporary industrial power restrictions,” Lin added.

Electricity usage rose 5.4% year-on-year in June, 1.7 percentage points higher than the average for the first half of the year, according to official data. The increase was driven primarily by residential demand, which jumped 10.8% in June compared to 4.9% over H1.

Still, the economic impact would likely remain limited, as residential demand accounts for only about 15% of total electricity use, while industrial consumption makes up roughly 65%, Lin explained. If rationing becomes necessary, household consumption typically takes priority, with industrial users facing the first restrictions. “The government generally prioritises cutting energy-intensive electricity users, mitigating the impact across broader swathes of industry,” Lin said.

Data from China's Meteorological Administration showed that historical high-temperature records were broken at 102 meteorological stations nationwide in June 2025.

COAL CONSUMPTION

Despite the heatwave, China’s coal imports fell 11.1% year-on-year in the first half of 2025, deepening from a 7.9% decline in the first five months. Lin attributed the drop to a broader slowdown in electricity demand, which rose 5.4% in H1 compared with 7.34% in 2024.

“Coal imports are closely tied to power demand. Despite the summer surge, the broader slowdown in power usage growth explains the reduced import volumes,” Lin said, adding that domestic coal supply remains largely sufficient.

China’s steel rebar futures are likely to face further downward pressure in the second half of the year, as consumption remains weak amid insufficient stimulus and soft export demand, local analysts recently told MNI. (See MNI: China's Steel Futures Face Downward Pressure)