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Southwest China is currently experiencing power shortages due to a severe drought and heatwave. Officials in Sichuan, which is a key manufacturing base for companies involved in the production of solar panels and semiconductors, also ordered power rationing at homes, offices and malls in 19 of the provinces’ 21 cities last week. Sichuan is the boiler-room for polysilicon (used in CPUs and GPUs), lithium (EV batteries), zinc, and aluminum. Major companies being suppliers to Apple, Intel, Foxconn, Tesla, Volkswagen, amongst others are affected. With power restrictions in place, providing residential power is prioritized over industrial production. In comparison with COVID, the power shutdown could result in a more severe economic downturn than during COVID. In comparison with Covid-cycle, special measures were taken to keep running key factories with personal staying on place while today, they are shutdown. It looks like as the Chinese government is in front of unprecedented challenges: dealing with Covid, economic impact of a weak JPY, the flare-up of the China-Taiwan issue, the already ugly state of the Chinese real estate sector, amongst other. Is there any survival threat to Xi Jinping?
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