By
Godfrey Benjamin
April 20th, 2024
In addition to the broader industrial ecosystem, the Chinese energy regulations also have a significant impact on digital currencies.
A number of third-party suppliers that are doing business with American multinationals including electric automaker Tesla Inc (NASDAQ: TSLA), and Apple Inc (NASDAQ: AAPL) amongst others have temporarily suspended their operations based on China’s new energy regulations. According to a Reuters report, the more than one temporary closure of these Chinese businesses was fueled by local regulations that seek to introduce tighter energy consumption policies.
The season of the year is notably one of the periods where consumers are more poised to buy all sorts of electronics, and the current production delays are bound to stump supply in relation to demands. China is currently facing a tight coal supply provision based on local regulations, and the drag on heavy industries is notably impacting the country’s economic growth, according to analysts.
One of Apple’s suppliers, Unimicron Technology Corp (TPE: 3037) said as many as three of its subsidiaries in China stopped production from midday on Sept. 26 until midnight on Sept. 30 to “comply with the local governments’ electricity limiting policy.” Despite the stump on production in the three factories, Unimicron is confident that its capacity to meet demand will not be affected as other plants are working optimally.
Besides Unimicron, a subsidiary of Hon Hai Precision Industry Co., Ltd (TPE: 2317), Eson Precision Ind Co Ltd (TPE: 5243), is also affected by the sweeping regulation. The firm confirmed that it has suspended production from Sunday until Friday at facilities in the Chinese city of Kunshan.
While many firms are reeling from closures, a number of players including United Microelectronics Corp (TPE: 2303), and Taiwan Semiconductor Mfg. Co. Ltd (TPE: 2330) both told Reuters that their Chinese plants are unaffected and are functioning optimally. The current supply terrain from the Asian country will further propound the currently existing chip shortage that has impacted production for mobile phones and cars across the board.
China’s Energy Regulations: Impact on Cryptocurrencies
In addition to the broader industrial ecosystem, the Chinese energy regulations also have a significant impact on digital currencies. Back in June, Chinese authorities banned cryptocurrency mining activities, a move that forced a massive price correction in which Bitcoin (BTC) slumped from its All-Time High (ATH), above $64,000 to a 90-day low of $29,360.96.
The premise for banning crypto mining is because the bulk of the energy generation used in Proof-of-Work (PoW) activities is powered by coal, and as such is harmful to the environment. The move to clampdown on coal energy options is indicative that Chinese authorities are not specifically targeting one industry as many crypto proponents believe.
The world is generally shifting bases as it relates to ameliorating human activities that reduce the Ozone layer and contribute to global warming. Many countries are introducing new climate-back regulations, and as such, impure energy sources like coal with high Carbon emission tendencies may be rolled back in the coming months as China seems to be doing presently. This is billed to stir additional industrial shakedown across the board in the mid to long term.