Dividends and Power shortages widen in China, dimming growth outlook

For the last 40 years or so, one constant in the economic world was China’s economy was going to grow as it became the manufacturing hub to the world. China consumed more raw materials than other country and its growth affected prices. If you went into Walmart to shop, many of the items are from China and in a country of a billion plus people many people moved up the economic ladder into the middle income. That outcome is a good thing. A negative affect is China is the world’s biggest consumer and source of climate-warming greenhouse gas. China was to change that to peak in 2030 and by 2060 be net zero.

In an article by Shivani Singh and Min Zhang of Reuters with every climate change goal there are roadblocks along the way. China wants to cut its greenhouse gas emissions and in November there is a big Conference sponsored by the UN in Glasgow, Scotland and China wants to say it is doing better.

One method to doing better is cutting down on emissions from coal, however China is world’s largest user of coal to generate electricity and recent cutbacks in the the amount of coal being used to help both manufacturers, consumers and pushed up coal prices and causing power shortages. The power shortages are affecting manufacturing companies who had to slow down production. The companies facing slowing down include Apple and Tesla.

Steel, aluminum and cement industries have been hit hard and according to Morgan Stanley analysts production capacity is down 7% in aluminum and 29% in cement.

Nomura Securities cut its 3rd and 4th quarter GDP growth forecasts to 4.7% and 3% from 5.3% and 4.4%. The global supply of textiles, toys and machine parts could be affected.

Linking to dividend paying stocks, all companies have to a role to play in lowering green house gases, however there will be a time lag between how they and their supplier companies use energy to how they use energy in the future. For your investments, how are they managing to use less and still make generate profits to pay dividends?

There are more questions than answers, till the next time – to raising questions.

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