In China, due to several weeks of record-breaking heat and lower water levels in the rivers on which hydroelectric power plants operate, local authorities are tightening measures to save electricity. The restrictions affected a number of large enterprises in many sectors of the economy. Economists fear that the unfavorable weather situation will slow down the recovery of the Chinese economy, which in the first half of the year suffered from severe lockdowns imposed by the authorities due to the outbreak of COVID-19.
Over the weekend, the authorities of the Chinese province of Sichuan introduced the highest, red, level of weather threat against the backdrop of a record heat wave that has been going on for almost a month. Yesterday, the temperature in Chengdu rose to +43.4°C. The province of 84 million people receives 80% of its electricity from hydroelectric power plants, but due to heat and drought, the water level in the rivers has dropped significantly, which has led to a shortage of electricity. An equally difficult situation is observed in the province of Hubei with a population of 58 million, which also depends on hydroelectric power.
The authorities have to save electricity, leaving it for emergency services, hospitals, other vital facilities, as well as for the residential sector.
As a result, industrial enterprises are forced to temporarily suspend their work: at the end of last week, Sichuan factories that produce components for cars, solar panels, and chips stopped working. The work of shopping centers is also significantly limited. The shutdown of these enterprises has hit the work of factories in other provinces, which are not so dependent on the operation of hydroelectric power plants, since they receive energy from thermal sources, mainly coal.
Tesla’s Shanghai plant has suspended production due to a shortage of components that are produced at contractor factories in Sichuan province. The enterprises of this province produce a fifth of all lithium batteries produced in China. 15% of the polycrystalline silicon used for solar cells is also produced in Sichuan.
Record heat that caused drought and forest fires in several provinces of the country (Sichuan, Hubei, Henan, Jiangxi and Anhui), hit not only in the industrial sector. These provinces provide about half of China’s rice crop. Over the weekend, the Ministry of Agriculture of the People’s Republic of China said there was a “very serious threat” to the grain crop due to extreme heat and drought in the country. According to the state television channel CCTV, about 1 million hectares of crops were affected by drought and fires in Henan province alone.
Economists fear that extreme weather, which has hit a range of industries, could seriously disrupt China’s economic recovery.
The country’s economy has already suffered from hard lockdowns, which were introduced by the country’s government in the first half of the year amid new outbreaks of COVID-19. “Given the anti-covid restrictions that are still relevant in the country, as well as ongoing problems in the real estate sector, in the past two months, the “black crow” of a new extreme event has also been flying over the country – record heat and drought, ”said Jefferies investment bank analysts.
“We estimate that electricity shortages slowed Chinese GDP growth by 0.6% last year. This year, the figure may be significantly higher, – said in an interview with the TV channel CNBC Deng Wang, Chief Economist at Hang Seng Bank China. — Now our forecast for China’s GDP growth this year is in the region of 4%. But if such a situation (with the weather.— “uh”) will continue, I would say that GDP growth could be less than 3%.”