China heatwave may have serious impact on its economy

  • By: Kaustav Roy
  • Date: August 19, 2022
  • Time to read: 3 min.

China’s devastating heatwave is its worst in nearly 60 years and it is expected to have a knock-on effect on its economy, as factories are forced to shut down for days and crop growth is disrupted while livestock are threatened. 

China is facing an intense heatwave that has swept the country for more than two months now, with temperatures rising to as high as 45 degrees Celsius in some places on some days. The country has recorded an average of 12 days of high temperature this summer, about five days more than normal.

The Sichuan province in China has ordered all factories to shut down for six days to ease a power shortage in the region, according to CNN. The extreme heat has resulted in a sudden spike in demand for air-conditioning in homes and offices, thereby putting pressure on the power grid.   

Sichuan, one of China’s largest provinces with 84 million people, is a key manufacturing location for semiconductor and solar panel industries and the rationing of power will hit factories belonging to some of the world’s biggest electronics companies such as Intel, Texas Instruments, and Foxconn, which is a supplier to Apple. Japanese car maker Toyota also has a plant in the region. 

The region is rich in mineral resources like lithium and polysilicon – key raw materials in the solar photovoltaic and electronics industry. Chinese lithium battery giant CATL, which supplies batteries to Tesla, also has a plant in the region. Shutting down factories for a week could tighten the supply of key raw materials such as lithium and polysilicon and push their prices higher. 

The southwestern province of Sichuan, which is also a key hydropower hub in China, has been gripped by extreme heat and drought since July and the average rainfall has dropped by 51 percent from the levels witnessed last year. Apart from Sichuan, many other provinces have also urged businesses to conserve power, as the heatwave has depleted power supply. 

The heat has also badly affected Chongqing, a sprawling metropolis in southwest China, which is home to around 20 million people. It has parched 51 rivers, 24 reservoirs and disrupted the water supply of more than 300,000 residents in the area. 

The intense heat has also disrupted the supply of hydropower and prompted the local officials to limit electricity to homes and businesses. The Yangtze river, which is the world’s third-longest river, has receded to a record low with water levels falling by 16-20 percent as compared to the same period last year, according to The New York Times. 

Rainfall in the area around the Yangtze river basin fell by about 45 percent, from its average seen over recent years. The extreme heat has also resulted in crop failures in many parts of China, thereby adding to inflationary pressures and economic woes of China. 

The size of rice harvest in China is expected to significantly reduce this time, as the intense heat has caused prolonged drought and dried up rice paddies, that are usually irrigated by rain. It is affecting other agricultural crops as well such as tea. 

August and September are the key period for the formation of the autumn grain output in China and in many other parts of Asia. Apart from grains, livestock were also affected by the heat in China. Chickens rejected their feed and struggled to lay eggs in the heat, causing egg prices to soar in the heat.

China’s worst heatwave in six decades is likely to have a serious knock-on effect not only on its economy but also on the global supply chain, according to economists, who are privy to the situation. 

Incidentally, the latest factory shutdowns come months after China’s ‘Zero Covid’ policy led to widespread lockdowns across the country, which disrupted supply chains and forced manufacturers to halt production. 

Kaustav Roy

Author - Kaustav Roy

World Business Reporter - View All Articles
Kaustav is a freelance journalist covering business news from around the world. Kaustav joined InterSpaceReporter as a freelance journalist on Monday 15th August 2022.

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