China Facing Major Power Crisis Due to Severe Drought

China is facing a major power crisis due to a severe drought and sweltering heat that have caused low water levels and a drop in hydroelectric power generation in recent weeks. This has led to power shortages and rationing of electricity in some provinces, with the Yangtze river basin — home to more than 370 million people and several key manufacturing hubs — being the hardest hit.

The power cuts have already disrupted the operations of companies such as Apple and Tesla, and have affected both big and small firms. 90% of factories in Sichuan province have completely shut down, according to an employee of the Messer Group, a German supplier of industrial gases. Even large state-owned enterprises and foreign firms have been affected.

The crisis has come at a time when supply chains were already strained by the impact of the coronavirus pandemic, China’s strict lockdowns and Russia’s invasion of Ukraine. It threatens supplies of everything from metals such as aluminum to automotive parts, as well as food commodities. Poor autumn harvests in China will have a huge impact on the global market for agricultural commodities, causing already high prices to surge further.

Dan Wang, chief economist at the Hang Seng Bank, said the drought and power shortages this year would have a bigger impact on the economy than 2021’s outages. She expects China to record lower economic growth than previously estimated.

Jens Hildebrandt, the head of the German Chamber of Commerce in China, said manufacturing companies are facing serious problems in China because of electricity shortages. He warned that the growing water stress and intensity of droughts in China will likely cause similar and more acute crises in future, potentially causing major disruptions to the global trade in industrial materials, as well as foodstuffs. Companies must make plans and stock up on more products for better preparedness, he said.