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Dry rivers, lack of electricity, closed businesses e supply chains that risk jumping. The tense and controversial Chinese summer is reserving an indigestible menu for the Communist Party, already struggling with a slowing economy. Faced with the wave of hottest heat of the last 60 yearsmany factories in the southwest of the China they are in fact forced to close. A severe drought has reduced the rivers, interrupting the supply of water and hydroelectricity and urging officials to limit electricity to businesses and homes. Offices in some cities have been ordered to turn off the air conditioning to save the overloaded electricity grid.
The epicenter of the crisis is the Sichuan but the difficulties also extend to the nearby metropolis of Chongqing, an autonomous municipality with over 30 million inhabitants and of great productive and technological importance. Here the temperatures have reached up to 45 degrees, with the Blue River reduced to less than half its usually powerful range. The third longest river in the world has retreated to an all-time low. The drought is putting a strain on electricity supplies in Sichuan, which relies on hydroelectricity to generate 80% of its energy capacity. The capacity of the hydroelectric plants in the province is itself halved since July, with electricity flow falling from around 900 million kWh to around 450 million kWh, and it is estimated that it will continue to decline at an average daily rate of 2%. To save energy, the subway stations and trains of the capital, Chengdu, have turned off the lights, including those of the ubiquitous billboards. The fountains, light shows and commercial activities during the night have been suspended. In Chongqing about 300 thousand inhabitants are having difficulty getting water. In all, more than five million people are experiencing power outages.
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According to analysts, if the heat wave persists, the energy crisis could affect other eastern provinces such as Zhejiang and Jiangsu, which depend in part on the purchase of electricity from Sichuan. It is in fact a key province of China’s west-to-east energy transmission program, although nationally Sichuan accounts for only 15% of China’s hydropower supply. And only 18% of the energy in China comes from hydroelectricity, as more than 60% of the electricity supply is still based on coal.
The situation is obviously affecting the industrial production. Nineteen of the 21 cities in Sichuan province have been asked to suspend production until Saturday 20 August. The sectors most affected are those of chemicals, military industry, coal and non-ferrous metals. The rationing of electricity led to the interruption of production in about 20 steel mills, while energy-intensive aluminum and zinc smelters have reduced production. Thousands of factories producing chips for processors, solar panels and auto parts have closed for at least six days. There Xuguang Electronics Chengdu said the stop would reduce its production by 48,000 electronic circuits.
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Toyota And Foxconnsupplier of Apple, are among the other international giants that have suspended the activities of the plants in the area. Chinese media reported that Catlmanufacturer of electric vehicle batteries and supplier of Tesla, closed its plant in Sichuan. Tesla is particularly exposed, given that in 2021 it recorded about 26% of sales in China. Additionally, the Tesla plant in Shanghai is the company’s most productive assembly plant. The drought could also have repercussions on General Motors. But a reduction in the supply of components would have repercussions on almost all car manufacturers, in recent years already affected by the consequences of Covid-19 and the shortage of semiconductors. And according to Everstream Analytics, production stoppages at component manufacturers in China can have a more severe impact on supply chains compared to recent pandemic-related measures COVID-19. High temperatures are not expected to subside until the end of August and there is a risk that factory closures will prolong or extend to other provinces.
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