As China’s energy crisis closes factories, how much is it affecting the economy?
- Soaring summer temperatures have dried up crucial rivers and reservoirs, hurting hydroelectric power generation that industrial regions such as Sichuan rely heavily on
- But analysts say one crucial factor will determine the extent of the economic impact
A short-term shutdown of major industries and widespread electricity rationing in China’s southwestern manufacturing hub of Sichuan – with local authorities prioritising the residential power supply – may have only a “limited” economic impact as long as the curbs can be lifted within a few weeks, according to analysts.
Temperatures as high as 40-42 degrees Celsius (104-108 degrees Fahrenheit) have sent power demand soaring and dried up crucial rivers and reservoirs, with industrial production suspended for six full days, since Monday, in all but two of its 21 cities.
Sichuan, with a population of around 84 million, is China’s sixth-largest economy in terms of gross domestic product, with industry accounting for more than 28 per cent. It plays a leading role in the production of silicon metal, electrolytic aluminium, chemicals, electronics and power-generation equipment.
“The power curbs will, for sure, have some negative impacts on economic growth. But I think if the power situation improves in a few weeks’ time, the industrial producers might be able to catch up with the lost production later on,” said Qin Yan, a carbon analyst with financial services company Refinitiv.
“At the moment, the situation is quite extreme with heatwaves and drought, therefore regulators have curbed industrial power consumption to ensure residential power supply.
“I think the adverse impact on gross domestic product is limited if the power curbs will last less than several weeks.”
Sichuan relies on dams to generate around 80 per cent of its electricity, but water flows into hydropower reservoirs have dropped by 50 per cent this month.