THE DROUGHT IN CHINA AND OTHER DEMONS

China is the world's second-largest economy, with plans to take first place for the next decade and thus put an end to U.S. hegemony. However, the consequences of climate change seem to threaten the rapid Chinese growth, which had already been slowing down since 2019, with the longest drought in 60 years. A third of the Asian giant's territory suffers from high temperatures and lack of rainfall, affecting China's economic dynamism.

            China's National Meteorological Service reported that temperatures between June and August 2022 had been the highest on record. On average, the national temperature was 1.5°C higher than usual for the year. In addition, rainfall decreased by 23%, affecting crops in northern and southwestern China.

            Some areas in central and northern China have written off a good part of the summer harvest due to the heat wave, but authorities are seeking to trigger rains in the central and southwest to save the autumn harvest. Autumn grain production (especially soybeans, rice and wheat) is crucial as it accounts for about 75% of annual output. 

The Yangtze River basin - the longest river in China and the third longest in the world - has been particularly hard hit. High temperatures and lack of rainfall caused river levels to drop, forcing companies to look for trucks and trains to transport their products between ports and the country's interior, as transoceanic ships could not navigate the Yangtze.

The extreme heat has increased the demand for air conditioning in offices and homes, putting pressure on the power grid. The drought has also depleted river water levels, reducing the electricity produced at the various hydropower plants fed by China's southwestern waterways.

The Yangtze and its tributaries feed four of China's world's ten most potent hydropower plants. The drought on this critical river mainly affects Sichuan province, which is 80% dependent on hydropower for its total energy production. Due to the shortage, this province has had to resort to power cuts. Between August 25 and 30, there were blackouts in several regional residential areas and rationing of air conditioners, escalators and lighting in shopping malls and offices to save energy. Even in Shanghai, 2,000 km away, the night lighting of various monuments and buildings was restricted for the same purpose.

Under the order to "leave power to the people," the local government began rationing power for Sichuan's industry. The province's industrial sectors produce machinery, electronics, metallurgical products, chemicals, construction materials, food products and high-quality silk, making the region one of the most economically dynamic.

Due to the cutbacks, several companies lowered their production or even closed their plants while the mandatory rationing passed. During the power cuts, Volkswagen decided to close its factory in Chengdu, the capital of Sichuan. Foxconn, an Apple supplier, also closed its plant in the region. Jinko Solar, one of the world's largest solar panel manufacturers, lowered its production to a minimum, and Toyota gradually began operating in Sichuan with internal power generation.

China's Ministry of Water Resources reported that the drought affected 830,000 people in six different provinces had their water supply affected. More than 300,000 had problems accessing drinking water. The drought in China brought more than just a lack of water. The low agricultural production forced the Asian giant to import more grains. It led to a global rise in grain prices, which had a counter-cyclical impact on Brazil's economy, whose harvests begin at the end of August. In May 2022, Brasil signed an agreement with China to sell them grains. In addition, the difficulty of transportation between the ports and the territory's interior creates the need for new routes.

The lack of electricity generation caused a decrease and a pause in production in one of the most important industrial regions of the country, with its effects. This factor, together with China's zero-covid policy confinements, puts even more pressure on and threatens the dynamism of the supply chain in China and worldwide. The solution to low hydropower production is increased coal consumption, which in the long term, aggravates the environmental problem. Climate change may lead China into a much-dreaded economic downturn. It portends stagnation for the world by 2023 and sustained energy and food price inflation despite higher interest rates. The OECD projects 1/2% GDP growth for the U.S. and 1/4% for the E.U and China's slowdown in the 3% range.

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