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China’s Record Drought: What effect on world trade and environment?

Old_JoeOld_Joe
edited August 2022 in Other Investing
I've not seen extensive detailed coverage of this situation, but it seems evident that in addition to being a major disaster within China it will also affect world supply-chain commerce. Moreover, it does not bode well for China's efforts to help reduce climate-change emissions.

Following are excerpts from a lengthy report in the New York Times, heavily edited for brevity:
HONG KONG — Car assembly plants and electronics factories in southwestern China have closed for lack of power. Owners of electric cars are waiting overnight at charging stations to recharge their vehicles. Rivers are so low there that ships can no longer carry supplies.

A record-setting drought and an 11-week heat wave are causing broad disruption in a region that depends on dams for more than three-quarters of its electricity generation. The factory shutdowns and logistical delays are hindering China’s efforts to revive its economy. The extreme heat is adding to frustration by snarling power supplies, threatening crops and setting off wildfires. Reduced electricity from hydroelectric dams has prompted China to burn more coal, a large contributor to air pollution and to greenhouse gas emissions that cause global warming. Many cities have been forced to impose rolling blackouts or limit energy use.

The heat wave has scorched China for more than two months, stretching from Sichuan in the southwest to the country’s eastern coast and sending the mercury above 104 degrees on many days. In Chongqing, a sprawling metropolis in the southwest with around 20 million people, the temperature soared to 113 degrees last week, the first time such a high reading had been recorded in a Chinese city outside the western desert region of Xinjiang.

The drought has dried up dozens of rivers and reservoirs in the region and cut Sichuan’s hydropower generation capacity by half, hurting industrial production. Volkswagen closed its 6,000-employee factory in Chengdu for the past week and a half, and Toyota temporarily suspended operations at its assembly plant. Foxconn, the giant Taiwanese electronics manufacturer, and CATL, the world’s largest maker of electric car batteries, have both curtailed production at factories in the vicinity.

In Ezhou, a city in central China near Wuhan, the Yangtze River is now at its lowest level for this time of year since record-keeping began there in 1865. The falling water levels in major rivers that serve the region’s main transport hubs have also led to delays elsewhere in the supply chain. The Yangtze River has receded so much that many oceangoing ships can no longer reach upstream ports. That is forcing China to divert large numbers of trucks to carry their cargo. A single ship can require 500 or more trucks to move its cargo.

The extreme weather sweeping across China also has potential implications for the world’s efforts to halt climate change. Beijing has sought to offset at least part of the lost hydropower from the drought by ramping up the use of coal-fired power plants. China’s domestic mining of coal has been at or near record levels, and customs data shows that its imports of coal from Russia reached a new high last month.

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