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China: Massive Covid shutdowns, then housing bubble now Drought/Heat wave.

I feel like I'm watching a modern-day version of the Ten Commandments. Next, come the Locusts and rivers turning to blood! Where's Charlton Heston when we need him?

China Extends Power Curbs Amid Heat Wave, Drought

Rationing is undercutting industrial production, exacerbating damage caused by country’s Covid measures

By Brian Spegele and Yang Jie, WSJ

Aug. 22, 2022 8:32 am ET

BEIJING—Authorities in central China extended power curbs limiting factory production and opening hours for shopping malls, as the region grapples with its worst heat wave in six decades and a hydropower-depleting drought.

In the Sichuan provincial capital of Chengdu, a major manufacturing hub, auto makers and components suppliers reported lower production because of the power constraints.

Further east, in central China’s sprawling metropolis of Chongqing, home to more than 30 million people, shopping malls were told they could only open on Monday between 4 p.m. and 9 p.m. due to power rationing, state broadcaster China Central Television cited the local government as saying.

The combination of the drought and heat wave is leading to high electricity demand as residents need air conditioning to stay cool and denting supply from hydropower dams that are crucial to the region.

Rainfall feeding the Yangtze River basin was down 40% in July from a year earlier. The river is a key source of water for hydropower production and key for transportation. Levels for some parts of the river have been at their lowest points since records began, China’s Ministry of Water Resources said last week.

The power rationing is undercutting industrial production, exacerbating the damage caused to China’s economy by the government’s stringent Covid-19 control measures. China is one of several countries that face droughts, which are challenging global supply chains and risk driving up food and energy costs.

General Interface Solution Holding Ltd., a Taiwanese maker of touch sensors and display components for electronics, said its subsidiary in Chengdu extended a suspension of production in accordance with the local government’s contingency plans. Apple Inc., which had previously named the company as one of its suppliers, didn’t respond to a request for comment.

Water levels of China’s Yangtze River have dropped as a heat wave hit parts of the country. Some factories in hydropower-reliant provinces have had to temporarily suspend operations to ration electricity. Photo: Mark Schiefelbein/Associated Press

Foxconn Technology Group, one of the biggest suppliers to Apple, has also been hit by power rationing. The company’s production in Chengdu was continuing to run at a low level Monday, said people familiar with the matter, although it was up slightly from last week. Foxconn was in talks with the local government to gradually increase production later this week, the people said.

A Foxconn spokesman said the current impact on production wasn’t significant. He didn’t comment further.

Meanwhile, the suspension due to the power curbs at Volkswagen AG’s plant in Chengdu continued Monday, a spokeswoman said, adding that the company expects to make up for any delays with increased production in the future. Toyota Motor Corp., which last week suspended production at its Chengdu plant, has conducted a test run on its production lines with its own power generator, a spokesman said. The plant wasn’t operating at normal levels, he added.

Tesla Inc. appealed to the Shanghai government for help ensuring that its suppliers in the region received sufficient power. In a letter to the Sichuan government viewed by The Wall Street Journal, Shanghai officials reported that Tesla had said it faced shortages of components as suppliers in Sichuan were unable to produce at full capacity due to the power cuts.

Shanghai’s famous Bund went dark on Monday as authorities turned off the waterfront district’s decorative lights to save energy. China extended power cuts in some areas to cope with soaring electricity demand during a scorching heat wave. Photo Composite: Emily Siu

The high temperatures have extended across much of southern China. The country’s meteorological administration said that 65 weather stations registered record temperatures. The heat advisory was listed as a “red alert,” its highest level, while the state forecaster put the drought warning at its second-highest level of orange.

The heat has also sparked wildfires. More than 5,000 firefighters, police and other personnel have been called in to battle blazes that ignited late last week south of Chongqing’s downtown. Authorities said the fires had been extinguished by Monday morning, but they would be on alert against the risk of the fires reigniting for at least the next three days.

Droughts have been increasing worldwide since the beginning of the century due to land degradation and the effects of climate change, according to the United Nations. The high temperatures and low rainfall experienced across southern China are raising particular concerns for grain production, especially that of water-dependent rice.

Tang Renjian, China’s minister of agriculture and rural affairs, said in certain drought-stricken areas the government should seek to artificially increase rainfall while also spraying crops with a water-retaining agent to help prevent evaporation, according to a ministry press release over the weekend.

“While we believe most weather-related disruption should be short-lived, higher risk persists on grain supply, in our view, followed by aluminum given its highest energy intensity, should the drought and weaker hydropower extend,” Goldman Sachs analysts said in a note Sunday. The six provinces particularly affected by the drought and heat wave produced 48% of China’s rice in 2021, the note said.

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