A City competition is heating up between Shanghai and Chengdu. The highest temperature and lowest rainfall since records began 60 years ago have caused severe power shortages in Sichuan, the southwestern province where Chengdu is located, and its neighbouring city of Chongqing. As a result, Sichuan was forced to restrict the energy use of thousands of industrial enterprises. This, in turn, threatens the parts supply of automakers, such as Tesla in Shanghai.
Listen to the story.
Enjoy more on iOS or Android Audio and Podcasts.
Your browsing does not support
Save time by listening to our audio articles while multitasking
in a recent letter, Shanghai officials urged the heat-stricken areas to guarantee the production lines supplied to them. This caused an uproar in Sichuan. The letter, which was widely circulated on social media, listed the phone numbers of several officials in Shanghai. Some Sichuanese have started texting or calling them to complain about their lack of concern for the well-being of their residents, then sharing the conversation online. “Who is Tesla to you?” one resident complained after an hour and a half of daily power outages.
On August 22, Shanghai shut down many of the bright lights of its famous skyline in what may have been a sign of solidarity Posture – 23rd. But the rupture between the two cities sheds light on the extent to which the drought is rippling through the supply chain. China is in the midst of what has been described as the worst heatwave on record. The Southwest also suffered from a devastating drought. Rainfall in Chongqing was 60% lower than the seasonal norm.
The combination of heat and drought has increased demand for energy while also drastically reducing the region’s dependence on hydroelectric power. Dams account for about 80% of Sichuan’s total power generation and nearly 15% nationwide. Compared with last year, Sichuan’s hydropower generation has halved. Local governments have prioritized residential demand, although some households now experience power outages for hours a day. But Sichuan officials asked as many as 16,000 industrial consumers to close between Aug. 15 and 25. The industrial output value of Sichuan and Chongqing accounts for about 6% of China’s total industrial output value.
Power outages have shut down businesses in the region, such as Japanese automakers Toyota and one of Apple’s key suppliers Foxconn. But the impact is also being felt downstream. In Wuhan, about 900 kilometers east of Chongqing, the low water level of the Yangtze River has hindered the passage of ocean-going cargo ships. Many companies based in China are losing components typically supplied by Southwest manufacturers.
Last year, China faced a severe power crunch after the government restricted the use of coal to meet climate goals. Since then, central planners have addressed some of the bottlenecks in electricity supply. The downturn has also reduced demand. Perhaps the lessons learned last year will prevent the crisis in the Southwest from spreading across the country. Even so, droughts and heatwaves have given Chinese policymakers a glimpse of the problems they may face more frequently in the coming years. ■
For more expert analysis of breaking news in economics, business and markets, subscribe to our weekly newsletter Money Talks. For more coverage on climate change, sign up for our biweekly newsletter “Climate Matters” or visit our Climate Change Centre
This article appeared in the business section of the print edition under the title “Hot Swap”