Industrial production has been suspended for several days in all but two of Sichuan province's 21 cities due to power cuts. Sichuan, with a population of around 84 million, is China’s sixth-largest economy in terms of gross domestic product (GDP), with industry accounting for more than 28%. It plays a leading role in the production of silicon metal, electrolytic aluminum, chemicals, electronics and power-generation equipment. “The power curbs will, for sure, have some negative impact 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, 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% of its electricity, but water flows into hydropower reservoirs have dropped by 50% this month. “Under the continuous high temperature, Sichuan’s power load is growing, but due to the low water coming from the Yangtze River during the dry season, Sichuan’s main source of electricity consumption – hydroelectric power generation – is limited,” said Yuan Jiahai, Professor with the School of Economics and Management at North China Electric Power University. Several provinces suffering from electricity shortages have already been gradually guiding enterprises to reduce electricity consumption since the start of August through initiatives and economic incentives, according to Yuan, who is also a member of the Chinese Society of Electrical Engineering. High-energy-consuming industries had been expecting electricity restrictions, but were unprepared for full shutdowns, Yuan added.
Beijing has recently stressed that there will be no repeat of the power crisis that rocked the country last year, with President Xi Jinping vowing that China “will never allow a major incident like large-scale power cuts to happen again”.“On the whole, the uncertainty of the duel effects of the epidemic situation and the high temperatures on industrial production in August is still high,” Lu Zhe, Chief Economist at Topsperity Securities, said. But the power restrictions may further expand to other areas amid a scorching heatwave in southern China, Yuan cautioned, even though other regions rely more on coal for energy production, the South China Morning Post reports.
