A Drier China Adds To Economy’s Woes

GLANCING BACK THROUGH the archives, this Bystander came across a more-than-a-decade-old post about China’s water insecurity.

The problem persists. The unprecedented scale of this year’s heatwave and drought — phenomena that will likely be recurring as they are climate-change induced — has only exacerbated it. The consequences will have high economic costs, including some of the second-order ones.

It is not an exaggeration to suggest that water shortages due to climate change are now one of the most serious threats to an economy that looks increasingly beset by structural challenges.

Droughts — and flooding — are annual events, but climate change is making them more severe and longer-lasting. That also gives foreign companies one more reason to source their raw materials, components and finished goods from elsewhere, threatening the maintenance of China’s central role in international manufacturing supply chains.

One reason that water shortages are so difficult to tackle is the uneven geographical distribution of the country’s water resources. Northern China has sparse natural water flows compared to southern China and to the requirements of its dense population and industrial concentration.

Urbanisation has caused water tables throughout northern China to fall fast, drying up irrigation wells for farmers. Poorly regulated industrialisation has worsened the problem by polluting surface and underground water reserves.

Southern China is expected to provide net water transfers to the north and other parts of the country through the South-North Water Transfer Project, a massive three-canal engineering project to divert Yangtze waters to the arid north.

However, the heatwave and drought that occurred from June to August were centred in the south, and persistently drier conditions will raise further doubts about southern China’s capacity to compensate for the north’s structural water deficit.

Economic disruption

They also imply adverse impacts in various sectors of the economy.

Monsoonal rainfall patterns usually mean that the upper Yangtze basin receives half its annual rainfall in July and August. However, during the heatwave, water levels in the Yangtze river dropped to their lowest since records began in 1865. Hydropower generation along the river fell, causing electricity rationing that interrupted industrial production. Shipping using the country’s longest watercourse, a major transportation artery, was disrupted, causing some factories downstream to close temporarily because of the non-arrival of raw materials or parts.

China’s southern and south-western provinces also export hydroelectricity to the eastern seaboard. In mid-August, Sichuan province, which relies on hydropower for 80% of its energy usage, saw its hydropower generation capacity fall by half. The provincial government there, too, required factories to ration power usage, leading to reduced production, which fed into global supply chains.

A second-order consequence is that the drier conditions will also undermine the ‘Eastern Data and Western Computing’ plan to boost the economically lagging western provinces by locating power- (and water-) hungry data centres there that will serve digital activity in the more developed eastern provinces.

The rationale for setting up data centres in poor, western provinces like Guizhou is that mountain rivers can produce hydropower to generate electricity and the mountains also provide a cool climate to help bring down the cost of cooling, one of the largest expenses for data centres. Those conditions no longer look assured.

Agriculture

Agricultural impacts will likely be significant. According to state media, the summer drought wilted hundreds of thousands of hectares of crops, probably millions.

China is a net food importer, and the government prioritises increased domestic production. Harsher farming conditions will make it more difficult to achieve food self-sufficiency. China will thus remain a significant buyer and price-setter in global food markets as climate change aggravates agricultural problems worldwide.

Beijing has few means to ameliorate persistent nationwide water deficits. The agriculture ministry advised local officials during the drought to increase efforts to ensure adequate irrigation water, open new water sources, rotate irrigation and produce artificial rainfall when necessary.

Inducing rainfall by cloud-seeding can provide local relief (providing there are some clouds to seed) but is not a systemic solution to chronic annual heatwaves and drought. Exhortations to open up new water sources are empty words when rivers and lakes are drying up.

China will double down on investing in renewable energy technologies, increasing its influence in these industries globally. Yet, less hydropower may also sustain the continued construction of coal- and oil and gas-fired power plants, reinforcing climate change effects.

Cross-border disputes

Internationally, the reliance of South and Southeast Asian countries on river water originating upstream in China means that chronic droughts in China may inflame international tensions.

China has a poor record of addressing its neighbours’ concerns about upstream dams affecting water levels in the Mekong, Salween, Ganges and Yamuna rivers.

As India’s industrial activity grows, including power-hungry sectors such as semiconductor manufacturing, management of shared rivers is likely to add to tensions with China over disputed territory.

Power Rationing Widens As China’s Extreme Heat Continues

SHANGHAI IS THE latest city to introduce electricity rationing as drought and extreme temperatures overstrain the country’s power grid.

Buildings along the Bund have been told to turn off external lighting for two evenings early this week to save power.

In the middle reaches of the Yangtze river, where conditions are severe, falling water levels have reduced the power supply from its hydroelectric dams. At the same time, demand for air conditioning has soared.

Factories and shopping malls in Chongqing have already been subject to temporary power cuts as authorities prioritise supply to domestic consumers.

Impacts on production have varied; vehicle maker VW says its plant has shut down, while electronics maker Foxconn says the effects have been minimal.

Authorities have extended the power saving measures by five days into a second week, with Sichuan and the rest of the Southwest bearing the brunt of the extreme heat.

Falling water levels have also disrupted shipping. Tesla’s Shanghai plant has suspended production because components are not arriving from Sichuan.

The impact on agriculture is growing, too. On Saturday, Sichuan’s provincial disaster committee said that 47,000 hectares of crops had been lost and 433,000 hectares damaged. More than 800,000 people face a shortage of drinking water.

In neighbouring Hubei province, authorities say 6.9 million hectares of crops are damaged, and a further 220,000 people are short of drinking water.

Brush fires are starting to be reported, adding further peril.

State media report that the drought threatens the autumn grain harvest, which provides three-quarters of the annual yield. Authorities are cloud seeding to try to induce rain.

China issued the year’s first national drought warning last week, a yellow alert, the third highest. The summer is the hottest and driest since China began keeping temperature and rainfall records in 1961, adding to the stress on an already slowing economy.

Heatwave And Drought Stress China’s Electrical Power Supply

BACK IN 2009, this Bystander alighted on a press report that China spent $100 million a year on cloud-seeding to induce rain and snowfall to combat drought.

That was more than six times the figure quoted for the United States. China frequently resorts to using anti-aircraft guns and rocket launchers to blast the sky with silver iodide, reportedly resorting to this way to make rain more often than any other country.

In the past, most cloud seeding occurred in the increasingly arid North China Plain. Now it is being deployed in parts of central and southwest China amid a severe drought and a two-month-long heatwave that the National Climate Centre says is the country’s longest and strongest since records were first kept in the early 1960s.

However, Hubei and several other provinces along the drought-stricken Yangtze river, now at record low levels following less than half the usual rainfall in some stretches, have run into a familiar problem with the technique: you need the clouds to seed in the first place. They are in short supply in a heatwave.

Upstream in Sichuan, the mercury has risen above 40 degrees Celsius with no immediate relief in sight. With water levels in hydropower reservoirs down by as much as half and demand for air conditioning rising, power shortages of up to several hours are widespread.

Electrical blackouts as authorities ration power are affecting industrial production. Emergency measures instituted to ensure households get priority for what power is available are forcing factories to cut back output or stop work altogether.

Foxconn’s factory in Chengdu, which makes Apple’s iPads, is one business amid a six-day shut down because of power rationing.

The overall impact on the economy of drought-induced temporary factory shutdowns will likely be minimal, but it is another drag on an already decelerating economy.

A longer-term concern may be the loss of crops for the autumn harvest, which could drive up inflation. The Ministry of Water Resources has said that the drought has affected 821,333 hectares of farmland in Sichuan, Chongqing, Hubei, Hunan, Jiangxi and Anhui.

Only half the usual annual release of water from the Three Gorges reservoir to relieve drought downstream has been possible this year. Many rivers and streams that flow into the Yangtse and are a source of agricultural irrigation are reported to have dried up.

Meanwhile, at the mouth of the river, Shanghai hit a sweltering 40.9 degrees Celsius in July, equalling its hottest day since the city started keeping records in 1873.

Meteorologists predict that the long-lasting heat wave will become the ‘new normal’ due to climate change.

This will force authorities to pay more attention to the inadequacies of the country’s national power grid, as evidenced by Vice Premier Han Zheng, who, on a visit to the State Grid Corporation of China this week, highlighted the importance of the energy and power supply for social and economic stability.

Drought Diplomacy In North Korea

CORN AS HIGH as Kim Jong Un’s thigh. That, at least, is what the picture above released by North Korea state media on June 1 shows.

The reality is likely to be different.

The isolated regime is suffering its worst drought in a century — probably its fourth ‘worse drought in a century’ of the past decade. Pyongyang’s news agency, KCNA, reported last week that paddies in the main rice-farming provinces of Hwanghae and Phyongan were drying up for lack of rain. Food supplies, never plentiful, are now at risk of falling — again — to the level of famine.

The devastation wreaked on the economy by the drought s compounded by the fact that 50% of the country’s electricity is generated by hydropower. Reports finding their way to this Bystander suggest that most parts of the economy are already feeling the effect of power shortages.

North Korea was hit by severe and fatal famine in the 1990s and relied on international food aid to get through. However, Pyongyang’s suspicion of humanitarian workers and reluctance to allow independent monitoring of food distribution, makes international agencies reluctant donors.

Relations between Beijing and Pyongyang are arguable at their lowest ebb. China even rebuffed North Korea’s putative interest in joining the Asian Infrastructure Investment Bank. Nonetheless, China’s foreign ministry said last week that the country was willing to help its drought-stricken erstwhile ally avoid a humanitarian disaster.

One set of questions is what price, if any, Beijing can extract from Pyongyang in return over its controversial nuclear program, and whether Pyongyang is ready to grasp an excuse providently offered to it by nature as an opportunity to back down from the nuclear tests and missile launches that have brought international sanctions down on it.

Another is whether Pyongyang can get food aid from Russia or Cuba, both places recently visited by senior North Korean officials, as an alternative to China, and even whether the regime is over-egging the pudding in regard to the severity of the drought. Last year, according to North Korea’s news agency, food production increased by 48,700 tons compared to 2013 — regardless of reports of severe drought.

China’s Natural-Disaster Displacement Risk Quantified

China: Disaster-related displacement, 1970-2013. Source: IDMC

CHINA ACCOUNTS FOR a disproportionate share of the world’s disaster-related displacement. That is not only a function of the size of its population. The country is at high-risk of being stricken by drought, seasonal floods, cyclones, earthquakes and landslides induced by the latter two.

Drought and cyclones are the most costly; earthquakes and floods the big killers. Some 130 million inhabitants are exposed to these risks. More than 8 million of them every year are at risk of being displaced, according to a new analysis of regional displacement risk by the Internal Displacement Monitoring Centre (IDMC).

Disaster-induced displacement has been increasing and is likely to continue to do so. For one, population growth and the increased concentration of people and economic activity in hazard-prone areas such as coastlines and river deltas are swelling the numbers of people exposed to natural hazards.

Second, better early warning systems and evacuation planning means that more people survive disasters even as their homes and property are damaged or destroyed. Third, climate change is making extreme weather both more frequent and severe.

The richer a country gets, the more resilient it is to natural disasters, not least of all because it has more to lose, so they take steps to protect what they have. Yet though they suffer fewer natural disasters those that do occur are more severe.

Since 2008, China has suffered three disasters that displaced more than 3 million people, five that displaced 1 million-3 million people and 34  that displaced between 100,000 and 1 million people.

All that helps explain why China has the highest absolute risk of disaster-related displacement in the region. It also ranks second in relative displacement for its population size — 6,082 displacements per million residents, after Laos’s 6,542 displacements per million inhabitants.

The IDMC predicts that over the next four years that the average number of displaced will rise to nearly 9 million and the per million ratio will rise to Laos’s current level.  Its study, which is regional, is intended to provide a forecast to help planners not so much to deal with natural disasters as to forestall their worst effects.

Drought Hits Northern China, El Niño Threatens Worse

EL NIÑO, THE periodic warming of sea-surface-temperatures in the Pacific, is already if prematurely being blamed for the worst drought to hit northern and central China in 60 years. State media says more than 27.5 million people are facing water shortages across at least six provinces.

Previous El Niños caused flooding in the southern rice-growing regions, as they did so disastrously along the Yangtze River in 1998, even as they brought drought to the wheat-growing provinces of the north. The extreme weather produced by El Niño in 1876–77 caused one of that century’s most deadly famines across Asia, with 13 million people dying from hunger in northern China alone.

While the latest El Nino conditions are only just starting to form in the Pacific, they are exacerbating the hot, dry weather in northern China, which was already suffering from serious water shortages as a result of years of deforestation, industrialization and urbanization.

The previous El Niño in 2009 triggered a sharp fall in wheat output. State media say that drought in Liaoning Province has so far devastated 2 million hectares of crops. An El Niño would ratchet up that number significantly.

Drought is also severe in Jilin, Inner Mongolia, Shaanxi, Henan and Hubei, affecting a further 2 million hectares of crops. The overall effects on harvests could be significant. A break to a run of 11 consecutive years of rising wheat harvests looks likely. The key question is whether this turns out to be a short El Niño lasting a few months, or a more long-standing event lasting as long as a couple of years.

China is not alone in being affected by El Niño. The net effect around the Pacific could be to cut global grain harvests by upwards of 2%. Sugar, beef, cotton, palm oil, cocoa and coffee output could also be hit, pushing up prices of those commodities. China’s cotton fields are south of the Yellow River, and like the rice paddies, subject to El Niño-related flooding.

Flood And Drought Co-Exist In China

Despite heavy seasonal rains causing floods and havoc across southern China, the north and parts of the center of the country still face severe drought. Officials have warned that crops are at risk on the North China Plain between the Yellow and Huai rivers. More than 4 million people across eight provinces are short of drinking water. The lack of rain extends to the Korean peninsula across the Yellow Sea. The Associated Press reports that North Korea is facing its most extreme drought since records were first kept more than a century ago, threatening already tenuous food supplies.

China Warns Of Severe Floods

While drought persists in southwestern China, this year’s rainy season is bringing fears of extensive flooding elsewhere in the country. The national flood and drought prevention agency is warning of flooding along the Yangtze potentially more severe than the catastrophic floods of 1998 that killed 4,150 people. Water levels on the river’s middle and lower reaches are 1-3 meters higher than normal as a result of the recent torrential downpours and floods are already occurring along some of the river’s tributaries.

State media quote Wu Daoxi, who heads the agency’s Yangtze office, as saying that the chance for large-scale flooding is significantly higher now than in 1998. Other officials from the agency say that widespread floods are also likely to occur along the Huaihe river and localized ones along the Pearl river. Reservoirs are reported to be already filled to 80-90% capacity. Last Friday, Chen Lei, minister for water resources, called for reservoirs to be shored up to prevent flooding, saying that 40,000 were at risk of giving way. One that did, the Badoucun reservoir in Hunan, has resulted in a local official being sacked for not taking precautionary measures in time.

The potential damage caused by flooding is getting more severe because depletion of groundwater is lowering water tables and causing some 50 of China’s largest cities to sink Venice-like, Shanghai, Beijing, Tianjin, Hangzhou and Xian among them. We have noted before the potential explosive social costs of a water crisis getting beyond the government’s control. It will take a comprehensive program of water conservation, better water resource management and better husbandry of the ecosystem. And there are plans on all those fronts. But the weather is no respecter of five-year plans.

Rains Bring Scant Relief To Drought In Southwest China

Nearly 5.5 million people are still suffering from lingering drought in Yunnan and Sichuan despite the recent rains bringing some relief. Authorities say that only 290,000 fewer people and 220,000 fewer livestock in the two provinces are short of water because of the break in the weather. More than 400,000 hectares of crops have been affected, according to the Office of State Flood Control and Drought Relief Headquarters. Rainfall in the two provinces has been at 10% of normal levels, threatening tobacco, corn and rice crops.

Separately, disaster relief authorities in Guizhou say that more than 5.5 million people have been affected by drought, rainstorms and hailstorms that have caused direct economic losses of 1.8 billion yuan ($283 million) so far this year. The picture above of an almost dried out reservoir in Weining County in Guizhou is dated May 20.

Meanwhile, three people died when torrential rain hit Chongqing, and more than 5,000 people had to be relocated after a heavy rainstorm hit parts of Hunan. In Nanning, capital of Guangxi, nearly 900 people were evacuated after a road next to which a school had been drilling for drinking water subsided, causing one building to collapse and six more to tilt.

FAO Sees Another Record Rice Harvest In China

Another bumper rice harvest is forecast for China this year, with the crop increasing 0.6% from last year’s record. The photograph above shows early rice being planted in Guangxi–and a reminder that it is still back-breaking work. Meanwhile, imports are expected to rise and exports to continue their decline of recent years as the country rebuilds its stockpile of reserves.

In its latest world rice outlook, the U.N.’s Food and Agriculture Organization (FAO) predicts the 2012 harvest will come in at 202 million tonnes of paddy (138.4 million tonnes of milled rice), up from 2011’s official forecast of 200.8 million tones of paddy (137.5 million tones of milled rice), which was a 3% increase on 2010’s harvest. The FAO’s optimism follows concerns that the persistent drought the southwest was threatening this year’s harvest.

The slowing rate of expansion of the harvest, the FAO says, “reflects rising costs of fuel and other inputs, which would dampen the positive effect of a 9%-18% increase in support prices.” As we have previously noted, China may be bumping up against the ceiling of its rice producing capacity. Beijing is directing more than four-fifths of its agricultural support budget of 1.2 trillion yuan ($190 billion) for this year to grain farmers (who include wheat and maize growers) to sustain the record levels of grain output and increase rural incomes.

Regardless of the bumper 2011 harvest, rice exports are expected to fall from 2011’s 516,000 tones to 400,000 tonnes this year (see chart). This reflects officials responding to domestic price inflation, particularly politically sensitive food price rises, by curbing sales abroad to restock domestic reserves. In addition, exports of China’s lower quality Indica rice are becoming less competitive, particularly in its African markets, where it is anyway looking to supply locally. For example, Chinese farmers will start growing rice on 25,000 hectares in northern Sierra Leone this year.

Imports are likely to rise. High domestic prices and supply shortfalls in drought-stricken southern provinces prompted large purchases by Chinese buyers, mostly from Pakistan and Vietnam, the FAO says. This has caused it to raise its 2012 import forecast from the 600,000 tones it had expected in January to 1 million tonnes. The FAO predicts that end-of-season stocks this year will rise to 83.1 million tonnes, up from last year’s 75.4 million tonnes.