Heatwave Impacts Chinese Economy

Factories and agriculture have been impacted by the heat.

Factories and agriculture have been impacted by the heat.

Many of China’s provinces are currently in the midst of a record-breaking heatwave that shows no sign of calming any time soon. As expected, the intense heat has caused a rising demand in electricity and cooling systems, though it has also resulted in drying of vital water sources like the Yangtzee River.

These conditions have begun to affect several of China’s vital economic staples, from factories to farms, which could lead to economic hardship in the long run.

“It will affect those big energy-intensive industries and it will have [a] knock-on effect throughout the economy and even to the global supply chain,” Dan Wang, chief economist of Hang Seng Bank China, told CNBC.

“We already see a slowdown in production in the steel industry, in chemical industry, in fertilizer industry. Those are very important things when it comes to construction, to agriculture and also to manufacturing in general,” Wang added.

By Wang’s estimates, if the heatwave continues (which is projected to for as long as several months), it will cause a noticeable dent in China’s GDP. “Last year, as we have estimated, the power shortage period has caused China about a 0.6% point of GDP growth,” Wang said. “This year we think this number will be a lot higher… I would say 1.5% point lower.”

“Right now, we are giving 4% of GDP growth for the full year. If the current situation continues, then I have to say the growth rate is probably below [3%],” she added.

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