China’s economic recovery faces challenging summer as hydropower producer sizzles amid drought

As sizzling summer heat leads to a surge in power demand, months of persistent drought conditions across a major hydropower producer in China’s southwest are compounding concerns about the nation’s economic recovery.

Rainfall in Yunnan province during the first four months of 2023 dropped by more than 60 per cent from the same period last year, and the trend has shown little sign of reversing even as the region enters its rainy season, according to local meteorological data.

While the province has been limiting the electricity consumption of more than 300 energy-intensive local enterprises – mostly for aluminium production – since September to ensure residents’ livelihoods, the impact may soon spill over to other parts of the country if the droughts continue, as Yunnan also bears responsibility for supplying electricity to the southern economic powerhouse of Guangdong.

As the power-supply dilemma caused by extreme weather has persisted for two consecutive years in China, the reliability of the existing electricity supply structure in the country is facing increasing challenges from the worsening impact of global warming.

“Hydropower generation in Yunnan in the following months is crucial for the electricity supply and demand situation in Guangdong,” said a note from Tianfeng Securities last week.

Last year, Guangdong consumed the most electricity – or 787 billion kilowatt-hours – among all major provinces and regions, and 23 per cent of the power it consumed was from other provinces, according to official data.

Among the external sources, Yunnan is the biggest supplier, accounting for around 70 per cent.

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