Heat wave in China could have repercussions on its economy: economist

A citizen wearing a breathing mask to escape the heat rides on the road on May 23, 2019 in China. Electricity load in China’s Henan province hit a new high on Monday, mainly driven by demand for air conditioning, as scorching heat waves swept through areas north of the Yangtze River.

CGV | Visual Group China | Getty Images

China is currently in the grip of a devastating heat wave that could have serious repercussions on its economy, according to the chief economist of Hang Seng Bank China.

The heatwave “is quite a dire situation,” Dan Wang told CNBC.Squawk Box Asiaon Thursday, adding that it could probably last “easily two to three months.”

China faces record heat waves and battling a power outage in the Yangtze River region. Extreme temperatures disrupted crop growth and threatened livestock.

“It will affect these big energy-intensive industries and it will have [a] ripple effect on the whole economy and even on the global supply chain,” she said.

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

According to a state media report, most parts of the Yangtze River Basin have experienced extremely high temperatures since July. Rainfall in the region has dropped by about 45 percent from the average for recent years, according to data from the Ministry of Water Resources.

The report also quoted Liu Weiping, vice minister of water resources, as saying on Wednesday that the reservoirs have replenished 5.3 billion cubic meters of water in the middle and lower parts of the Yangtze River since August.

The latest heat waves and blackouts are a reminder major blackout last year which enveloped many of China’s key manufacturing centers such as Guangdong, Zhejiang and Jiangsu.

“Last year, as we estimated, the power shortage period caused China to grow about 0.6 percent of GDP,” Wang said. “This year we think that number will be much higher…I would say 1.5% lower.”

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

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