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Add Toyota Motor Corp. and Contemporary Amperex Technology Co., the world's largest battery maker, to the growing list of companies shutting down factories in China's Sichuan province as a drought-induced power crisis worsens, according to Bloomberg.
Toyota closed its plant in the provincial capital of Chengdu until Saturday, a company spokesperson said, while Contemporary Amperex halted operations at its lithium battery factory in Yibin.
Sichuan is one of China's most populated provinces, with 80 million inhabitants, and is home to a major manufacturing hub heavily reliant on hydropower.
However, a heatwave and drought have caused reservoir levels to drop, resulting in declining power generation and forcing local authorities to ration power for factories.
The shutdowns add to a growing number in industries stemming from solar panels to aluminum smelting. Volkswagen AG said on Monday that its factory in Chengdu is affected by power shortages, but that it was only expecting slight delays in deliveries to customers. Foxconn Technology Co. also makes Apple iPads in the province, but said it was seeing only limited impact from the drought so far. -Bloomberg
The drought-induced power crisis is another excuse Beijing can use to explain why its economy falters.
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China's worst heatwave in decades is curbing hydropower generation in one of the country's most populous provinces. Local authorities requested some factories in southwestern China to halt production to conserve electricity, adding to the financial pressures of an already rapidly slowing economy.
Sichuan province has more than 80 million inhabitants and is home to a major manufacturing hub. The Washington Post said some factories had suspended production on request by the government due to high temperatures and drought, leading to declining water flows through local hydropower reservoirs.
Jin Xiandong, a spokesman for the National Development and Reform Commission, said on Tuesday that China has to increase coal-fired power output because of waning hydropower output.
China's inland Sichuan province is a major manufacturing hub that produces consumer goods from electronics, furniture, and food. Also, it's home to the world's largest crystalline silicon solar cell producer.
China Securities Journal said Foxconn's plant in Sichuan that produces Apple products, such as iPads and Macs, wouldn't be significantly impacted by power rationings.
The province is highly dependent on hydropower, and high temperatures that could last through the end of this month might indicate more power restrictions for manufacturing plants.
Fu Linghui, China's National Bureau of Statistics spokesman, said the heatwave has sparked "adverse effects on economic operations," adding that the economic recovery "has slowed down marginally."
On Sunday, we noted that China's central bank unexpectedly cut its key interest rates in a feeble attempt to prop up the failing economy weighed by Covid lockdowns, property downturn, and a crippling heatwave. The cut comes after July's economic data was awful, pointing to an economic slowdown gaining momentum.
Further power cuts in Sichuan will result in more production suspension and dampen the country's souring economic outlook.