Water-Intensive Companies in South-West China Face Water Restrictions

By Dr. Youzhi Guo, CWR 2 April, 2010

Severe drought leads to water rationing affecting economic output.

Since spring of this year, southwest China has suffered from its worst drought in 100 years, which is likely to persist until May, reveals the National Meteorological Center. According to China’s Ministry of Civil Affairs, five million hectares of crops, 61.3 million residents and 11.7 million heads of livestock have been affected by water shortage, and direct economic losses have been estimated at 23.7 billion yuan (3.5 billion USD).

Among the provinces affected (Yunnan, Guizhou, Guangxi, Chongqing and Sichuan), Yunnan and Guizhou are at the center of the crisis (see figure below). In Yunnan, the production of crops such as tea, rubber and coffee is expected to fall dramatically and direct economic loss is estimated to reach 12.7 billion RMB (1.87 billion USD). Guizhou is not much better off, with the provincial government predicting a fall of 12,600 tons in wheat, 150,000 in rape seed, and 82,000 in potato production. In Guangxi, China’s major sugar producer, Chengdu-based Sinolink Securities estimates that sugar production will decrease by 33%.

To protect drinking water, some cities in southern China are planning to restrict or even shut down operations of water intensive businesses. Qujing in Yunnan, one of the cities facing severe drinking water shortage, is the first to take such action. According to a Xinmin news report, on March 1, the municipal government shut down 89 car-washing companies and five spas. In Kunming City, according to a local news report, the local water company has informed the media that water consumption will be controlled when water supplies are not considered sufficient for domestic use. As a result, some car washing and spa businesses have started to monitor and improve their water efficiency.

Water shortages have also begun to affect power generation. As reported by Xinhuanet, a government official from Kunming City reveals that there has been an industrial power shortfall of 26%. To address the problem, the government purchases electricity from other provinces such as Guangdong and has reduced the power supply available to energy intensive companies, particularly those that are not in line with the government’s industrial development policy. This has resulted in cutting off 50% of power supplied to cement, 15% to steel and iron, and 10% to nonferrous metallurgy companies.

Experts predict that if the drought persists beyond the next few months, water shortages will begin to seriously impact performance of agricultural, nonferrous metallurgy and hydropower companies located in southern China.