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China Advisory: Factory output reduced as droughts force rolling blackouts

China's factories see production slow as droughts cause hydropower plants to reduce electricity output

Factories in China's Sichuan province are facing closures following rolling blackouts caused by a lack of hydroelectric output.

The rationing of electricity distribution from hydropower plants comes as reservoirs in the south-western region of China have been affected by depleted water levels following a period of sustained drought.

Although not uncommon during hot summers in China factories in Sichuan, the region best known for manufacturing semiconductors and batteries, were ordered to shut down for 6 days in order to preserve electricity in the area. The local government is yet to announce any 'white list' or exemptions from the blackouts.

The droughts point to a much broader water shortage across China, with the Yangtze Basin currently sitting around 45% lower than usual. The Yangtze River is a key supply chain artery running all the way to the sea near Shanghai and a drop in water levels could result in vessels being unable to carry full loads, therefore limiting supply along the route.

Blackouts are also being implemented further downstream, with restrictions also in place for Chongqing and Hubei Province.

We will keep this page up to date with the latest developments.

If you have any questions about your Asia supply chain please contact our dedicated team here.

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