China’s double whammy of a super-severe drought and property market mess mean huge amounts of economic damage. The big northern hemisphere drought is hitting Europe, the US and China.
In context with the global economy, this is a near-worst-case scenario. All the economic indicators are getting hit at the same time. China is not alone.
The other big economic powerhouses are also in big trouble. Europe is really getting savaged by the worst drought in 500 years. Pictures from the UK of England’s very un-green and unpleasant land are a testimony to an emerging massive hit.
This drought is unique in some ways. Europe, the US, and UK are in stages of ongoing drought. The economic hits include prices, businesses shutting down, and the resulting demand for credit and capital likely to drive up interest rates. Some sectors will have to get credit just to stay in business.
The UK drought is a good indicator. There was already a smaller drought in 2020. Satellite pictures show the drought spreading across the south and even in the north. This is, to put it mildly, atypical for England, and a lot of UK farmland is under direct threat of more drought in the foreseeable future.
If China dries up, so does the global economy
…So if China is also in drought meltdown at the same time, the knock-on economic effects will be downright gruesome worldwide. China’s huge economy, industries, and population need a lot of water. They also need money to manage the issues.
This is happening just as a multi-trillion dollar property market, its debts and economic structures are taking another gigantic kick in the teeth. This market needs managing, and it takes big money to do it.
It’s ironic to think that China, a high-capital investor economy, could now be backstabbed by its high values and debts. Hits to property markets sooner or later entail losses, and investors bailing out. That will be expensive.
It’ll also be expensive for the global investment market. Chinese money will have to reposition, meaning money coming out of some other foreign markets and moving to safer places. A potential Scrabble set hit by an asteroid is one scenario.
A physical and capital sinkhole in progress
Simply surviving this drought will be even more expensive, even for China. Poor crop yields and increased demand for food imports could go on for years. That’s not a great outcome for the world. The world’s second-largest economy is a very high-maintenance thing. It can’t run on empty while also having to constantly make up deficiencies in so many things.
The physical problems are bad enough for China. Chinese industry uses a LOT of water. A prolonged water shortage could cripple major producers. The sheer scale of risk is another problem. Even the Three Gorges Dam is a relative drop in the bucket by comparison over time. It could mitigate a year or so, but not 5-10 years, for example, and not for the whole of China.
Another immediate problem that will affect all the northern hemisphere economies is winter. A low level of snow will reduce meltwater, drastically. This was already an issue in the US and Europe, where the Rhine and Colorado rivers are under threat from a reduced melt.
In China, it’s a very moot and extremely difficult issue. Can the Tibetan runoff help China’s water needs? China has built 20,000 dams since it took over Tibet. One of them, the Zangmu dam, is huge and controversial for taking water from neighboring countries.
The trouble caused by the drought is that it and most of the other Chinese dams are for hydropower, not specifically for irrigation. China’s massive dams programs are also naturally predicated on normal drainage and flow levels. If the melt fails, they will have to work at reduced capacity.
…Meaning less power, and less accessible physical water for these areas. Droughts are famous for creating these multi-level problems, and in a gigantic economy, they’re worse.
The biggest risk for China is time. If this drought goes on for 5-10 years, it’s impossible to predict the outcomes. That can happen. Big droughts tend to stick around. China is already having issues in just one season.
Maybe China can mitigate the effects, recycle water, or take other measures to restrict the damage. If not, the effects will compound. That could trash both China and the global economy very effectively.
China drought and property market train wreck – Tough global economy in sight
China’s double whammy of a super-severe drought and property market mess mean huge amounts of economic damage. The big northern hemisphere drought is hitting Europe, the US and China.
In context with the global economy, this is a near-worst-case scenario. All the economic indicators are getting hit at the same time. China is not alone.
The other big economic powerhouses are also in big trouble. Europe is really getting savaged by the worst drought in 500 years. Pictures from the UK of England’s very un-green and unpleasant land are a testimony to an emerging massive hit.
This drought is unique in some ways. Europe, the US and UK are in stages of ongoing drought. The economic hits include prices, businesses shutting down, and a resulting demand for credit and capital likely to drive up interest rates. Some sectors will have to get credit just to stay in business.
The UK drought is a good indicator. There was already a smaller drought in 2020. Satellite pictures show the drought spreading across the south and even in the north. This is to put it mildly atypical for England, and a lot of UK farmland is under direct threat of more drought in the foreseeable future.
If China dries up, so does the global economy
…So if China is also in drought meltdown at the same time, the knock-on economic effects will be downright gruesome worldwide. China’s huge economy, industries, and population need a lot of water. They also need money to manage the issues.
This is happening just as China’s multi-trillion dollar property market, its debts and economic structures are taking another gigantic kick in the teeth. This market needs managing, and it takes big money to do it.
It’s ironic to think that China, a high-capital investor economy, could now be backstabbed by its high values and debts. Hits to property markets sooner or later entail losses, and investors bailing out. That will be expensive.
It’ll also be expensive for the global investment market. Chinese money will have to reposition, meaning money will have to come from somewhere. Most likely, it will coming out of some other foreign markets and moving to safer places. A potential Scrabble set hit by an asteroid is one scenario. That’s why this is such a big deal.
A physical and capital sinkhole in progress
Simply surviving this drought will be even more expensive, even for China. Poor crop yields and an increased demand for food imports could go on for years. That’s not a great outcome for the world. The world’s second largest economy is a very high-maintenance thing. It can’t run on empty while also having to constantly make up deficiencies in so many things.
The physical problems are bad enough for China. Chinese industry uses a LOT of water. A prolonged water shortage could cripple major producers. The sheer scale of risk is another problem. Even the Three Gorges Dam is a relative drop in the bucket by comparison over time. It could mitigate a year or so, but not 5-10 years, for example, and not for the whole of China.
Another immediate problem which will affect all the northern hemisphere economies is winter. A low level of snow will reduce meltwater, drastically. This was already an issue in the US and Europe, where the Rhine and Colorado rivers are under threat from a reduced melt.
In China, it’s a very moot and extremely difficult issue. Can the Tibetan runoff help China’s water needs? China has built 20,000 dams since it took over Tibet. One of them, the Zangmu dam, is huge and controversial for taking water from neighboring countries.
The trouble caused by the drought is that it and most of the other Chinese dams are for hydropower, not specifically for irrigation. China’s massive dams programs are also naturally predicated on normal drainage and flow levels. If the melt fails, they will have to work at reduced capacity.
…Meaning less power, and less accessible physical water for these areas. Droughts are famous for creating these multi-level problems, and in a gigantic economy, they’re worse.
The biggest risk for China is time. If this drought goes on for 5-10 years, it’s impossible to predict the outcomes. That can happen. Big droughts tend to stick around. China is already having issues in just one season.
Maybe China can mitigate the effects, recycle water, or take other measures to restrict the damage. If not, the effects will compound. That could trash both China and the global economy very effectively.
Complacency is not an option. Predicted water shortages past and present all paint the same grim picture. There was already a water supply crisis worldwide. Do nothing, and the consequences are inevitable.
Predicted water shortages past and present all paint the same grim picture. There was already a water supply crisis worldwide. Do nothing, and the consequences are inevitable.
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Disclaimer
The opinions expressed in this Op-Ed are those of the author. They do not purport to reflect the opinions or views of the Digital Journal or its members.
