Rivers Are Low in China: So What!

If you still need proof that we live in a global economy, you need look no further than the consumer electronics market for HDTVs and other devices. In this case, the important factor is an ongoing drought in the Yangtsu River basin in China. A big yawn, right? Well, consider this. The Yangtsu River is the biggest source of hydroelectric power in China. And according to a Reuter’s report, the Three Gorges hydropower project has a production capacity of 18.2 gigawatts, which is “the equivalent of about 15 third-generation nuclear reactors.” Already, the water level behind the plant is well below the limit needed to operate the 26 turbines efficiently.

If you’re still wondering what this has to do with the price of beans — or your next television — then consider this. According to the Reuter’s report, “almost half of all silicon-making facilities (in Hunan) had been suspended because of the lack of electricity,” citing a source in Shanghai. And the country is already burning more coal and expensive diesel oil to generate electricity. Lowered production and higher energy costs could spell price increases for just about all digital products, from MP3 players and cell phones to big screen HDTVs.

An economist once said that China has been exporting deflation for years in the form of lower priced goods, but the time will come when the country will start exporting inflation instead. It may be that this drought could accelerate that change.