China's drought may have serious global impact

Wide swathes of northern China are suffering through their worst drought in 60 years -- a dry spell that could have a serious economic impact worldwide if it continues much longer, experts say.

Some areas have gone 120 days without any significant rainfall, leaving more than five million hectares (12.4 million acres) of crops damaged -- an area half the size of South Korea -- China's drought control agency said Sunday.

There are fears that the problem could send global prices soaring at a time when food costs are already causing governments headaches. According to the UN last month world prices broke their peak levels of 2008 to hit a record high.

"If the dry spell continues into March or April, wheat production could be seriously affected, with losses of more than 10 million tonnes," Ma Wenfeng, an analyst at Beijing Orient Agribusiness Consultants, told AFP.

"China would be forced to boost its imports."

More than 2.5 million people lack drinking water, particularly in the eastern and central provinces of Shandong and Henan, which each have around 95 million inhabitants.

Weather authorities are not forecasting much rain over the next two months for the regions around Beijing, in the Yellow River basin and along the Huai, the waterway that divides the rice-plenty south and the wheat-growing north.

Shandong's Rizhao city, which means "sunshine", has suffered from its longest drought in 300 years, stretching back to September 11, according to local media.

Beijing meanwhile has not seen any rain or snow for 100 days -- its worst run since 1951. The water shortage is also expected to worsen as warmer weather kicks in after two months of particularly cold temperatures.

In some areas, the earth is all cracked up and if rain does not fall in the next few weeks, the wheat that farmers sowed in autumn might not even germinate when the weather warms up.

Around the world, wheat exporters such as the United States, Russia or France are closely monitoring the weather forecast not only for China but also for India, which is experiencing an even worse drought, according to Ma.

China and India are both the world's largest producers and consumers of wheat.

"If production goes down in both countries at the same time, the impact on prices will be considerable," he warned.

Chen Lei, minister for water resources, said Sunday that two-thirds of Chinese cities are short of water. The nation's per capita water resources only amount to 28 percent of the global average.

For the moment, the economic impact of the drought has been mitigated by China's "big stocks of wheat and rice", Ma said.

These are the result of a rise in prices both in China and abroad over the past few years, which has encouraged farmers to grow grain.

But with soaring food prices already weighing on people's minds, the psychological impact of the drought -- and its potential effect on prices -- is quite big, said Ren Xianfang, a Beijing-based analyst with IHS Global Insight.

China's consumer price index rose 5.1 percent year-on-year in November -- the fastest rate in more than two years. Cereal prices increased 14.7 percent year-on-year.

The government has said it will hand out 2.2 billion yuan ($334 million) in immediate drought relief aid.

It will also invest four trillion yuan over the next decade to improve water stocks and distribution, amid warnings of worse to come.

"With the urbanisation planned for the next five years, the shortage will become even more acute," warned Ren.

(c) 2011 AFP