Chinese manufacturing contracts for second straight month amid drought, power shortage

China's manufacturing activity dipped for the second straight month in August amid record heatwave and drought.

The manufacturing Purchasing ManagersIndex (PMI) rose to 49.4 from 49 last month, according to China's National Bureau of Statistics, however, it was still below the 50-point mark which defines contraction from expansion.

China's manufacturing index expanded in June but it fell last month amid power shortages and unprecedented drought conditions in the country. China's Sichuan province was hit with an acute power crisis as it shut down factories amid the heatwave. Sichuan is a major auto manufacturing hub which hosts the Toyota factory also.

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Reports claim authorities in Sichuan province began restoring power to some factories after strict emergency energy supply measures were introduced. Malls in Sichuan and Chongqing were forced to cut down on their opening hours as the power crisis led to a deep economic crisis in the area.

Sichuan also produces half of China's lithium which is used in batteries for electric vehicles. Reports claim at least 19 out of 21 cities in the province were forced to suspend industrial production as the electricity crisis along with the rampant heatwave led to soaring temperatures. Hydropower generation was also hit as water volumes shrunk in Sichuan's rivers. Chinese authorities said the country has been experiencing the longest period of high temperature for the first time since 1961.

At least five million people in southwest China faced power cuts amid theelectricity supply crunch. Temperatures in Sichuan province surpassed 40 degrees Celsius and the demand for air conditioning spiked furtherexacerbating the energy shortage.

(With inputs from Agencies)

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