Drought is on going in China

Supply-chain Risk Briefing

Summary

A moderate-scale drought has been ongoing in China since March 25, 2026. The current GDACS alert level is Green, indicating a relatively low stage, but continuous monitoring is necessary given China's vast agricultural and manufacturing base.

Supply-chain impact

• Agricultural production: As China is the world's largest producer of rice, wheat, and corn, prolonged drought is expected to create upward pressure on global grain prices
• Manufacturing water supply: Water shortages in China's eastern coastal manufacturing belt could potentially disrupt production of electronic components and chemical products
• Inland transportation: Concerns over delays in transporting raw materials such as coal and iron ore if water levels drop in major inland waterways like the Yangtze River
• Power supply: Reduced electricity generation in southwestern regions with high hydroelectric dependence could impact energy-intensive industries such as aluminum

Watch points

• Regional precipitation trends: Changes in rainfall patterns in major agricultural areas (North China Plain, Yangtze River basin) and manufacturing clusters
• Government response measures: Trends in policy announcements by Chinese authorities regarding water rationing, agricultural subsidies, and industrial water restrictions
• GDACS alert level changes: Supply-chain risk reassessment needed if upgraded from Green to Yellow or higher