Drought worsens China power supply crunch*****

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SHANGHAI, May 17 (AP): Much of central China is enduring its worst energy crisis in years, with factories and residents facing power cuts as supply runs short of demand - a problem worsening as drought dries rivers, reducing hydroelectric capacity. Authorities are warning that manufacturers in booming industrial regions west of Shanghai may face even tighter power rationing when demand surges in the peak summer months while electricity generators curb output due to rising costs for coal and oil. Though summer rains may eventually relieve the drought, with even the powerful Yangtze river running too low for shipping in some stretches, China appears to be hitting limits to its growth in a resource scarce-environment. The power crunch comes at time when worries over inflation make rising energy costs and crop failures less welcome than ever. Hydroelectricity provides about one-fifth of China's power and with river beds running dry it has fallen by about 20 per cent, according to a report by UBS analyst Tom Price. The industry group China Electricity Council has estimated a power shortfall of 30 million kilowatts in the summer. That is only 3 per cent of China's generating capacity, but the shortages are concentrated in key manufacturing regions such as Zhejiang and Jiangsu, near Shanghai. Last week, the government ordered a suspension of diesel exports to help prevent shortages as factories hit by outages step up use of fuel-powered generators. According to industry reports, petrochemical and plastics manufacturers and smaller factories are among those most affected. But Shanghai-based Baosteel Group, one of the country's biggest steel makers, is also among companies ordered to prepare for cutbacks, state media reported Tuesday.