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Asia at risk of losing annual $8.5tn from climate change

China and India to be hit hardest; need for infrastructure investment grows

Studies show that global warming is increasing water vapor in the atmosphere, which increases precipitation in certain places. (Source photo from Japan Meteorological Agency)

TOKYO/HONG KONG -- The growing number of natural disasters resulting from climate change is becoming a threat to Asian economies.

Nikkei Asia analyzed data from the non-profit organization World Resources Institute and found that in 2030, the economic output of places around the world that face riverine flood risk would be $17 trillion. Asia accounts for around half of this, at $8.5 trillion, with Asian countries like China and India particularly vulnerable to flooding.

The findings show there is an urgent need to develop infrastructure to minimize the impact of flooding.

In the city of Leshan in China's Sichuan province, which is part of the Yangtze River system, a number of businesses were affected by floods in mid-August. A fertilizer factory owned by Sichuan Hebang was flooded, resulting in damaged machinery and inventory losses worth more than 300 million yuan ($46 million). Shenghe Resources, a rare earth exploration and refining company, took preventive measures at its facilities but was unable to stop the flooding at its plant.

China received a large amount of rainfall this year, and from January to September there was 80% more flooding than in a normal year along the country's 836 rivers, including the Yangtze. 73 million people were affected, nearly 20% more than the average over the past five years. Direct losses in agriculture, aquaculture and commerce amounted to more than 200 billion yuan.

In China, the ability to control the waters has historically been the responsibility of the country's leadership.

Chinese President Xi Jinping in August toured flood-struck Anhui province in the east of the country. At around the same time, Prime Minister Li Keqiang was visiting flood victims in the southwestern city of Chongqing.

It is highly unusual for the Chinese Communist Party's two foremost officials to leave Beijing at the same time, underlining the importance of the flooding issue. A failure in flood control could even jeopardize the survival of the regime.

During his visit to Anhui, Xi recalled the legend of "Great Yu Who Controlled the Waters." The legendary Yu was the founder of the first Chinese Dynasty of Xia, and was said to have been successful in controlling floods along the Yellow River.

But the problem goes beyond China and flooding, with a series of natural disasters linked to a warmer climate potentially affecting factories and homes and threatening the economic activities of countries around the world in the longer term.

Nikkei Asia used a tool developed by the WRI that calculates flood risk to analyze how much economic damage could be expected if climate change continues at the current pace.

The WRI tool divides up the world by single square kilometers and calculates the gross domestic product for each square using the population figures and GDP per capita of the country. The impact was calculated by summing up the annual GDP of each square where there is a flood risk.

According to the calculations, if global warming continues at its current pace, in 2030, the amount of GDP at risk from a once-in-a-decade flood event would be $17 trillion, accounting for 12% of the forecasted global GDP in that year.

China is exposed to the greatest risk, the data showed. The total GDP of the area at risk was $4.6 trillion, or 14% of the country's overall GDP. Four of the top five countries in terms of risk exposure are in Asia. The figure in terms of value for all of Asia was $8.5 trillion, around half of the total for the world. In the absense of effective flood prevention measures being taken, that is expected to reach $14 trillion in 2050 and $24 trillion in 2080. The numbers are based on a scenario whereby a flood would wipe out the GDP for the area in question for the entire year -- meaning that in reality the damage incurred would likely be less.

In Asia, increases in rainfall have raised the risk of flooding. According to the Japan Meteorological Agency, of the roughly 170 observation sites in Asia and Siberia for which data are available, 53 sites, or 31% of the total, had 50% or more rainfall than usual in July this year; this figure was the highest number for July for the past decade. The precipitation in Wuhan and Shanghai, China, was 2.3 times higher than usual; Osaka, Japan, recorded 2.6 times more rainfall than usual.

"Studies have shown that global warming is increasing water vapor in the atmosphere, which increases the precipitation in one place," said Masahide Kimoto, a professor at the University of Tokyo. "Prolonged rainfall, like that in Japan and China, may also be affected by that."

In addition to riverine flooding, the risk of coastal flooding due to rising sea levels is also increasing; using WRI's data to analyze the economic impact from once-in-a-decade coastal flooding in 2030, the global impact reached $850 billion, with Asia accounting for about 70% of the total. China was seen to be the most affected.

The actual number of natural disasters that cause economic damage is continuing to rise, according to data from reinsurer Munich Re in Germany, reaching 820 in 2019, a threefold increase from 1980. Among those disasters, flooding has increased more than six-fold over the same period.

Fragile infrastructure in emerging economies also exaggerates the situation.

For example, the rainy season in Mumbai, India, lasts for four months from June to September every year. During this period, sometimes hundreds of millimeters of rain fall in a day, resulting in knee- and waist-deep flooding in many parts of the city.

The streets, canals and underground storm water drainage system built during Britain's colonial rule of India in the 19th century are still largely in use. The renovation of the underground drainage system began in 2005, but there has been little improvement in the drainage capacity, due to the city's inefficient bureaucracy.

The problem is nationwide -- the number of deaths due to heavy rains and floods across India exceeded 1,400 for three consecutive years to 2020.

According to the WRI, the index showing what capacity infrastructure has to withstand floods is low in India and Bangladesh. On average, India's infrastructure can withstand a once-in-11-years flood, while that of Bangladesh can only withstand a once-in-three-years flood event. Chinese infrastructure can withstand a 35-year flood -- more fragile compared with that of Japan, which can bear a 91-year flood.

Although infrastructure investment entails a financial burden, the benefits outweigh the costs in the long run -- WRI data show that the cost over the next 30 years of building levees, dams and other infrastructure to withstand a 50-year river flood by 2050 is estimated to be $347 billion in China and $217 billion in India. But this figure is lower than the cost of negative impact of floods.

The WRI points out that "investing in protective measures like levees and dikes is not only important for safeguarding millions of people and their homes and businesses, but also to help grow economies," adding that "in the face of multiplying threats from climate change, infrastructure is a resilient, high-performing solution that also creates jobs."

Climate change demonstrates that it is necessary for countries around the world to continue investing to prevent natural disasters and to maintain sustainable growth.

Additional reporting by Shunsuke Tabeta in Beijing and Ken Koyanagi in Tokyo.

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