April 24,2009

Falling Power Generation in April= China's Economy Still in the Woods

By CSC staff, Shanghai

Power generation and consumption is a leading economic indicator, a wind vane for future economic trends. A February bounce in power generation that continued in the first half of March was welcomed by economic policy makers, not least Premier Wen Jiabao, as a sign of recovery. It was, perhaps, a false hope as power generation again declined in late March. China Electricity Regulatory Commission officials predict a 4% decline in power generation in April.

Meanwhile, with yet more negative information released yesterday, the A-share market today decline steeply. The Shanghai Composite Index closed at 2461.35 points, down 2.94%, and the Shenzhen Component Index closed down 4.06%, at 9249.08 points,
Nationwide first quarter tax revenue totaled 1.302 trillion yuan, a fall of 10.3%, year on year. Consumption tax maintained rapid growth of 38.5%, year on year, in the first quarter, but other major taxes all declined. Domestic VAT, import linkage tax, corporate income tax, and personal income tax dropped by 2.4%, 15.8%, 16.7%, and 0.3%, respectively.
According to Vice-Minister Lou Qinjian of Industry and Information Technology, important industries such as cars and steel face serious production surpluses and 9 among the 12 key industries are seeing year-on-year profit decreases.
Rumor has it that the National Development and Reform Commission released an urgent notice on April 15, after an executive meeting of the State Council, requiring local governments to submit a third batch of qualified projects for central government investment as soon as possible. Projects funds are expected to be allocated in the first half of May at the earliest.
According to statistics from the State Grid, power generation dropped 0.7% year on year in March, after a rise of 5.9% in February and a fall of 12.3% in January. Experts believe the fallback indicates economic uncertainties. State Grid figures also show that power generation in the first quarter of this year dropped 2.25%, year on year.



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