May 26,2009

Electricity Consumption Recovering? Made in China Rebounding?

By CSC staff, Shanghai

Electrical power consumption in Guangdong and Zhejiang, China's two major exporting provinces, has shown a bit of an increase in May after steadily falling for months, and while, nationwide, power consumption as whole is still dropping, the decrease is slowing. Is "Made in China" starting to show signs of life?

The latest State Grid figures show the nation's power generation in the second ten days of May dropped 0.57% year on year, a definite slowing of decline.

 
"Slower power generation decline in the second ten days of May means some of China's industrial growth was accelerating. It was also related to the government's adjustment to industrial structure. Energy and non-ferrous metal prices are rising and relevant enterprises are showing signs of rebound," said Zhu Baoliang, chief economist of the prediction department of the State Information Center.

Power generation in the second ten days of May in the east and middle of China showed positive growth, rising in the east by 1.9% and in central China by 2.3%. This was due mainly to resource enterprises in Jiangxi and Henan benefiting from the industrial structure adjustment and recovering production.
 
Also in the second ten days of May, average daily power consumption in Zhejiang and Guangdong grew by 2.7% and 5.8% respectively, showing that processing trade firms are partly rebounding.

In that same period, average daily power consumption in Sichuan grew by 30.4%, the most rapid growth among all provinces. Average daily power consumption in Tibet, Hainan, Xinjiang, and Jiangxi also grew rapidly, reaching 18.4%, 18.4%, 15.8%, and 10.1%, respectively.

Among high power consumption areas, average daily power consumption in Guizhou, Shanxi, and Ningxia declined most, falling 20.4%, 17.8%, and 14.9%, respectively.

In the second ten days of May, growth of average daily power generation of the State Grid dropped by only 1.2%, 3.4% better than the growth in the first ten days of May. Growth of China's Southern Power Grid in the same period reached 0.4%, much higher than the ?.4% growth in the first ten days of May.
 
Total power generation in China reached 90.97 billion kwh, down 3.9% year on year, while in the second ten days of April, it stood at 91.38 billion kwh, off 3.94% year on year.

Meanwhile, the International Energy Agency (IEA) is questioning some National Bureau of Statistics (NBS) figures, a position NBS rejects. IEA says the claimed 6.1% first quarter GDP growth is not consistent with the 3.5% petroleum demand decline in the same period, and the very weak power demand.

IEA believes that without large changes in income elasticity, China's oil demand should have been higher, and thinks this contradiction may be due to the vagaries of China’s GDP statistics. IEA also quoted the analysis of Lombard Street Research, an economic consulting institute, in support. The NBS gives two reasons for the inconsistency. First, the industrial structure changed quite a lot in the first quarter, and the service industry, with less power consumption, is growing rapidly. Second, power consumption growth in industries with high power consumption was slowing, and that in high-tech industries was growing rapidly.

It is not uncommon for overseas institutes to doubt China's economic statistics, nor even for domestic analysts. Compared with statistics collection systems in western countries, which have been developing for over a century, China’s statistics retrieval system is shaky and often politically skewed, and still in need of great improvement.

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