China’s Declining Electricity Consumption Conflicts With Party Line Growth Story

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As we have said, electricity use is a very reliable contemporaneous economic indicator. China’s power output and consumption figures say the economy is contracting. From China Stakes (hat tip reader Michael):

China’s power consumption in May continued to decline. Although the National Bureau of Statistics denied the conflict between economic growth and power consumption decline since the beginning of the year, Zhao Bingren, ex-chairman of China Electricity Regulatory Commission, expressed his doubt on economic statistics reported by some areas.

According to the figures from the State Grid, power generation in the last 11 days of May dropped 5.7% year on year, higher than the decline in the second 10 days of May, mainly because working days in the last 11 days of May this year are lower than that in the previous year, as the Dragon Boat Festival occurred at the end of May.

The power generation situation in Yunnan and the south of Hebei is apparently better than that in the rest of China… However, power generation is still hovering at low levels in most areas with intensive high energy-consuming industries. In May, decrease in power consumption in Shanxi and Inner Mogolia stood at 5% to 6%, higher than the average level of the country.

Power consumption decrease in Guangdong, Shanghai, and Zhejiang reached about 10%, 13.6%, and 6.1%, all higher than the country’s average.

“During January and May, electricity demand dropped about 4% year on year,” revealed Zhao Guobao, vice director of the National Development and Reform Commission and director of the National Energy Administration…change in product structure and decrease in inventory of high energy-consuming products is an important reason for the conflict among energy consumption, electricity consumption, and GDP growth.

Zhao Bingren said statistics reported by some local governments representing drastic economic growth might not be true. “I visited two provinces, and think their statistics are not true. They can never make up two important figures: power consumption and transportation. ”

Power consumption in Sichuan dropped 9.9% in the first quarter, but its economic growth in the same period reached 10.8%. The local government explained the economic growth is mainly led by the post-disaster reconstruction. “I don’t know how the economy grows in this area,” said Zhao Bingren.

Shao Bingren is now vice director of the Committee of Population, Resources and Environment of the NPC. He thinks the economic situation in China is not so optimistic. The government’s investment has mainly flowed to state-owned enterprises and infrastructure construction, instead of the whole society. In the first quarter investment in non state-owned sectors dropped by 3.3%, and the investment decline in foreign-invested and private enterprises is even bigger.

The export situation has not been improved, and internal demand has not been well stimulated. Financing difficulties of many small and medium enterprises have not been solved. The employment situation is still severe.

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  1. wawawa

    You can not trust reports of a totalitarian gov.

    Unfortunatly, US gov.'S reports are becoming non-trustworthy as well.

    Hmmm !

  2. Thomas

    I think Zhao's speculation makes sense: While the more developed Eastern provinces probably have reasonably decent data quality, the data coming from the more backward provinces should be taken with many grains of salt. The Sichuan example is particularly dramatic: I accept that GDP can grow significantly faster than electricity use. But how can there be a disconnect of 20 percentage points between the two indicators? Especially if the growth is supposed to be due to investment-intensive reconstrution efforts, not to more haircuts and restaurant meals…

  3. Thomas


    data from Statistics China says that energy-intensive heavy industry grew less than overall GDP, but it still grew year-on-year. Somewhere on their website, they provide a list of the most energy-intensive industries, and all of them allegedly grew a bit.

    Aluminum wasn't on the list, as far as I recall, but I doubt that aluminum production alone can explain the discrepancy. What is the % of China's electricity being used by aluminum producers? I don't know, but it can't be more than a few percent, so the drop in production is unlikely to affect ovnerall electricity output by more than 1-2 %, I'd say.

    Personally, I think it's likely that GDP growth is overreported right now. I don't think the extent is so dramatic that the overall economy is in year-on-year decline. But I'm guessing it's probably growing "only" in the 3-5 % range, as opposed to the officially announced 6.1 % (Q1 year-on-year).

  4. Thomas

    One interesting indicator on the Statistics China webpage is the volume of goods transported in Q1. Total volume is up significantly year-on-year, even though distance-weighted volume is down.

    That squares with the observation that exports are down, while also confirming that the domestic economy is growing (as goods to be exported presumably get transported over longer distances).

  5. Carrick

    Considering their volatile and difficult history, the Chinese frugality and consciousness of utility usage (and conscious of how dire economic conditions can become), might be playing a bigger role than we'd expect. I lived w/ a Beijing family in soviet style housing, and was amazed how little water and electricity was used & recycled. Industry aside, some of the usage drop might be attributed in part to home usage reduction.

    A year or more ago, lower middle income people in these hotter southern cities were buying and using their first cheap Chinese-made home air conditioners. This year, especially during the bearable weeks of early summer, people may have unplugged the units.

    It sounds small, but an AC unit is a huge energy draw in a house that feed maybe four electrical devices in total (TV, AC, small 10-20 gallon water heating tank, maybe a fridge, and a small radio.)

    If a huge swath of the cost conscious lower middle income population is unplugging/not using their TVs, not heating their shower water, and not using their AC units… that would drop their electricity bill by at least 50%, and with minimal discomfort (it being spring/early summer.) Although the CCP would love to advertise household usage figures like this in climate talks (keep an eye on Cologne/Bohn this week, they might do it to back up their claims of 'developing nation' status and to spank the West for being less successful in altering listyle & household usage), they wont do it domestically b/c it would carry as "common people suffering, making dramatic cuts, where is the govt relief?"

    What might electricity usage look like if the majority of NYC households suddenly dropped their usage at the very least by 50%, by only unplugging 2-3 devices? And if this could be done by rolling back material lifestyle advancement by only a few years — this would be like Americans returning to large screen TVs and desktop PCs, instead of using their monstrous flat screen plasma TVs and laptops.. not that foreign, not that big of a deal.

    Keep in mind that these homes are maintained by mothers and grandmothers who usually (and especially now) don't 'work'. Meaning, they're buying meal ingredients at the market daily, rather than refrigerating them, cooking w/ gas (instead of electricity like in the US), and probably returning to the cost & energy saving practice of communal cooking. Plenty of afternoons I would leave the building for work, and see the grandmas shelling peas and other stuff for dinner. It was only 30-40 yrs ago, when these meal makers were starting their families, that communal cooking was the party-promoted norm.

    I wouldn't look solely to industry to explain the electricity drop. A fair chunk of it may be explained by household use, and that altered behavior might reflect the bearishness/wariness of a conservative culture, more than economic conditions choking back industry or deep anxiety in the population. Combined with real reduced industry usage, evolving soundness of data collection, and party number fudging… who knows.

  6. Thomas


    I believe I saw a breakdown of Q1 electricity use in "private households" and "industrial use".

    Not sure how they calculate this and if it is accurate (and don't remember where I read it either), but I do remember that private household use was said to be up year-on-year, whereas industrial use was down a lot more than the overall average.

  7. Thomas

    Btw, the figures we are discussing are power use in Jan-May. China's "aircon season" only starts in June (though it's true that some southern Chinese households use aircon for heating purposes in winter).

  8. Thomas


    Why does a commercial real estate glut imply that official statistics are lying?

    Btw, I think that the 500 m square feet figure given in the article is wrong:

    Beijing has a population of roughly 10 million, of which 5 million are working age, and less than 2 million work in an office. It makes no sense to assume that 250 square feet were built (on top of existing office space) for every office worker in just 2 years.

    Having said that, there certainly is a huge oversupply of commercial real estate in Beijing, Shanghai, and many second-tier cities as well.

  9. mxq

    re: Thomas and china re glut

    FT ran this a few weeks ago — China property prices ‘likely to halve’:

    "The volume of empty apartments across the country hit 91m sq metres at the end of last year, up 32.3 per cent from a year earlier, according to official figures…Those numbers included neither the huge volumes of completed real estate projects whose owners are waiting for market conditions to improve before they put them on the market, nor the estimated 587m sq m or apartments sold in the past five years but left empty by their owners."

    What i thought was even more staggering was the fact that:

    "At a national level, average housing prices tripled between 2003 and the peak in mid-2008 and are now 10 to 12 times average income, which means 60 per cent of homebuyers’ monthly income must go to mortgage repayments"

    To put that into perspective, in the US, the "Housing Opportunity Index" hit an all time affordability low, during 3Q06, where 60.6% of the median person's income was required to pay for a house…we all know what happened after that…

  10. Thomas


    Yes, I agree that China's real estate market is in trouble. Too many expensive apartments, and not enough rich people to buy them.

  11. Thomas

    Regarding "the estimated 587m sq m or apartments sold in the past five years but left empty by their owners":

    This has long been widespread behavior among Chinese investors:

    Buy an apartment hoping for price appreciation. But don't rent it out, because tenants might create trouble or wear it down.

    They do it on purpose, not because they can't find tenants (well, I suppose sometimes it's also because they can't find tenants).

    Strange way to manage your investment, if you ask me, but that's what many Chinese people do.

  12. Glen

    The constant cheering of China's 'resurgence' by the Australian MSM is just sickening. I'm yet to read any significant piece that analyses, with any degree of investigative journalism, the glaring anomalies that are emerging from China. Fat, dumb and happy is the order of the day.

  13. eTrader

    If you have an account in Chinese bank, you have a good opportunity of non-risk investment.

    You can borrow money from that bank with lower interest than your saving account! All you have to do is throw that money into your saving account, then ask the bank to lend more money!

    That's basically what is going on in Chinese economy. I'm not sure how this will end.

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