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Electricity Use Seen Overstating China Economic Slowdown

Bloomberg - Aug 7, 2012

A stagnation in electricity output that fanned speculation China’s slowdown is intensifying may instead be evidence of an accelerated transition to a more services-based economy.

The government will release information on July electricity production tomorrow as part of its report on industrial output. Power generation in June was unchanged from a year earlier even as industrial production rose 9.5 percent. Heavy industries including metals and cement consume about 60 percent of electricity and account for 20 percent of gross domestic product, according to GK Dragonomics, a Beijing-based consultant.

The shifts signal that electricity’s relevance as an economic indicator is receding five years after Li Keqiang, now the vice premier, was quoted as saying he watched data on power, rail cargo and loans because GDP numbers were “man-made.” An evolution within manufacturing to more efficient production is also damping electricity use as China upgrades its factories.

“Steel plants, cement plants and refinery facilities -- these big electricity consumers -- have suffered a lot more than service-industry players in the first half,” said Dong Tao, Credit Suisse Group AG’s Hong Kong-based head of Asia economics excluding Japan. “So electricity consumption is not a benchmark but a reference.”

Read Full Article from Bloomberg

- Posted: 2012-08-07 17:39:54


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