Power Generation Declines: China's Recovery Is Lagging

By CSC staff, Shanghai, Published: May 06,2009 Falling Power Generation in April= China’s Economy Still in the Woods Power generation in China dropped again in April, indicating that the macroeconomic rebound the market has expected is yet to appear. According to the State Grid’s latest statistics, April’s national power generation totaled 274.763 billion kwh, a fall of 3.55%, year on year, and a decline of over 3% from the previous month. The Ministry of Industry and Information Technology says that in the first three months of this year, China’s power consumption totaled 780.990 kwh, down 4.02%, year on year, and power consumption in March alone totaled 283.389 kwh, down 2.01%. Also according to the State Grid, in April, power consumption growth in Shanghai, Jiangsu, Zhejiang, Anhui, Fujian, Henan, Jiangxi, Sichuan, Chongqing, Heilongjiang, Shaanxi, Xinjiang, and Tibet was higher than the national average. In Jiangxi, Sichuan, Shaanxi, Anhui, Xinjiang, and Tibet, the growth has continued positive. The situation in the last third of April was apparently better than in the second ten days of the month. Power generation dropped 3.90%, year on year, in the second ten days, after dropping 3.05% in the first ten days. Most power plants decide their power generation volume according to consumption, so decline in power generation means power consumption in the area is also declining. China’s grid system is comprised of the State Gird and the China Southern Power Grid (CSPG). Figures from CSPG also indicate a decline. In the second ten days of April, power generation in Guangxi dropped 25.3%, year on year, the largest decline among all areas in this period. The power generation decline in Guangdong reached 18.5%, although that was lower than the decline in the first ten days. However, power generation in Guizhou, another province under the CSPG, rose by 40%, year on year. Earlier, some provinces, mainly in the middle and west of China, including Inner Mongolia, Qinghai, Ningxia, Yunnan, Sichuan, Guizhou, Shaanxi, and Gansu, released favorable power price policies for enterprises with high power consumption. In Zhejiang, covered by the State Grid, power generation rose 0.7% in the second ten days of April. At the end of March, with private firms and exports as its pillar, Zhejiang was seeing a rebound. In March, Zhejiang’s exports to Latin America totaled $2.46 billion, up 11% year on year. Power generation in Shanghai and Jiangsu also rebounded a bit, in the last ten days of April. In the second ten days of April, power generation in Jiangsu slumped 10.20%, year on year, and Shanghai also saw a two-digit decline, but power generation picked up before the end of the month. Since the beginning of this year, Xinjiang, Yunnan, Sichuan, Anhui, and Shaanxi have maintained high growth, meaning that mining and other industries may be supporting high power demand. Zhu Baoliang, an expert at the State Information Center, says the main reason for South China’s power generation decline is the recessionary fall in agriculture and light industry exports. “External demand may not recover until the end of the second quarter.” Or not even then. Judging from current statistics, financial turmoil is spreading from coastal areas to inland China. “Although the mining and equipment-manufacturing industries can better resist risks, they are also currently in an adjustment period. Steep power generation decline in April is not surprising at all,” said Zhu Baoliang. The China Electricity Council had estimated China’s power consumption in April would continue to fall, and would drop below that in March. Although the decline in March slowed, expectations for power consumption in April were not optimistic. Experts predict power consumption growth will be low in the first half of the year and rise in the second half. In the short term, there’s still heavy pressure for economic slowing. Although PMI is continuing to rebound, some sub-indicators such as materials and finished product inventories are falling back again, indicating no increase in terminal demand. Wang Yonggan, secretary general of the China Electricity Council, thinks the first two quarters of this year may be the hardest time and may continue to see negative growth. Power demand in the whole nation, especially in coastal areas, may see positive growth in the third quarter, which, it is hoped, will promote power consumption growth in the middle and west of China in the fourth quarter.