A severe drop in the usage of electricity has been used to point at a drop in economic growth. But business analyst Shaun Rein, and author of “The End of Cheap China” explains to the BBC why electricity is no longer a good measurement, and China’s growth is still well at track.
The power generation figure is somewhat misleading since it disproportionately reflects the heavy manufacturing sector.Electricity use will become less popular as an indicator as China’s economy changes
Energy-intensive, high-polluting industries like steel construction have been hit hard by collapsing demand from Europe, creating a significant impact on power consumption. Manufacturing hubs like Guangdong have suffered, but other provinces that are less reliant on manufacturing are continuing to see strong growth.
Not only that, the government is continuing to limit power-intensive industries to encourage growth in more energy-efficient areas, such as higher-end manufacturing.
There will naturally be some friction in the economy during a shift and that is to be expected, not feared.
To be sure, a slowdown is taking place.
However, the economy will grow faster starting at the end of the third quarter as increased liquidity makes its way into through the financial system.