MNI: China Electricity Demand Growth To Fall From Q1 High

China’s electricity consumption growth rate will slow from a Q1 high of 9.8% y/y due to base effects, following 2023’s total 6.7% y/y increase, but will remain above GDP gains for the foreseeable future as the country's industrial-sector activity strengthens, local analysts and economists have told MNI.

Electricity demand grew 3.6% in Q1 2023, a stark contrast to 2024's result, as the country emerged from Covid-zero, said David Fishman, senior energy analyst at economic consultancy Lantau Group, noting malls and tourist spots resumed power consumption this year.

“But although we anticipate a cool down as these year-over-year effects diminish, we still project a 6-7% year-on-year increase in 2024 as industrial activity, which consumes the most power, remains robust,” he added.

According to official data, Q1 secondary sector electricity consumption grew 8.0% y/y, accounting for 53.8% of total growth, while tertiary and household sector demand increased 14.3% and 12.0% y/y, contributing 25.5% and 19.5% to growth respectively.

GDP OUTPACED

Chinese electricity demand now outpaces GDP growth, which the government expects at about 5.0% this year, a trend more apparent since 2020, Fisherman continued, noting electricity expansion grew at 4.5% in 2019 as the economy increased 6.0%.

The recent resumption of retail and tourism activity consumed power but did not add proportionally to GDP growth, Fisherman explained, noting growth in energy-intensive activities with lower added value, such as cement and petrochemicals also contributed to the divergence.

China’s strong output from ferrous and non-ferrous industries, such as copper smelting, consumed significant electricity relative to its GDP output, while electrification of industrial and agricultural processes and an uptick in AC installation also supported the trend, said Qi Qin, an energy analyst at the Centre for Research on Energy and Clean Air.

The nation produced 13 million tonnes of refined copper in 2023, up 13.5% y/y, while China’s industrial value-added rose 6.3% y/y from January to April this year. (See MNI: Copper Prices To Fall, Chinese Demand To Remain Flat)

Dan Wang, chief economist at Heng Seng bank based in Shanghai, said since 2022 the transition towards energy intensive high-tech manufacturing, as services sector stagnated, drove the rapid electricity growth. The metric's use as a GDP indicator had also improved as authorities increased supply-side support and prioritised the economy towards production over consumption, Wang continued.

Electricity demand holds a track record as a GDP indicator in China, being part of the Li Keqiang index, along with corporate bank loans and freight volumes.