14 Jul 2009 13:16

Power output to rebound in H2, Chinese economic recovery still uncertain - analysts

By Terry Wang

Shanghai. July 14. INTERFAX-CHINA - China experienced its first year-on-year increase in power output in June since last October, and although industry experts believe that power output will continue to grow in the second half of the year, some remain skeptical it will herald an economic recovery.

China's power output last month grew by 3.59 percent year-on-year to 309.33 million megawatt hours (MWh), according to the latest statistics from the National Electric Power Dispatching and Communication Center (NEPDCC).

The increase in power output was due in part to a rebound in secondary industry product output, especially that of steel products, that started in May, Yu Hai, a power industry analyst with Shenyin & Wanguo Securities, said in a research note on July 6.

In addition, fixed-asset investment growth during the first half should lead to an increase in demand for industrial products and in turn push up power consumption in the second half, according to a research note published on July 3 by Chen Junhua, an analyst with China International Capital Corp. Ltd. (CICC). The year-on-year growth rate of the country's fixed-asset investment climbed every month from January to May, reaching 33 percent in May, Chen said.

As such, Chen estimated that aggregate power consumption in 2009 will grow by more than 4 percent on an annual basis.

While some experts are confident that rising power consumption signals that China's economy will recover in the second half, others are cautious as regional and seasonal factors have had a significant impact on the increase in power output in June.

"The large increase in June's power output in China's central and eastern regions are most likely attributed to the [hotter] weather," Wang Shuang, a power industry analyst with United Securities, said in a research note on July 8.

Wang believes that only the increased power output in the southern regions points to a regional economic recovery as the weather has less of an impact on the rate of power consumption.

The year-on-year increase in power output in June can also be explained in part by seasonal factors. For example, last year's Dragon Boat Festival holiday took place between June 7 and June 9, whereas the holiday ran from May 28 to May 30 this year. The loss of the holiday in June resulted in about an 0.5 percent increase in power output in June over the same period of the previous year, Xue Jing, director of the statistics department of the China Electricity Council (CEC), said at an industry forum on July 8.

In addition, power output in the coastal regions of Shanghai, Jiangsu, Zhejiang and Guangdong in June 2008 began to shrink well ahead of the rest of the country, which contributed to seemingly high year-on-year growth in power output in June 2009, Xue said.

Nonetheless, she predicted that power output will continue to grow in the second half of the year. Since the beginning of the year, the CEC has revised its projection for domestic power output growth for the year from 5 percent to between 2.5 percent and 3.5 percent, Xue said. China's power output would have to grow by 9 percent year-on-year in the second half to meet that projection, which Xue believes will not be difficult considering how much output declined in the second half of 2008.

The table below specifies China's power output in the first half of the year.

China's power output, January to June 2009

Month MWh (mln) Y-o-y change (%)
Jan - Feb 488.3 -3.7
Mar 286.73 -0.71
Apr 274.76 -3.55
May 289.72 -3.54
Jun 309.33 3.59

Source: NEPDCC