China's GDP growth may be optimistic
By Michael Lelyveld
China's energy sector has been showing signs of slower growth, sending mixed signals about the state of the economy. Most energy indicators for the first half of the year have been below the official economic growth rate of 7.6%, suggesting that real growth could be considerably lower than figures reported by the National Bureau of Statistics (NBS).
China's crude oil imports, for example, fell 1.3% from a year earlier in the first six months to 5.6 million barrels per day, according to the General Administration of Customs (GAC). The rate was down sharply from the 6.8-percent increase for all of last year.
The country's power consumption rose 5.1% in the first half to 2.5
trillion kilowatt hours, the National Energy Administration (NEA) reported. That pace was also slower than the 5.5% increase in electricity use for 2012.
Six-month coal consumption inched up 1.8% from a year earlier to 1.93 billion tons, Reuters reported, citing the China Coal Transport and Distribution Association (CCTD).
The growth dipped 1 percentage point from 2012 and 7.6 points from 2011, the industry group said.
Hard to read
But the energy data may only be adding to the guesswork about the economy in a year of transition.
"It's hard to read from the energy numbers what that means in terms of real economic growth," said Mikkal Herberg, research director for energy security at the Seattle-based National Bureau of Asian Research.
Conclusions about the true state of the economy have been clouded by uneven impacts of policy changes, overcapacity, price distortions, and half-implemented measures as China's new government tries to steer a more sustainable growth course.
Herberg said the weaker energy figures may reflect the disproportionate effects of smokestack industries on China's slowdown of gross domestic product (GDP), a key benchmark of economic expansion.
"It's perfectly sensible to me that you could have 7% or 7.5% overall GDP growth but still have a significant slowdown in energy demand growth because so much of it is hitting heavy industry," he said.
Energy-intensive and construction-related industries have been a prime target for reforms as the government has resisted calls for more stimulus and infrastructure spending to revive faster growth.
On July 25, the Ministry of Industry and Information Technology ordered over 1,400 companies in 19 industries to cut production capacity, state media reported. Outmoded plants are expected to be shut down in the biggest energy-consuming industries, including steel, cement, aluminum, and paper-making, the official English-language China Daily said.
Some industries have been overproducing despite low prices and losses. While coal use was up slightly in the first half, production was down 3.7%, CCTD said.
"Most of the state-owned coal mines ramped up output ... but many regional and private mines have either stopped production or trimmed output," Reuters quoted the group as saying.
During the period, 26 large coal companies reportedly suffered losses of 4.66 billion yuan (U.S. $759.5 million).
But crosscurrents in policy-making make conclusions difficult. In March, the new government tried to stop overbuilding and price growth in the speculative property sector by ordering a 20% profit tax on home sales. Most local governments ignored the order, which succeeded only in driving more buyers into market, hoping to beat the expected tax increase.
The effect appears to be reflected in a renewed surge in real estate prices and better-than-anticipated results in construction-related industries.
Cement production rose 9.7% in the first half, while production of flat glass jumped 10.8%, the official Xinhua news agency reported, citing the National Development and Reform Commission (NDRC). Combined profits in the building materials industry climbed 19.9% in the first five months of the year, Xinhua said.
In June, housing prices rose in 63 of the 70 cities monitored by the NBS, suggesting little effect from the government's new policies.
Similar conflicts have emerged in the natural gas sector, after the NDRC announced a 15% rise in wholesale prices for non-residential use on June 28. On July 24, Xinhua reported that gas-fueled buses and taxis ground to a halt in the northern city of Harbin after local officials refused to approve corresponding retail price hikes, forcing filling stations to close.
"This is a wildly uncoordinated process," said Herberg. "They still do not have bureaucratic instruments to coordinate these things. That's been a huge and consistent problem."
Analysts have had trouble making sense of sudden surges in energy demand at a time when China's economic growth is believed to be lagging.
Recently, Platts energy news service estimated that apparent oil demand jumped 11.7% in June to nearly 10 million barrels per day, far above the 3.9% growth rate for the first half of the year.
"The oil data in June was surprisingly robust and was quite a contrast to the seemingly bearish macroeconomic data, such as its sluggish second quarter GDP growth and weakened industrial production," said Platts senior writer Song Yen Ling in a statement.
GDP rose 7.5% in the second quarter, while industrial output gained 9.3% in the first half, the NBS reported. China's crude oil imports increased 2% in June from a year earlier to 5.4 million barrels per day, according to the GAC.