China Economic Data Questioned

China's power plans draw scrutiny amid doubts about data.
By Michael Lelyveld
2009-06-15
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BOSTON--China is planning to add new power plants at a double-digit pace this year despite declines in electricity use for eight months in a row, industry reports say.

Although electricity demand has been falling from year-earlier rates since last October, China is expected to raise its generating capacity this year by 80 gigawatts, or over 10 percent, the Reuters news agency and the official China Daily reported, citing the China Electricity Council (CEC).

Power plant construction in China accounts for about a third of all the new generating capacity in the world, the Paris-based International Energy Agency (IEA) has estimated in its annual world energy report.

But the global economic slowdown has had no effect on China's building program, although the country's power consumption fell 4 percent in the first quarter of the year, according to the CEC.

In fact, China's leaders want to speed up new power projects and raise construction targets through 2020, China Daily reported on June 2.

The English-language paper said that "China's highest leadership has called for a revision in the national energy program in order to help the economy buffeted by the financial crisis."

Questions raised

The disparity between falling consumption and faster construction has raised several questions about the plan, experts told Radio Free Asia.

"It really doesn't add up," said Robert Ebel, senior adviser to the energy security program at the Center for Strategic and International Studies in Washington.

First, there are doubts about whether a speedup is the right response when consumption has been slowing down. Last November, China Daily reported that many power companies had cut output by 50 percent or had shut down generators entirely.

Although rates of decline have eased since November, power use in May lagged 3.5 percent behind year-earlier rates, the same as in April, Xinhua reported. The results defied expectations of a quick recovery, the official news agency said.

The push for new power plants also seems to run against the government's campaign to improve efficiency by getting the country to use less energy to create economic growth. According to the National Development and Reform Commission (NDRC), China reduced its energy consumption per unit of GDP by 4.5 percent last year.

The efficiency program is at the heart of China's case that it is helping to fight global warming as it argues that developed nations should do their share by making major cuts in emissions.

But China has reacted angrily to suggestions that its figures do not add up.

Contradictory figures

In May, the IEA questioned the official data in the monthly issue of its oil market report with a commentary under the heading, "Another Chinese Riddle: How Reliable Are GDP Figures?"

The agency said that China's claim of 6.1-percent GDP growth in the first quarter "does not tally" with falling power consumption and estimates that oil demand fell 3.5 percent during the period. "Another possibility is simply that real GDP data are not accurate, and therefore should not be taken at face value," the IEA said.

"The viewpoint is groundless," the National Bureau of Statistics (NBS) fired back on its website. "It made a mistake to oversimplify the correlation between economic growth and energy use." The NBS argued that China was not getting enough credit for efficiency improvements and cuts by energy-intensive industries.

But in its report on the NBS response, China Daily also cited unnamed economists who "believe the figures are contradictory."

"I'd have to agree with the IEA on this one," said Ebel. "It doesn't seem right that electric power consumption would be declining."

While efficiency may account for some power savings, the differences in the latest data are large. In May, industrial output rose 8.9 percent but power generation fell 2.7 percent, the NBS reported last week.

High GDP estimates would exaggerate both China's recovery and its efficiency, since energy use is down. Inflated figures could boost Beijing's argument in climate talks with the United States and other developed nations by making it appear that China has made bigger efficiency gains.

'Serious fabrication'?

Despite the NBS assurance, the head of the bureau, Ma Jiantang, cited the need to "continuously improve the quality and credibility of China's official data" on April 17 following a critical commentary on the Wall Street Journal website, Xinhua reported. The National People's Congress has found "serious fabrication" in official statistics, the report said.

Philip Andrews-Speed, a China energy expert at the University of Dundee in Edinburgh, Scotland, said it is hard to put stock in official estimates for the first quarter that were released on April 16. Preliminary figures are often subject to major revisions later on.

"I never pay too much attention to Chinese statistics that are produced so quickly," Andrews-Speed said in an interview. "My view is that one just has to relax and accept that one just doesn't know what's going on, and maybe even the Chinese government doesn't know what's going on."

That still leaves the question of whether China is following a sound policy by accelerating power plant construction when demand has been on the decline.

Andrews-Speed said there is a case for the policy because of China's experience of an economic slump in 1988-89, when demand lagged and the government ordered a halt to plant construction. The result was a power shortage when the economy recovered.

"That is clearly a bad idea because it takes two to three years to build a power plant," he said. "When the economy picks up again, ... then you want the power plants to be ready."

But the potential for mixed motives in China's data is also hard to ignore, Andrews-Speed said.

"Whenever you look at Chinese statistics, you say is it incompetence, is it confusion, is it conspiracy? And here, it may be a mixture of all three," he said.

Another troubling implication of the plan to boost targets for generating capacity through 2020 is that China's leaders may have no confidence that efficiency improvements will be sustainable, Andrews-Speed said.

In that case, China may use even more coal than projected with even more serious effects on the environment, he said.

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