Signs of revival in power surge
Mainland power output surged last month, a sign of economic expansion many observers say is a more reliable indicator of revival than the big increase reported yesterday in gross domestic product.
The 25.9 per cent year-on-year jump in electricity generation - the strongest growth in a non-holiday month in 12 years - indicates Beijing's 4 trillion yuan (HK$4.54 trillion) stimulus programme has lifted the mainland from the trough of the global downturn.
More than 70 per cent of the electricity the mainland generates is used by industry, primarily in the steel, cement, aluminium and other heavy industrial sectors.
The National Bureau of Statistics unveiled fourth-quarter GDP growth of 10.7 per cent and December consumer price inflation of 1.9 per cent - both slightly higher than expected.
The figures, coupled with sharp gains in housing prices last year and runaway bank lending this month, stoked fears that the economy may be overheating. Many economists predict interest rates will be increased earlier than expected to pre-empt a full-blown asset bubble.
With gross domestic output of 33.5 trillion yuan last year, China will surpass Japan as the world's second-largest economy this year, analysts believe. Nevertheless, it still lags far behind Japan in total consumption and economic output per capita.
The growth in power output is partly explained by a cold snap which began in December and extended into mid-January.
Analysts expect mainland power output will continue to grow strongly year on year in the first half of 2010 because of the low base for comparison during the depths of the global financial crisis.
'The low-base effect means we could see a 25 per cent to 30 per cent rise in electricity generation for January and 15 per cent for the first half of this year,' Citigroup Asia Pacific utilities analyst Pierre Lau wrote in a research note. For the whole year, he expects power generation growth to be 12 per cent, the high end of the 6 per cent to 12 per cent range forecast by nine brokerage analysts polled.
The China Electricity Council, which represents generators, tipped a relatively conservative 7 per cent.
Stronger power demand, the aggressive closing of older, polluting plants and a slowdown in new plant construction is expected to absorb excess generation capacity for the first time in four years.
Analysts expect power plant utilisation hours to grow between 2 per cent and 5 per cent this year, against declines of 6 per cent last year. This is positive for the industry, which has been suffering falling profits since September's 40 per cent increase in spot-market coal prices.