Manufacturing News

China's softening growth slows power use

China's power consumption slowed in the first two months of 2014 in a further sign of dampening in the world's second-largest economy, official data showed on Thursday.

Electricity consumption, an indicator of economic activity, rose 4.5 percent year on year in the first two months, according to data released by the National Energy Administration (NEA).

The growth was down one percentage point from the rate seen in the same period last year, said the administration.

The slowdown was mainly attributed to sluggish industrial power use, which accounted for around 70 percent of the country's total consumption, especially high energy-consuming industries like iron and steel, cement and petrochemicals.

The shrinking need for power could be seen in manufacturing and metallurgical sectors, which struggled in the first two months amid an overall industrial slump and seasonal downturn, said Dai Bing, analyst from online e-commerce platform

In January and February, electricity use by primary industry totaled 11.3 billion kWh, down 7.8 percent year on year. Power consumption by secondary industry reached 582 billion kWh, up 4.3 percent, while that by tertiary industry gained 5 percent to reach 109.4 billion kWh.

According to statistics authorities data, an array of economic indicators for the Jan-Feb period showed a feeble increase in their respective sectors, including industrial added value and fixed asset investment.

"The weak readings resulted from the government's top-down actions of eliminating outdated industrial capacity since the last quarter of 2013, partly prompted by concerns over worsening smog," said Wang Jun, researcher at the China Center for International Economic Exchanges.

Analysts expect the strict control over sectors with high energy use and overcapacity to continue, slashing electricity consumption in those fields.

In the short term, Dai predicted power use growth would recover this month because of stabilizing coal production.

China Electricity Council estimated national power consumption to grow steadily this year at 7 percent, in line with the country's economic growth.

China's economy grew 7.7 percent last year, well above the government goal, but a set of data that pointed to softening manufacturing activity in recent months has renewed concerns on the growth outlook.

Earlier data showed the purchasing managers' index for the manufacturing sector retreated to an eight-month low in February and slowed for the third month running.

In view of the weak strength, several institutions have lowered their forecasts for China's economic growth in the first quarter.

The Bank of America Merrill Lynch has cut the GDP growth forecast in the first quarter to 7.3 percent from its previous estimate of 8 percent, while the Center for China in the World Economy under Tsinghua University tuned down its forecast to 7.4 percent from its January estimate of 7.5 percent.

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