China energy use has become recession pattern

China's gross domestic product in the second quarter was 7.6% on year, the first time below the 8% target after 1Q 2009. The year-on-year growth of the secondary sector of industry was also slowdown to 7.6%.

Growth rate of the secondary sector which is accounting for about half of China's GDP, is usually higher than GDP total rate.

But the growth rates of the manufacturing sector were lower than the total GDP growth between 3Q 2008 and 1Q 2009 when economic recessions hit China following the Lehman shock.

Although Chinese growth rates rebounded from the previous slump, recent figures are shrinking again. The secondary industry sector's growth rate is likely to be lower than total GDP growth again in the near term.

Lower activities in the manufacturing sector are shown in the energy consumption. Year-on-year changes in monthly crude oil processing and electricity output in China are seen in the below chart.

Growth of energy use had declined to the negative area after the Lehman shock, however, economic stimulus with 4 trillion RMB by the Chinese government led the country's energy demand to recover sharply.

Although growth of Chinese energy consumption were stable during 2010 and mid-2011, it has become weaker again over the past few months. China's crude oil throughputs were lower than a year ago in the past three consecutive months.
Growth of the nation's electricity generation was flat from a year earlier in June, while the largest power supply source, thermal power generation recorded year-on-year decrease during April and June.

Slowdown of growth in Chinese energy consumption is not so significant when only one of petroleum or electricity shows slump, but simultaneous decline of both of them represents the serious situation.

Recent growth pattern of Chinese energy consumption seems to be same as that in the recession period. It suggests activities in Chinese manufacturing sector are shrinking rapidly.

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