Some have been suspicious about the reliability of China's economic data.  The reason was China's GDP has increased but electricity consumption has decreased for the first two quarters.  The latest release on the electricity consumption can shed some light on the issue.

According to data released by China's Energy Administration on August 14, China's total electricity consumption in the first 7 months was still down 0.89% compared with previous year.  But the secondary industry is the only component that consumed less year on year (4.26% down), all the other sectors, primary industry, tertiary industry, and residential, were up from last year (5.05%, 10.37%, and 10.99% respectively).  The sector level consumption data is the first time being released.

As can be seen from the chart below, electricity consumption by the secondary industry accounted for 74% of the total.  Its contribution to GDP in the first two quarters, however, was only 50%, according to the National Statistical Bureau.  In terms of GDP growth, the contribution was 3.8%, 6.6%, and 8.3% from the primary, secondary, and tertiary sectors respectively.

Given the secondary industry accounted for 70% of the electricity consumption and 50% of the GDP, it is easy to see that GDP growth can diverge from electricity consumption growth, because the growth from the first and tertiary industries did not require that much electricity growth.  On the other hand, why did the secondary industry contributed to positive GDP growth but still consumed less electricity itself?  This is due to the improvement of energy efficiency.

According to a release by China's National Development and Reform Commission, energy consumption per unit of value added dropped 3.83% in the first 6 months by the coking industry, 8.43% by the iron and steel industry, 19.59% by the non-ferrous metal industry, 9.03% by construction materials industry, 8.21% by petrochemical industry, 15.16% by chemical industry, 11.45% by textile industry, and 9.5% by power industry. 

In addition, the government has taken mandatory actions to shut down small inefficient facilities.  Small coal-fired power plants with total capacity of 19.89 million KW had been closed in the first half year.  The plan for this year is to close out-dated facilities of 10 million tons for iron making, 6 million tons for steel making, and 5 million tons for cement making.