China's April - May power demand worse than expected

The unusually weak demand is giving China’s power producers cause for worry.

They fear that this may be a sign that China’s economic slump will continue to worsen, especially since the demand in May was steeper than in April.

According to the National Bureau of Statistics of China, April's growth in electricity demand in China was only 0.7% compared with 7.2% in March 2012 and 11.7% in April last year. The fall in China's official PMI Index in May to 50.4 from 53.3 in April, its lowest level in the year to date, further supports the generators' initial observations.

Fitch Ratings, which has been monitoring Chinese economy, says that lower electricity demand has clear links to slower economic growth, but they would not expect an overall fall in demand for an extended period in China, given expectations for GDP growth. Fitch forecasts Chinese GDP growth to remain at a comparatively strong 8% in 2012 and 2013, albeit lower than the 9.2% growth in 2011

Indeed, China’s recent announcement of an interest cut appears to be part of a government effort to mitigate the cooling down of an overheated economy.