Warning to energy producers

By Fu Jing (China Daily)
Updated: 2008-01-16 09:11


An energy watchdog yesterday warned power producers that China's possible economic slowdown due to a downturn in the US economy and the nation's industrial restructuring may decrease energy demand.

The official from the National Energy Leading Group forecast that China's economic growth would hit "the highest point" of the cycle in the second quarter of this year and slow down thereafter.

"Chinese energy companies should keep a close watch on the economic cycle and market demand to maintain stable supply," Zhou Xi'an, from the National Energy Leading Group, told China Daily yesterday. But he assured the companies that there was still a "steady demand" for energy as the economy may grow at over 9 percent this year.

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"Our understanding is that the US authorities have concluded that the country has already slid into recession because of the subprime crisis," said Zhou.

Studies have found that China usually follows the US growth trend with a six-month time lag, Zhou said. "We should be well prepared for the impact of a US recession."

Zhou's office has long been involved in a study on the relationship between economic cycle and energy demand.

"The second quarter of this year should be a turning point. We have taken the period between 2002 and that quarter as one of an upward trend. From then on, growth will be downward or stable."

Zhou said China's economic slowdown during 1996-2001 brought down energy demand. "In some years during that phase, the energy demand decreased and even the pace of energy supply growth dropped below zero. These are the lessons energy companies should keep in mind."

Generally, China's energy consumption growth is slower than its economic growth, said Zhou. Last year, the country's coal output was estimated at 2.52 billion tons, up 5 percent from the previous year. But the economy is forecast to have grown at about 11 percent.

An official report forecast China's oil demand will grow at an average pace of 4.5 percent in 2006-15, much lower than the planned average growth of around 8 percent.

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