China's just released more data that points to slowing economic growth

Wind turbines flank a coal-fired powerplant. Photo: Getty Images

China’s electricity consumption rose by about 3% in August compared to levels of a year earlier, according to state-run news agency Xinhua.

Citing data from the National Development and Reform Commission (NDRC), Xinhua state that the nation used over 460 billion kilowatt hours of electricity from August 1 to 28, an increase of 5% on July.

While seasonal factors could explain the acceleration in power consumption, the figure was far stronger than the 1.3% annual growth rate recorded in the first half of 2015, the lowest growth rate recorded in five years.

According to the report, the NDRC figures also revealed China’s rail freight for coal, steel, iron and petroleum remained stable in August, a slight expansion from July.

“Judging from the current situation, the power consumption for August is likely to keep the 3% growth year on year, and it will continue to climb in September. Based on these factors, the economic operation showed a positive sign,” said Li Yangzhe, a member of the NDRC.

While power consumption is accelerating compared to the report, the miniscule annual increase, along with flat growth in freight volumes, will yet again raise questions over the 7% annual GDP growth rate reported by the government in the June quarter.

As Chinese premier Li Keqiang noted when he was the party committee secretary of Liaoning province in 2007, the GDP figures reported were “man made”, and hence unreliable.

Instead of using the official GDP figure to determine the performance of the regional economy, he stated that he preferred to use three indicators – railway cargo volumes, electricity consumption and loan growth from banks – to evaluate the true state of the economy.

As a result of Li’s remarks, economists established the “Keqiang Index”, a separate gauge to measure Chinese economic growth.

The chart below, supplied by CBA, shows that using Li’s unofficial measure, current levels of growth are far below the 7% reported by the government.

Given the data presented by the NDRC overnight, along with subdued loan growth in July when excluding financing provided to financial firms to help engineer a rescue of China’s stock market, it suggests that China’s economy is growing far less than what official figure would suggest. At least, according to the premier’s own preferred growth measure.

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