Electricity Demand Defies China Slowdown Fears

Despite the U.S.-China trade war affecting GDP growth forecasts, China’s electricity consumption remains strong, even though official power generation figures may not accurately represent the total output as they do not include distributed generation. Industrial output exceeded expectations with a 6.1% increase in April, but analysts caution that the worst economic impacts of the trade tensions are yet to come.

China’s economic growth is expected to slow due to the trade war with the United States, but power generation and consumption figures have not decreased. The manufacturing sector, which drives two-thirds of China’s power demand, continues to grow, although the growth rate slowed to 6.1% in April from 7.7% in March. The real effects of the trade tensions are anticipated in the future. However, current data suggests that China’s economy may not be as weak as initially feared, with power consumption showing resilience and indicating potential growth different from predictions.

Notably, China’s electricity generation data, which excludes small-scale generators and residential rooftop solar, suggests that the Chinese power sector may be stronger than perceived. Chinese power consumption increased in the primary and secondary industries by 13.8% and 3% respectively, while the services sector saw a 9% rise. Total power consumption in the first four months of the year increased by 3.1% compared to the previous year. These figures indicate that the impacts of the trade war on China’s economy will likely be seen in the future, emphasizing the importance of power demand as an indicator of economic activity.

China’s installation of a record amount of new solar capacity in the first quarter of 2025, particularly in rooftop PV, further supports the notion of a resilient power sector. The surge in rooftop PV installations is expected to continue, with the total distributed solar capacity additions for the year projected to be significant. Despite concerns over the trade war, Chinese industrial output in April surpassed analyst estimates, indicating that the effects of U.S. tariffs may not be as severe as initially anticipated. However, uncertainties persist, and the coming months will reveal the true impact of the trade war on the world’s second-largest economy.