China Power Report Q1 2008

The new China Power Report from BMI forecasts that the country will account for 53.5% of Asia Pacific regional power generation by 2011, with an increasing generation surplus that provides a theoretical export capability. BMI's Asia Pacific power generation estimate for 2006 is 6,278 terawatt hours (twh), representing an increase of 8.5% over the previous year. We are forecasting an increase in regional generation to 9,207twh by 2011, representing a rise of 46.6%.

Asia Pacific thermal power generation in 2006 is estimated by BMI at 4,772twh, accounting for 76% of the total electricity supplied in the region. Our forecast for 2011 is 6,578twh, implying 38% growth that reduces the market share of thermal generation to 71% - thanks largely to environmental concerns that should help to promote renewables, hydro-electricity and nuclear generation. China's thermal generation in 2006 is estimated at 2,184twh, or 46% of the regional total. By 2011, the country is expected to account for 52.5% of thermal generation.

For China, coal was in 2006 the dominant fuel, accounting for 70.2% of PED, followed by oil at 20.6%, hydro at 5.6% and gas with a 2.9% share of PED. Regional energy demand is forecast to reach 4,972mn toe by 2011, representing 41.1% growth over the period. China's 2006 market share of 48.2% is set to climb to 55.8% by 2011. China's 54.3twh of nuclear demand in 2006 is forecast to reach 121twh by 2011, with its share of the Asia Pacific nuclear market rising from 9.6% to 16.5% over the period.

China's overall business environment can be considered attractive in a regional context, with a relatively high level of long-term political risk countering the below-average long-term economic risk. The strong suit is the rate of growth in energy demand and electricity generation, which is the best in the region by a wide margin. China also scores well in terms of energy import dependence, in that self-sufficiency is currently relatively healthy - but will deteriorate over the next few years as growth in demand for coal, oil and gas exceeds the rate of domestic supply expansion. The country's overall score is let down by the extent of power market regulation, state ownership and limited liberalisation. In the BMI Business Environment Ranking matrix, China receives an unchanged composite score of 31, which still ranks the country second out of 11 states included in the Asia Pacific region.

BMI is forecasting Chinese real GDP growth averaging 9.8% per annum between 2006 and 2011, with 2007's forecast at 11.1%. Population is expected to expand from 1.32bn to 1.36bn over the period, with GDP per capita and electricity consumption per capita both forecast to increase significantly. The country's power consumption is expected to increase from an estimated 2,484twh in 2006 to 4,255twh by the end of the forecast period, leaving surplus generation rising from 350twh in 2006 to 674twh in 2011, assuming 12.2% annual growth in generating capacity.