China's economy still waiting to return to full power

Special Report: Global Financial Crisis

BEIJING, April 20 (Xinhua) -- Most people are alarmed when their power
bills rise. But Wang Wenxu has been happily watching electricity consumption
increase at his company for the last two months.

Belt maker Chengda Belt, where Wang is a senior manager, is based in the
city of Wenzhou in eastern China, home to almost 300,000 small and medium-

sized
private export firms that manufacture everything from shoes to sunglasses for
consumers around the world.

Since the end of the Chinese Lunar New Year, Chengda has seen overseas
orders rise, assembly lines running at almost full capacity and more than 650
staff working overtime. More importantly, it's in profit again.

"In the last two months, total orders are 1 to 2 percent more than the

same
period last year," Wang says.

With production up, Chengda uses more electricity. In the last two

months,
Chengda paid 70,000 yuan (10,248 U.S. dollars) for almost 70,000 kilowatt-

hours
of power to produce up to 1.35 million belts each month.

In contrast, late last year when China's export industries were hard hit

by
plunging global demand due to the financial crisis, Chengda consumed just

20,000
kilowatt-hours a month.

"At that time, our foreign orders dropped by more than 40 percent. We
produced about 600,000 belts a month and for every belt, we lost 2 U.S.
dollars," Wang said.

At peak times before the export slump, Chengda consumed more than 80,000
kilowatt-hours of power and produced about 1.5 million belts a month, 80

percent
of which were shipped to American and European markets.

Power consumption is a closely watched early indicator of the vitality of
China's economy, because so much of the country's growth relies on
power-intensive industries such as steel, aluminum and chemicals. Power
consumption closely tracks the true pace of industrial activity since

industries
account for 74 percent of the total.

As many factories like Chengda resume production at part or full

capacity,
China's power consumption has picked up gradually in the last two months, in

one
of the key indicators that economists and officials said the Chinese economy

had
bottomed out.

The China Electricity Council (CEC) announced on April 14 that power
consumption stood at 283.4 billion kilowatt-hours in March, a drop of 2.01
percent from a year earlier, but a jump of 15 percent from February's 245.5
billion kilowatt-hours.

In the first quarter, power consumption totaled 781 billion kilowatt-

hours,
down 4.02 percent from a year earlier, a milder decline than the 5.22 percent
year-on-year slump in the first two months.

The CEC figures show China's monthly power consumption began to contract

in
October last year, when the country consumed 269.9 billion kilowatt-hours, a
decline of 3.7 percent year on year.

In the following two months as the global financial crisis hit harder,

the
downward pace of demand accelerated. In November, consumption was 256.2

billion
kilowatt-hours, down 8.6 percent, and in December it was 273.7 billion
kilowatt-hours, a drop of 8.93 percent.

Wang Zejun, an industry analyst with Beijing-based Huarong Securities,

said
consumption rose in February and March as construction began on many projects

in
the 4-trillion-yuan stimulus plan.

It was also a result of a series of aggressive measures taken by the
government to stimulate the economy, including export tax rebates, which

allowed
Chengda Belt to raise profit margins while slightly cutting prices.

Wang Wenxu says that rise in orders is partly due to the closure of many
smaller belt-making companies since late last year and overseas buyers moving
orders to bigger firms like Chengda.