China has been under pressure by rising energy prices and commodity prices. At the same time, it is in the middle of a massive boom in electricity use. As we’ve documented, the nation’s electricity demand has recently surged by over 6%. This growth is a result of rapid industrialization as well as the build-out of electric vehicle (EV) infrastructure. China’s power consumption is on track to reach 13,757 terawatt-hours (TWh) by 2030. This development is indicative of a strong compound annual growth rate of 6.3% between 2024 and 2030, even as the nation grapples with demographic changes and economic headwinds.
China’s real GDP is projected to grow exponentially, from $2.01 trillion in 2024 to a whopping $2.31 trillion by 2030. This historic increase is a testament to the country’s booming economic expansion. This exceptional economic growth becomes even more pronounced given the context of a declining population. It further declined from 1.412 billion in 2020 to a pro forma 1.410 billion in 2024. This demographic shift poses crucial questions about the sustainability of any economic growth as well as its influence on energy use trends.
Energy Consumption Breakdown
Since 2024, China’s industrial sector has been dominant in the structure of power consumption. Remarkably, it represented 67% of the country’s electricity consumption. This stark figure is a reminder of the key role that manufacturing and industry in general has to play in energizing that demand. It was the residential sector leading the charge at 15.6%. At the same time, the commercial sector was next with 4.4%, and the transport sector contributed an anemic 2.3%. Moreover, segments like agricultural, governmental, and commercial customers combined to make up a 10.7% share of electricity consumption.
Energy-intensive industries are booming. At the same time, there is increasing attention on electrifying transportation and improving digital infrastructure, both of which will increase electricity demand even more. China is making massive investments in the right things. Consequently, electricity consumption is projected to increase at a rate greater than GDP, underscoring the need for strategic planning and investment in energy resources.
Government Policies and Future Investments
In response to mounting energy challenges, the Chinese government has implemented a moratorium on constructing new coal-based facilities in major economic regions such as Hong Kong, Shanghai, and Beijing. This policy shift is a huge step toward the industry showing it’s serious about moving away from coal and other fossil fuels. The government is focusing on three key areas for future investment: gas-based power generation, renewable power generation, and smart grid infrastructure.
These environmental sectors offer outsize investments opportunities as China looks to improve energy security and carbon emissions goals. By prioritizing renewable energy sources and modernizing its grid infrastructure, China aims to create a more resilient and efficient energy system capable of meeting growing demand.
Economic and Environmental Implications
The interplay between rising energy costs and increased electricity consumption highlights the challenges China faces as it attempts to balance economic growth with environmental sustainability. As more industries grow and electrification makes progress, the demand for energy will certainly increase.