BMI's Executive Summary

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The new China Power Report from BMI forecasts that the country will account for 54% 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 6,167 terawatt hours (twh), representing an increase of 7% over the previous year. We are forecasting an increase in regional generation to 9,041twh by 2011, representing a rise of 46.6%.

Asia/Pacific thermal power generation in 2006 is estimated by BMI at 4,644twh, accounting for 69.9% of the total electricity supplied in the region. Our forecast for 2011 is 6,455twh, implying 39% growth that raises the market share of thermal generation to 71% - in spite of environmental concerns that should be promoting renewables, hydro-electricity and nuclear generation. China's thermal generation in 2006 is estimated at 2,184twh, or 47% of the regional total. By 2011, the country is expected to account for 53.5% of thermal generation.

For China, coal is the dominant fuel, accounting for an estimated 68.4% of 2006 PED, followed by oil at 19.8%, hydro-electric energy at 6.5% and gas with a 3.0% share of PED. Regional energy demand is forecast to reach 5,258mn toe by 2011, representing 47% growth over the period. China's estimated 2006 market share of 48.8% is set to rise to 58.3% by 2011. China's estimated 58.6twh of nuclear demand last year is forecast to reach 114.7twh by 2011, with its share of the Asia/Pacific nuclear market rising from 10% to 15.7% 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 very low 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 several 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 a composite score of 31, which ranks the country second out of 11 states included in the Asia/Pacific region.

BMI is forecasting Chinese real GDP growth averaging 9.1% per annum between 2006 and 2011, with this year's forecast at 9.7%. 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 last year to 4,255twh by the end of the forecast period, leaving surplus generation rising from 288twh in 2006 to 630twh in 2011, assuming 12.0% annual growth in generating capacity.