Energy Consumption and Economic Activity in China

Abstract

This paper uses province-level cross-section data to explore the relationship between energy consumption and economic activity in China. Our key Jinding is that the income elasticity of energy consumption is approximately 1.0. When a province exports energy or has significant amounts of heavy industry, its energy consumption is higher. However, income elasticities are similar across energy-exporting and -importing provinces. Energy consumption is lower in coastal provinces than inland provinces, but the income elasticity is higher in the rapidly developing coastal provinces. We conclude that China’s economy is unlikely to become significantly more energy-intensive during the 1990s.