The relationships between energy consumption and key industrial sector growth in China

Abstract

Previous studies suggested that, at the aggregate growth level, feedback effects often exist between energy consumption and overall growth. This study further tested for the long- and short-run relationships between primary energy use and key industrial sector variables in China. The annual data spanned the period from 1953 to 2018. The results show that energy use and the changes in three key sector output values were cointegrated. In the long-run, at the sectoral level, there was unidirectional causality running from sectors to energy use, which follows the conservation hypothesis. Hence, strict energy-saving measures in industrial, construction, and wholesale and retail sectors will not curb their respective long-run growth The growth in the construction and wholesale and retail sectors can lead to a slight decline in energy use. Thus, China can encourage long-run growth in construction and business at a low environmental cost. In the short-run, bidirectional causality and small elasticities existed between energy use and three key sectors. China can stimulate the short-run growth in the industry, construction and domestic trade while taking strict energy-saving measures in these sectors.