The Long-term Relationship Between Electricity Consumption And Economic Growth In China

Electricity power industry has become one part of basement of whole foundationindustry in the modern industrial countries. In china, the development of Electricityindustry has been giving highly attention since the time when the new state wasestablished, though until now china is in the process of industrialization. A mount oftheoretical research and practice indicate that there is strong relationship betweenelectricity power demand and the growth of national economy.As a result, the establishment and development of Electricity power industry is to bepaid more attention.By support of technique and related theory, a few developed countries startedindustrial reform in succession since the1970s, which is to break natural monopoly andintroduce market competitive mechanism, improve operating efficiency for betterservice to economic growth. China’s electricity power industry reform began in1980s,after series of exploration such as funds setting; separation of function of thegovernment from enterprise management, domestic electric power supply industrystepped on the way to the competition from monopoly. In the same time, the statecouncil approve of “the power system reform scheme” and the establishment of chinaelectricity regulatory commission.Previous studies paid more attention to the long-term relationship and causalitybetween power demand and economic growth, rather than to study whether the timepath of power demand and the relationship of two variables could change under thecircumstance of power industry reform. Considering the reform background, this paperuses a new root-test method with structural change to analyze time path of domesticpower demand, then studies the long-term relationship between power demand andeconomic growth with variable co-integration theory.Through the related empiric analysis, this paper concluded as follow: using LMroot-test, the result shows the time path of domestic power demand is a stationaryprocess with two structural change point, which is different with the conclusion underthe traditional root-test. Stationary process suggests that the time path of power demandis stable around the time tendency, path changed in1981and2000, the first changeresults from the efficiency improvement of the power using after economy systemchanges. The second change is made by some external facts such as economic cyclical changes and power industry reform. Based on traditional root-test, using variableco-integration theory, the paper studies the long-term relationship between powerdemand and economic growth. Combining with Chow forecast test and one stepforecast test to analyze the effect to which the power industry reform may give rise tothe macro economy operation, the study indicates2002is the critic year that chinaelectric power demand and economic growth in long-term relationship shows structuralchanges and power system plays an active role in improving the power production andits use efficiency.