How much have electricity shortages hampered Chinaʹs GDP growth?

Based on an econometric analysis of the annual growth data for Chinaʹs GDP and electricity generation from 1953 to 2010, we find that electricity generation growth Granger causes GDP growth, but not vice versa. We also find that the GDP elasticity of electricity generation is about 0.6, implying that a 1% increase in Chinaʹs electricity generation growth would increase GDP growth by 0.6%. While Dengʹs reform raised Chinaʹs GDP growth rate by about 5% per year, it did not alter the GDP elasticity of electricity generation. Hence, an obvious strategy to promote Chinaʹs economic growth would be accelerating electricity generation expansion. Rapidly adding thermal generation units, however, could have large-scale, adverse environmental impacts. We therefore support Chinaʹs 2011 five-year plan, which calls for expanding investments in renewable energy, conservation and energy efficiency as well as improving Chinaʹs integrated electricity planning and cost-based pricing decisions.