China’s Rail Freight Dip Signals Diversifying Energy Economy

The percentage of green energy consumed in China has increased in recent years. Eco-friendlier sources such as hydro, wind, nuclear and natural gas made up 16.9 percent of total energy consumed in 2014, a 3.5-percent increase compared to 2010. The development of new energy has reduced demand for both thermal power and coal.

In 2014, volume of coal transport fell 2.3 percent year-on-year, resulting in a 1.2 percent decrease of railway freight. Between January and August in 2015, shipping of coal cargo fell 11.4 percent , leading to a 6.1-percent-drop of overall railway freight.

This phenomenon follows China’s “new normal” economic transition. A dip in China’s economic growth rate results in reduced coal freight, which then affects electricity consumption.

However, the change is neither the result of a different economic mode nor a data issue. Rather, it reflects the progress of China’s structural changes.

The reduction of China’s railway freight is a sign of economic adjustment, optimized energy infrastructure, diversified transportation and improvement of productivity zone arrangements. The optimization of energy infrastructure has reduced demand for coal, while the adjustment of traditional industries and diversified transportation options have led to a reduction in rail freight.

Similarly, the slow-down in electricity consumption growth rates is the result of a rising service industry, industrial transformation and upgrades and improvements in energy utilization.