CITIC SECURITIES has released a research report stating that China's total electricity consumption in 2025 is projected to grow by 5.0% year-on-year, a deceleration of 1.8 percentage points compared to 2024. The electricity elasticity coefficient of GDP has fallen to 1.0 for the first time since 2020, with structural factors identified as the primary reason for the slowdown in power demand. The report notes that while the prosperity of traditional high-energy-consumption industries continues to decline and the growth rate of emerging high-end manufacturing has seen a periodic slowdown, electricity usage in the secondary industry as a whole remains relatively resilient. Driven by the expansion of new energy vehicle charging and battery swap services, as well as computing infrastructure, the growth in electricity demand from the tertiary industry remains largely stable. CITIC SECURITIES anticipates that the GDP electricity elasticity coefficient is expected to rise again, forecasting total electricity consumption growth rates of 5.4%, 5.2%, and 5.0% for 2026, 2027, and 2028, respectively. The main viewpoints are as follows:
Report Origin: A Rare Decline in Electricity Elasticity Coefficient to 1.0. China's total electricity consumption in 2025 increased by 5.0% year-on-year, slowing by 1.8 percentage points from 2024, with the GDP electricity elasticity coefficient falling to 1.0, a rare occurrence in recent years. Even after excluding the impact of temperature fluctuations on residential electricity consumption growth, the overall electricity growth rate still declined by 1.2 percentage points. This report uses the trend changes in electricity demand as a starting point to analyze the prosperity trends of various industrial sectors and changes in the structure of electricity consumption.
Secondary Industry Shows Resilience, Manufacturing Demand Growth Expected to Bottom Out. Manufacturing remains the core source of growth for China's electricity demand. In 2025, its electricity consumption is estimated at approximately 5 trillion kWh, contributing 1.7% to the growth of total societal electricity consumption. From a sub-sector perspective, the focus of electricity consumption growth in manufacturing is gradually shifting from traditional high-energy-consumption industries to emerging high-end manufacturing. In recent years, growth in non-ferrous metals and ferrous metals industries has slowed, while the prosperity of the non-metallic minerals industry has declined, leading to a continuous reduction in the electricity consumption increment from traditional high-energy-consumption industries. Meanwhile, production declines in sectors like polysilicon due to "anti-involution" efforts have resulted in a high-then-low contribution to electricity consumption growth from emerging manufacturing. Against the backdrop of a narrowing decline in the growth rate of high-energy-consumption industries and the deepening of anti-involution efforts leading to a stabilization and rebound in emerging industry growth rates, the overall electricity demand growth rate in the manufacturing sector is expected to bottom out and recover.
Tertiary Industry Demand Largely Stable, IT and Charging/Swapping Services Drive Core Growth. Benefiting from the rapid expansion of new energy vehicle charging and battery swap services and computing infrastructure, the wholesale/retail trade and information/software services sectors have become significant contributors to the growth of electricity consumption in the tertiary industry. In 2025, their new electricity consumption accounted for 37.9% and 19.7% of the tertiary industry's total new consumption, respectively. Although the overall growth contribution rate of the tertiary industry slightly declined due to influences from sub-sectors like public services and management organizations, the development of emerging service industries provides stable support for its electricity demand. It is anticipated that electricity demand in the tertiary industry will maintain steady growth.
2026-2028 Electricity Consumption Growth Forecasted at 5.4%/5.2%/5.0%. China's GDP growth target range for 2026 is 4.5% to 5%. Electricity demand is expected to maintain a robust expansion pace matching economic growth. Considering the macroeconomic growth targets and changes in the industrial structure, the total electricity consumption growth rates for 2026 to 2028 are forecasted to be approximately 5.4%, 5.2%, and 5.0%, respectively. This corresponds to an average annual electricity consumption increase of about 530-570 billion kWh. Driven by industrial upgrading and the continuous release of new demand, the absolute increment of China's electricity demand will maintain strong resilience.
Risk Factors: Total societal electricity consumption growth falling short of expectations; significant decline in market transaction electricity prices; substantial increase in fuel costs; major fluctuations in the construction costs of new energy projects; slower-than-expected progress in power sector reform.
Investment Strategy: Given the highly resilient outlook for electricity demand, the power sector's prospects will primarily depend on supply-side evolution and government policy stance. Although market electricity prices are currently still affected by supply shocks, the gradual introduction of government measures to stabilize prices, the anticipated earlier arrival of a policy-driven price floor, and a more positive government attitude towards the generation side are expected to drive a valuation expansion cycle for the sector. Recommendations focus on selecting companies based on underlying asset quality, medium-to-long-term growth prospects, and dividend distribution willingness. Top picks include: 1) Leading hydropower, nuclear power, and integrated coal-power companies with high-quality underlying assets; 2) H-share thermal power and H-share green power companies with low valuations and attractive dividends; 3) New scenarios and models benefiting from the increasing integration of digitalization and the new power system, such as virtual power plants, microgrids, and power-computing synergy.
Comments