Economic growth and energy use: The case of township and village enterprises in China

One of the most dynamic elements of China's booming economy is the so-called township and village enterprises (TVEs) whose ownership is highly decentralized and operation market-oriented. With an average growth of about 25 percent per year since the early 1980s, the TVE sector accounts for about three-quarters of rural output, one half of total industrial output, and almost one-third of China's GDP. This paper examines the patterns of energy use by TVEs, the decline in energy intensity, and regional differences in energy use. One of the most striking features of TVE energy use is the apparent decoupling of energy and output. Between 1987 and 1993, while output grew more than 20 percent per year, annual growth in energy use was less than 14 percent. Energy use per unit of output thus was reduced by about 30 percent in merely six years. Factors that contributed to the decline of energy intensity are analyzed, including structural change in output and technical efficiency improvements. The enormous variation in energy intensity and industrial structure across regions is also investigated. Regional energy intensity is closely associated with industrial structure, which, in turn, is determined by local resource endowment and access to capital, skilled labor, and markets. The high energy intensity in inland province - five times the level of coastal provinces - is mainly due to the high share of energy-intensive industries, such as mining, building materials, and metallurgy. In contrast, output from coastal provinces is dominated by non-energy-intensive industries, such as textiles and light manufactures.