Why Has the Energy-Output Ratio Fallen in China?

In China, between 1978 and 1995, energy use per unit of GDP fell by 55 percent. There has been considerable debate about the major factors responsible for this dramatic decline in the energy-output ratio. In this paper we use the two most recent input-output tables to decompose the reduction in energy use into technical change and various types of structural change, including changes in the quantity and composition of imports and exports. In performing our analysis we are forced to deal with a number of problems with the relevant Chinese data and introduce some simple adjustments to improve the consistency of the input-output tables. Our main conclusion is that between 1987 and 1992, technical change within sectors accounted for most of the fall in the energyoutput ratio. Structural change actually increased the use of energy. An increase in the import of some energy-intensive products also contributed to the decline in energy intensity.