Managing Dynamic Information Transition Between the Semiconductor Cycle and China's Coal-Electricity Market

This study examines the unexpected rise in electricity production in China amid economic pressures from 2022 to 2023, highlighting the role of information dynamics. Employing a Bayesian Structural VAR model, the research delves into technology shocks derived from the semiconductor cycle to elucidate these anomalies within China's Coal-Electricity Market. We find: (1) A positive response of China's electricity production to technology and demand shocks, influenced by information transitions, lasting nearly a year. (2) Rapid absorption of reactions to coal supply and inherent electricity production shocks within one to two months. (3) The semiconductor cycle, though initially set as the primary variable in Cholesky identification, is determined to be endogenous in this information-intensive system. (4) Historical decomposition reveals increased electricity use from 2022 to 2023 is propelled by tech-driven growth and energy market speculative behaviors, paralleling the peak of the dot-com bubble in 1999-2000. Accordingly, we propose policy recommendations.