The Chinese government may be serious about curbing overcapacity, but if so, the power industry has yet to get the word.

China added more new power generation last year than the total capacity of the United Kingdom or South Korea, according to figures from Bloomberg New Energy Finance, cited by Britain’s The Guardian newspaper.

On the bright side, China installed a record amount of new solar power capacity, more than any other country in the world, but it also added more than three times as much in new coal-fired generation, The Guardian said.

The addition may be justified if China succeeds in taking older, dirtier coal-fired plants offline in the future, Scissors said, but the capacity numbers suggest that the shutdowns have not taken place yet.

Scissors said the central government is also likely to meet with resistance from state-owned enterprises (SOEs) that have been told to close inefficient plants, which provide employment and enjoy local support.

“The SOEs always want another SOE to contract,” he said.

The question of compliance brings the issue back to shadow banking and estimates of economic growth.

Financed off the books

Since state-owned banks have been barred from lending to overcapacity industries, further operations can only be financed off the books.

“That way, it makes the local government happy because they’re continuing to lend, and it makes the national government happy because it’s not on the books,” Scissors said.

The combination of seemingly contradictory data, the overcapacity campaign and the forces behind shadow banking may indicate that China’s economy is actually growing faster than the 7.7-percent GDP growth rate.

“If there’s more off-book activity, that would suggest a strengthening economy,” said Scissors.

The theory may leave world markets increasingly in the dark as they react to economic reports from China, but it could help to explain some of the seeming contradictions in recent data, as well as the increase in urban smog.