Date
17 January 2017
Chinese engineers inspect a power station. China has introduced direct power selling by generators to large users in a limited number of regions. Photo: Xinhua
Chinese engineers inspect a power station. China has introduced direct power selling by generators to large users in a limited number of regions. Photo: Xinhua

How to deliver a jolt to China’s power sector

China could undertake a number of measures to improve the power sector, lower retail power prices and thus indirectly boost the economy.

The actions are all related to the liberalization of its electricity markets.

Several countries in the region have opened up or are in the process of opening up their markets.

By regional standards, the Australian power market is the most advanced, while those of Japan, the Philippines and Singapore are developing at different rates.

China has introduced direct power selling by generators to large users in a limited number of regions.

It plans to advance power retailing and other market reform in the coming years.

Successful reform, if administered aggressively, would boost the economy through the creation of new jobs and operational efficiencies for industry participants.

Competition and greater efficiency could also reduce the price of retail power, especially to industry.

The authorities could more urgently force through power reform, especially the separation of transmission and distribution, so that power companies and others may become more efficient through competition and cut their operating costs.

They could also force mergers of the listed companies of the major power groups, improving the management of the companies and creating growth through economies of scale.

Foreign companies that have rich experience in competitive markets could be allowed to participate in the Chinese electricity retailing sector, creating more competition and some growth opportunities.

The views expressed in this article are those of Joseph Jacobelli, an analyst at Bloomberg Intelligence.

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