Open AccessUnderstanding the Performance of the Electric Power Industry in China
Author(s) -
Guy Liu,
Liang Zhang
Publication year - 2012
Publication title -
asian economic papers
Language(s) - English
Resource type - Journals
eISSN - 1536-0083
pISSN - 1535-3516
DOI - 10.1162/asep_a_00143
Subject(s) - electricity , investment (military) , constraint (computer aided design) , electric power industry , china , balance (ability) , production (economics) , plan (archaeology) , economics , industrial organization , budget constraint , electricity price , business , market economy , mains electricity , electricity generation , power (physics) , microeconomics , politics , engineering , mechanical engineering , medicine , physics , archaeology , quantum mechanics , political science , law , electrical engineering , physical medicine and rehabilitation , history
Despite three decades of reform, China's electricity sector is still organized by a “new reformed plan” where capacity investment has been liberalized but prices and production remain controlled. This paper examines the impact of the current plan prices on end-users with reference to the OECD and how the plan price of electricity supply is formed. We argue that the plan price is set in an attempt to balance the interests of the public and the power industry. We find that China's industries do not pay a cheaper price for electricity than the West, and the plan price is formed through bargain between the firm and the state, which allows the firm to have a soft price constraint on its costs.
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