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Philip Andrews-Speed

The internationalization of China’s energy industry has a number of features that distinguish it from other sectors. Gaining access to primary energy resources has been an important motivation for companies in the extractive industries, and this has led to a massive level of overseas investment. Companies involved in power generation have won contracts to construct infrastructure, whilst the manufacturers of wind and solar energy seek new markets and access to technology. China’s government provides explicit support to these enterprises in order to enhance national energy security, to create internationally competitive corporations, and to complement its international diplomacy. Most of these companies are state-owned, and this ownership has given them distinct advantages in their internationalization. The locations of their investments have generally been closely tied to the objectives of each investment, and have evolved in line with changing objectives and growing capacity. China’s overseas energy investments have become contentious as they are perceived to be focused on countries with poor governance, applying low social and environmental standards, and dumping goods below cost. Set against these accusations are the very real contributions that China has been making in assisting developing economies through investment and the provision of technologies and construction services at reasonable cost.

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Philip Andrews-Speed and Sufang Zhang

This chapter examines the evolution of China’s energy policy since 1949 using the electricity industry as an example. Applying a public policy framework, the paper examines the processes of agenda setting, of policy design and decision-making and of implementation and learning. The policy agenda for energy in China has become progressively more complex, in reaction to changing domestic priorities, external events and ideas from abroad. The number of actors has grown in the energy sector, in general, and the power industry in particular. In combination with the decentralization of authority to local governments, this has made the process of policymaking more complex and the coordination of implementation more difficult. In the design of policy, the government has been reluctant to give up the tried and tested administrative instruments in favour of economic instruments. Rather, officials have preferred to stick to what they know, namely deploying exhortation, command and control regulation, direct financial support and state ownership. Market forces have played only a subordinate role in China’s electricity industry. Economic instruments such as subsidies, fines and feed-in tariffs have been deployed but often at too low a level to provide the incentive to change behaviours. This has led to frequent adjustments of policy instrument in order to achieve a programme’s objectives as the agencies learn from experience. For these reasons, China’s electrical power industry over nearly seven decades has been characterized by incremental reform and path dependency.