China's Market-Oriented Reforms in the Energy and Environmental Sectors

by An Bo, Lin Weibin, Zhou Aiming, and Zhou Wei
June 5, 2015

This paper presents a brief overview of the policies, regulations, measures, plans, and schemes aimed at facilitating and accomplishing market-oriented reforms of China’s energy sector in recent decades.

This paper is available in Chinese



With China’s high-growth era coming to an end, the country’s energy demand will be entering a new phase characterized by steady growth in total energy demand. As a result, China’s energy sector is bound to be confronted with a series of challenges associated with transiting to a new growth pattern. Market-oriented reforms in the energy sector are fundamental to accomplishing this transition, and a series of such reforms across some specific areas of China’s energy sector have been implemented with fairly positive results and effects. However, reforms of the country’s energy sector as a whole have been overcautious and conservative compared with those in other key sectors. Since taking office in 2012, the Xi Jinping administration has adopted several new measures to improve energy price formation mechanisms and to encourage market competition, which collectively have accelerated the pace of relevant reforms of the energy sector significantly. This paper argues that there are a wide spectrum of factors driving China’s efforts in liberalizing its energy market and puts forward a series of recommendations on taking forward the market-oriented reforms in the energy sector in the broader context of nationwide strategic development of energy sector.

  • Unified market access shall be institutionalized and the diversification of sources of investment in the energy sector should be promoted. Price reforms must continue to be advanced in oil and gas, electricity, and other related energy subsectors. Prices for relevant competitive areas shall be liberalized in an orderly manner.
  • Reforms should be deepened in priority areas such as electricity grids and oil and gas pipeline networks, with the objectives of clearly defining these networks and gradually establishing supply-and-demand oriented, reliable, and flexible electricity and gas transmission system with fair access. Power sector reforms are to be accelerated and direct trading between supply and demand sides shall be promoted to build a competitive electricity market.
  • The development and implementation of energy strategy, planning, policy and standards shall be further strengthened. The government should accelerate the process of decentralization to streamline administrative procedures through deregulation or delegation of authority.