chapter  8
Deregulation and growth in the energy sector
Pages 14

Over the past two decades dramatic changes have taken place in the Chinese

energy sector. In the 1980s when economic growth took off immediately after

the spate of reform initiatives, China’s energy sector suffered from severe

supply shortage. The then energy policy focused on promoting the growth of

coal production. As a result, the coal industry expanded rapidly. In particular,

the township and village-run mines emerged as the major force in coal

production. However, since the late 1980s, the policy focus has shifted to the

development and reform of the electricity sector. One of the main changes was

that the non-state sector was allowed to enter the market. The build-operate-

transfer (BOT) model was adopted in the mid 1980s, for instance. By 1999,

about US$15 billion of private funds had been invested in China’s power sector

(World Bank 2000). These changes have led to a great expansion of the

capacity for electricity generation in China. By the late 1990s, China’s

electricity supply could almost meet the demand, and there was even a surplus

in some regions. In the meantime, China has increased its oil imports as well as

domestic production of natural gas. Currently, China’s energy sector is

characterised by (1) oversupply of coal, (2) rapidly growing electricity-

generating capacity, (3) a net oil-importing industry and (4) an expanding

natural gas sector. These new developments together with China’s recent entry

into the World Trade Organization will affect China’s energy policy in the

twenty-first century.