Research On Performance Of Chinese Power Generation Industry During Market-Oriented Reform

Power industry is one of the most important foundational energy industries in national economy. It is also a foundational sector, which always has a priority in economic development strategies in almost every economy. With technology advancement, especially power control and information technology improving, and understanding about monopoly industries deepening, countries around the world start to actualize market-oriented reform of power industry in succession in order to enhance power industry operational efficiency. China is no exception. The successes of the market-oriented reform of power industry and its effectiveness have significant impacts on the entire economy. Therefore, the study on performance of Chinese power industry during market-oriented reform has a vital significance.Reform of Chinese power industry includes four stages, such as government monopoly management, collect money to develop generation capability, separation between government and enterprises and company regrouping,"separation of the factory and power-net, merchandizing product after competitions of price". By retrospection about these four stages, we found that the emphasis of Chinese power industry market-oriented reform is generation-side power market-oriented. Therefore, studying on performance of power generation industry during market-oriented reform process is more in line with Chinese actual conditions, and has more pertinence. During the market-oriented process, power generation industry is gradually moving towards diversification in the structure of property rights, its corporate governance structure is improving, and competitive market structure began to take shape. This series of changes affect alteration of power generation industry during market-oriented reform.Study on performance of power generation industry is a complex systematic project. It is difficult to analysis in a unified level; it should be in micro-view (enterprises), medium-view (region) and macro-view (based on the restriction condition of resources, environmental factors). Three different levels provide an all-round and systematic inspection. Based on general principle of indicators selected and characteristics of power generation industry, in particular characteristics of coal-dominated electrical source structure, we bring forward input and output indicators of performance research in three different levels. By non-parametric methods (including DEA and Malmquist Productivity Index base on DEA), this paper presents a systematic and comprehensive study performance of power generation industry. In addition, a panel data econometric model accomplishes the empirical research on factors affecting the performance.On micro-level performance of power generation industry, this paper mainly researches on dynamic change of resource allocation efficiency (profit margin indicator) and total factor productivity (decomposed into three parts, i.e. technical efficiency, scale efficiency and technology advancement rate). During the period of 1998-2007 average return on equity of listed companies in power generation industry presented downward trend in overall, indicating that introduction of competition has broken the monopoly of the listed companies, which reduced their high profits by virtue of market force, and it increased resource allocation efficiency of listed companies in power generation industry. Empirical research on listed companies in power generation industry by Malmquist productivity index base on DEA suggests that during the period 2000-2006, some aspects about listed companies, such as total factor productivity change, technical efficiency change, scale efficiency change and pure technical efficiency change, were performing continuous improvement. The average annual improvement of these aspects are 2.1%, 2.4%, 0.9% and 1.5% separately, while during this period average of annual change on technology advancement rate is less than 1, but in 2005 and 2006 this two years technology advancement is special significant. By a regression model of panel data, further analysis of factors that affect performance shows that the correlation between corporate performance and market-oriented reform of power industry is significant positive. Enterprise size and the proportion of independent directors are positively correlated with corporate performance; the correlation between corporate performance and shareholding ratio of first major shareholders is significant negative, the size of directorate is negatively correlated with corporate performance; while there is no significant correlation between corporate performance and remuneration of the executives.The analysis on performance of power generation industry in medium-view is in line with the micro-view, the research also focuses on dynamic change of resource allocation efficiency and total factor productivity. During the period 1999-2006 average total assets profit margin of each regional power generation industry is raising, this makes resource allocation efficiency of all power generation enterprises in each region improve in overall. Empirical research on Chinese power generation industry in all regions by Malmquist productivity index based on DEA suggests that during the period 1998-2006 performance of power generation industry in each region has been improved in a certain degree. The average annual improvement of total factor productivity, technical efficiency, technology advancement rate and pure technical efficiency are 1.4%, 0.2%, 1.2% and 0.4% separately. Based on regression model of panel data, this paper further analyzed factors that affect performance of power generation industry in each region. The result suggests that the correlation between performance and market-oriented reform of power industry is significant positive, capacity of coal in each region and price of power product are same positive correlated with performance. Correlation between performance and the proportion of firepower is significant negative, price of coal is the same negative correlated with performance. The relation of average scale of power generation enterprise and performance presents a U-shape curve.The analysis on performance of power generation industry in macro-view is based on dual constraints, i.e. resources and environment-affected long-term sustainable development of power generation industry; By Matlab7.2 software and a super-efficiency DEA model with non-expected output, for performance of thermal power industry during the period 1991-2007 is examined. The empirical research results show that during the period 1991-2007, performance of thermal power industry ranges from 0.8923 in 1991 to 1.7519 in 2007, which shows a continuously improving trend during this period, particularly in 2007, compares to 2006 the increase rate reaches 71.49%. The improvement is significantly. This is mainly due to the environmental management to power industry by the government, especially benefit from the work on saving energy and reducing pollutant emission.In order to further improve performance of power generation industry based on empirical researches above, considering factors that affect the performance significantly, following steps should be taken in several aspects. (1) Introduce in competition mechanisms to further promote the diversification of property rights structure; (2) Improve modern enterprise system and the corporate governance structure; (3) Improve power supply structure, and promote green energy development; (4) Further deepen reform of power price and gradually tune up mechanism of power price; (5) Further enhance industrial policy of saving energy and reducing pollutant emission, and advance the skill level of power generation.