China's Power Industry Investment And Financing System

The electric power industry is a critical part of economic infrastructure. Electricity is generated, distributed, and sold concurrently so that it cannot be stored, thus it is objectively required that electric power industry lead the way for whole economic development. Nowadays China is second in the world in capacity of generators installed and electricity generated. The capacity of electricity generated and consumed is rapidly increasing. Yet the per capita installed capacity and generating capacity are both under half the world average. System of investment and financing is very important to the electric power industry development. It is the basic regulations and principal methods, which include investors and means of financing and managing institutions. Through reform and practice, now the investment and financing system in China can be outlined as diverse investors, diverse financing sources, diverse forms of investment, etc. At the same time, government face problems such as undefined property rights, lack of risk binding force, etc. Financing is a major part of system of investment and financing. Each method has its characteristics, for example, the bank loan has simple procedures, low costs for financing but overload with interest; foreign loans such as World Bank and Asia Development Bank, sometimes have low interest rates, but often with attached terms. There are some innovative ways such as asset-backed securities, commercial bills, electric power industry investment fund and financing leases, etc. Besides multiple financing, many factors must be included in improvement for investment and financing system. First, the examination and approval system for electric power projects must be replaced by a ratification system and then converted to a filing system under the government; at the same time the investment program must be administered with foresight in case investment proves to be excessive or inadequate. Second, relative laws and regulations must be improved and medium mechanism for investment developed to set up a fair and sound environment for investment. We should value the private investment and attract the private capital to electric power industry by giving special permission. At present, we should promote the competition of the electric power market through the underway electricity pricing innovation and regional market experiment. For electricity pricing design, we should make the prices formed with market mechanisms, by which we can set up efficient market regulations and push forward the investment and financing competition through interaction between trade and investment. In conclusion, only through innovation using diverse means and multiple ways, can a sound and rational investment and financing system for electric power industry be developed.