Transforming China’s Industrial Sectors : Institutional Change and Regulation of the Power Sector in the Reform Era

Aiming to reduce the politicization and direct administration of electricity generation, transmission and distribution, the central planners launched three major episodes of institutional changes in the reform era culminating in the creation of an independent ministry-level agency - the State Electricity Regulatory Commission (SERC) - to oversee an oligopoly of restructured power companies in 2002. However, a new regulator operating in face of powerful state-owned firms and an hierarchical and competitive bureaucratic landscape is bound to open a new chapter in contentious politics. We argue that the influential role of National Development Reform Commission has undercut the institutional role and autonomy of SERC, resulting in growing discrepancy between the SERC's legal mandate and its efficacy in establishing clarity in rules of competition. Hampered in their growth potential, independent power providers and grid operators have focused their business strategic efforts on crowding out the private sector and foreign investors, and playing off ministerial supervisors for particularistic gains. The resulting regulatory outcome provides neither effective governmental management of oligopolistic dynamics and price fluctuations in the power sector, nor sustained momentum for privatization. We conclude by comparing the power sector to oil and petrochemicals, telecommunications, and transport sectors, noting that even in a highly authoritarian political environment, the domestic diffusion of regulatory institutions has produced manifestly different forms of governance