This paper investigates the mechanism of the power shortage in China by estimating the capacity expansion and capacity utilisation behaviour of the power firms. The theoretical and empirical evidence is presented to show that the state planner deals with the ‘coal-electricity' conflict by...

Theoretical and empirical evidence is presented to show that inefficient power firms in China are subsidised by the state through the ability to charge high electricity prices and the creation of a “soft price constraint†on costs. This cost inefficiency challenges the merits of...