Chapter 2: China’s Electricity and Communications Regulation in Global Context
By Irene S. Wu
Everywhere in China, there are phones and electricity. Compared to other countries at comparable levels of development, this is a remarkable achievement and a great boon to the quality of life for ordinary Chinese. Now that electricity and communications service are widely available nationwide, the next level goal is to maximize these services’ contribution to economic growth. This chapter has focused on five major regulatory issues: establishing a regulator, defining markets for competition policy, core network regulation, intersecting issues like media regulation and the environment, and implementing safety standards.
Starting in the 1990s, the government repeatedly took steps to separate regulators from operators. Nevertheless, the objectives of SOEs, such as becoming global leaders in specialized export products, often appear to be higher priorities than growing the domestic services market through competition.
In both electricity and communications, there is more competition in market segments with lower barriers to entry and incentive regulations in place than in market segments with higher barriers to entry.
In communications, there is some level of competition in nearly every market segment.. In electricity, there is competition in generation and retail.
In terms of regulating the core network, in communications, the public consensus in China is that poor interconnection among operators results in high prices and inferior service including broadband. In addition, internet regulation requires routing all traffic through specific network points in order to filter out content the government thinks unsuitable, which contributes to congestion.
In electricity, the reform wave initiated in 2015 with a regulatory audit of Southern Grid Corporation’s Shenzhen branch, has spread to other regions and promises to shrink the Grid companies’ monopoly rents to the benefit of generators, retailers, and ultimately, users. However, international experience shows that such reforms are difficult in the best of political circumstances and will take some time to show results.
In Policy, Regulation and Innovation in China’s Electricity and Telecom Industries. Loren Brandt and Thomas G. Rawski, eds. Cambridge University Press, 2019.