A portfolio approach to energy governance : state management of China's coal and electric power supply industries

Abstract

This study addresses the extent to which China's central state devolved ownership and investment levels in its energy sector to other actors during the modern reform period (1978- 2008). The project focused on China's coal and electric power industries, leveraging industry and government data, interviews, two firm case studies and a unique survey to measure policy, ownership and investment change over time. The results show that such devolution has been neither incrementally advancing nor consistently lacking, but has fluctuated according to the national electric power balance. The study suggests that China's central state actively manages the range of firms in the strategic coal and electric power industries as a dynamic portfolio of assets, resulting in such fluctuation. These findings run counter to what the dominant theories in the literature would otherwise predict. Neo-liberal theory would predict the incremental reduction of central state ownership in these sectors, as is evident in many of China's other sectors. Arguments predicated on the ability of the central state to sustain "self-reproducing authoritarianism" would predict fairly stable levels of central state investment and ownership in this strategic sector through time as well as quite limited liberalization. Finally, a theory privileging elite politics would indeed predict fluctuations, yet at different turning points in time than those found in this study, and without the sustained pattern that is evident in the extended time period under examination, which spans four distinct political eras.

(cont.) This first implication of this study is that neo-liberal means can be deployed to achieve state-led ends. Second, the study provides evidence that such means of economic liberalization reform need not be cumulative and are, in fact, reversible. Third, the case studies reveal that firm decisions have a significant impact on the execution of these powerful broad central state policy changes that periodically reshape the structure of China's energy sector. Finally, this study also raises important implications relating to public policy, and in particular the ability of the Chinese state to fulfill aggressive greenhouse gas emission reductions in an effort to mitigate climate change.