1 AIT Asian Institute of Technology

Foreign direct investment in China's power sector

AuthorJia, Ke
Call NumberAIT RSPR no. SM-01-22
Subject(s)Investments, Foreign--China

NoteA research study in pa1tial fulfillment of the requirements for the degree of Master of Business Administration, School of Management
PublisherAsian Institute of Technology
Series StatementResearch studies project report ; no. SM-01-22
AbstractIn the early 1990s, hoping to reduce electricity shortages and enhance the efficiency of Chinese power plants, China opened its doors to foreign direct investment (FDI) in electricity generation. Using data from an original survey of foreign private investors, official Chinese statistics, and other sources, we assess the volume and characteristics of FDI in China's power sector, its impact on energy efficiency, and the factors that limit this impact. Five principal findings are described as follows. First, the volume FDI in China's power sector will likely fall short of the government's 2001-2005 capacity expansion target by a ยท substantial margin, most likely because of persistent institutional barriers to FDI. Second, to avoid the lengthy central government approval process for large plants and to minimize risk, early FDI tended to be in small-scale, gas- and oil-fired plants using imported equipment and located in coastal provinces. However, more recent FDI tends to be in larger coal-fired plants that use more Chinese equipment and tends to be located in the north as well as the east. Third, and perhaps most important, FDI is likely having a significant positive impact on energy efficiency. Almost a third of the 20 FDI plants in our sample use advanced efficiency-enhancing generating technologies, and a fifth are cogeneration plants. Fourth, the main factor that has hampered the contribution of FDI to energy efficiency is an institutional bias in favor of small-scale plants, which are generally not as energy efficient as the large-scale plants. And finally, the most important barriers to FDI generally are uncertainty associated with the approval process of FDI projects, electricity sector regulation, and the risk of default on power purchase contracts.
Year2001
Corresponding Series Added EntryAsian Institute of Technology. Research studies project report ; no. SM-01-22
TypeResearch Study Project Report (RSPR)
SchoolSchool of Management
DepartmentOther Field of Studies (No Department)
Academic Program/FoSMaster of Business Administration (MBA) (Publication code=SM)
Chairperson(s)Swierczek, F. W.;
Examination Committee(s)Quang, Truong ;Bechter, Clemens;
Scholarship Donor(s)Royal Thai Government;
DegreeResearch Studies Project Report (M.B.A.) - Asian Institute of Technology, 2001


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