Since the reform in the 1980s, the Chinese electric power industry has experienced rapid expansion in both capacity and outputs, which is surprising since the industry is still under a plan control. The shortage of supply is a common problem in a plan economy according to the conventional wisdom. But China provides very different experience that challenges the wisdom. Why? This thesis attempts to understand why the plan-controlled industry can achieve such rapid growth over a short period of time. The study pursues its investigation through exploring three issues: the price and cost structures, the pricing setting and the capacity expansion with reference to OECD experience. By comparing power prices of China with the West, we find that China has successfully kept its household prices as lower as its industrial prices, while the OECD economies are reverse, a lower power price for the industry but higher for the household users. The finding shows that the plan increases consumers‟ welfare more than the market does. With further investigation to the cost structure of Chinese power plants with reference to the UK experience, we find that the Chinese power producers have lower variable costs than the Western plants, but similar overheads costs. To further explain such finding, we studied a sample of 100 coal-fired power plants from 2003 to 2005 for their pricing behaviour. We find that the firms adopt a high cost strategy to bargain with the state for higher plan prices, because of the one-firm-with-one-plan-price policy. This causes a soft price constraint on costs, which inevitably protects high cost firms, driving up the total costs of the firm, and providing a lower incentive to the firm to improve their cost efficiency. The firms are planned by the state for their outputs. Will the state plan affect the capacity of power supply in favour? The study argues yes, because (1) entry is free and capacity investment is under firm‟s autonomy, (2) the firms are very responsive to capacity utilization and demand in choosing their capacity investment, and (3) the firms seek more profits through seeking more plan outputs that are linked with capacity. Therefore, the firms do not compete in prices but the capacity of power generation. These explain why the reformed plan system works in stimulating capacity growth.
| Identifer | oai:union.ndltd.org:bl.uk/oai:ethos.bl.uk:534477 |
| Date | January 2010 |
| Creators | Zhang, Liang |
| Contributors | Liu, G. S. |
| Publisher | Brunel University |
| Source Sets | Ethos UK |
| Detected Language | English |
| Type | Electronic Thesis or Dissertation |
| Source | http://bura.brunel.ac.uk/handle/2438/5176 |
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