Politics, officialdom putting brakes on essential power reforms
Arthur Andersen believes that political and organisational issues are holding up the mainland's push to liberalise the power sector.
Despite establishment of State Power in 1998 to consolidate mainland state-held power assets, there are still many controlling interests, often competing against each other, in the sector.
Andersen cited key players such as the Electric Power Department of the State Economic and Trade Commission, on the national level, and the provincial economic and trade commissions.
The problem was that subordinate governments helped fund projects in which the state also invested.
'State Power is effectively on an equal footing with the subordinate provincial governments - details within the corporation process, for example, asset values and level of historical contributions of provincial governments, can become a very difficult process,' Andersen said.
'Perhaps, only the highest authority in the country - the State Council - can adjudicate this matter.'
In January, the government moved to split the State Power monopoly into two new businesses - State Power Generation Corp and State Power Distribution Corp - one holding power-generation assets and the other the power grids.
The split paves the way to set up a wholesale market, or a pooling system, which lets different power generators supply electricity to a power grid on a competitive basis.
The system was designed to reduce electricity tariffs and so benefit users.
Arthur Anderson partner Paul Eccleston believes it will take a while to set up the pooling system.
'However, it is sure the Beijing government is speeding up the pace of liberalisation in the next 12 months,' he said.
'Probably because it realises the power market is of paramount importance to its economic growth.'
China had the region's fastest electricity consumption growth in Asia - at an annual growth rate of 8 per cent, he said.
With its entry to the World Trade Organisation it would allow foreign investors to take part in the wholesale market.
But, the investment environment was risky, with a major factor being an uncertain regulatory regime, Mr Eccleston said.
'It is still unknown who owns what,' he said.
Nevertheless foreign competition promised a rash of mergers and acquisitions - despite last November's temporary ban on the transfer or disposal of state-owned power plants.