THE gap between China's supply and demand for electricity could be intensified by uncertainties over changes in law and administration relating to the industry, the levelling of import duties, and value-added taxes on raw materials. Plans to streamline development by abolishing the Ministry of Electric Power are believed to have been thrown out by the National People's Congress, throwing the future of the administration of electricity production back into the melting pot. According to John Adams, a deputy-director of China financial services with a London merchant bank, reports are circulating that the advisers to the NPC have been told to go away and think again on their plans for controlling the industry. Mr Adams, a former Bank of England official, told the Asia Power 96 conference in Singapore yesterday it was not clear whether new duties and taxes would be levied on existing projects, those contracted for, or only on fresh contracts. He warned that China was facing a potentially politically embarrassing shortfall of electricity production. 'One of the problems of China is, at what point does the domestic installation which they are definitely capable of continuing, begin to fall very far short of domestic needs?' he said. China has about 200 gigawatts of power production capacity, and has been increasing the figure by about 10 gWs a year, but that had fallen behind demand, Mr Adams said. 'We know that the level of investment in the 1980s was predicated on economic growth of 7 per cent, but they got growth rates four or more points higher than that,' he said. 'It is not surprising that energy demand is exceeding energy supply by a large amount. There must be some point within five years or so that lack starts to translate itself into some sort of political constituency in China.' Financing China's expanding electricity production had been shaken up, so that the power companies no longer had access to state funds at extremely low interest rates. The cash for expansion had to come from somewhere, and that could mean higher prices for the consumer, Mr Adams said, although any increases would have to be approached carefully. A law relating to the electricity sector suggested there would be a gradual unification of prices, but it was not clear if that meant the subsidised agricultural sector would have to start paying prices closer to the 'quasi-market' levels charged to industry, he said. 'There was going to be a new body to regulate the pricing and general overview of China's electricity industry. 'This was going to be introduced as part of the reforms of the Ministry of Electric Power, but that is now in abeyance so we must wait and see what comes through,' he said. 'The law is a wish list which bears the print of many hands, if you look at the law there is still a tremendous tension between what the Chinese would like to do and what their own ideas of how the country should be run will let them do.' Mr Adams doubted whether there would be another round of international share flotations by China's power companies this year, or even next. Four already have floated, but he said he detected antipathy to the system in Beijing, as well as investor resistance in the US, following the poor performance of the issues. However, he said, at grass roots level, managers of power companies understood what they had to do to fund their expansion, and were anxious to develop proper financing arrangements, with official credit ratings, rather than rely on soft loans from abroad.