China’s approach to electricity pricing and infrastructure has indeed been a significant factor in its industrialization and economic growth.
China’s electricity system operates under a model where the government maintains significant control over pricing and infrastructure development. Unlike many countries where electricity grids have been privatized and operate primarily for profit, China has treated electricity as a strategic public resource. This has allowed for:
- Lower electricity costs: China has managed to keep electricity prices relatively low and even decreasing in some periods, which is unusual for a rapidly developing economy.
- Massive infrastructure investment: The state-led approach has enabled China to build the world’s largest power system, with extensive transmission networks that can deliver electricity efficiently across the country.
- Support for manufacturing: Low energy costs have given Chinese manufacturers a competitive advantage, particularly in energy-intensive industries.
- Renewable energy development: China has become the world’s largest producer of renewable energy, with significant investments in hydro, wind, and solar power.
This energy strategy has indeed been one factor that has helped China avoid the “middle-income trap” that many developing countries face, where economies stagnate after reaching a certain level of development. Other important factors include:
- Investment in education and human capital
- Strategic industrial policies
- Infrastructure development beyond just electricity
- Gradual economic reforms that maintained state control in key sectors
