Slowing the Growth of Coal Power in China: the Role of Finance in State-Owned Enterprises

The report analyzes how China's coal power growth was driven by a combination of government capacity targets, stable electricity tariffs, and preferential access to low-cost debt for state-owned enterprises (SOEs). It finds that SOEs have become increasingly financially self-sustaining, using tariff revenues intended for depreciation to fund new capital expenditures, which limits the effectiveness of recent government efforts to constrain coal growth. While macroeconomic shifts and new environmental policies are slowing demand, the report argues that the financial autonomy of SOEs allows them to continue expanding coal assets independently of external policy support.

• State-owned enterprises (SOEs) dominate the Chinese coal power sector, with SOEs owning 61% of installed capacity and controlling shares in another 33%.
• Coal power expansion has been driven by government policy through capacity targets, such as the 300 GW target in the 12th Five Year Plan, and financial levers including low-cost debt from state-owned banks.
• The electricity tariff and dispatch system incentivizes capacity expansion because operating hours are distributed roughly equally among generators in a region, meaning SOEs increase total profits by increasing their share of total capacity.
• SOEs have become financially self-sustaining to the point where tariff revenues allocated for depreciation expenses can now cover the entire construction cost of new coal power plants.
• SOEs are highly leveraged, with liabilities representing more than 80% of the capital for the 'Big 5' power generation SOEs and around 75% for their listed subsidiaries.
• Recent macroeconomic shifts, termed the "New Normal," including slower GDP growth and a transition toward a service-oriented economy, are reducing the growth of electricity demand.
• The Chinese government has attempted to constrain coal growth by increasing SOE dividend requirements, targeting 30% by 2020, and slowing the pace of tariff adjustments relative to fuel price increases.
• Private domestic and foreign investors play a very limited role in the sector, with domestic private investors owning 3% and foreign investors owning 2% of total installed capacity.
• Non-electricity coal uses, such as coal-to-gas and coal-to-liquids, are more carbon-intensive than direct coal combustion for power, with coal-to-liquids emissions being twice as intensive as conventional petroleum fuels.

APA

Hervé-Mignucci, M., Wang, X., Nelson, D., & Varadarajan, U. (2015). Slowing the Growth of Coal Power in China: the Role of Finance in State-Owned Enterprises. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2015/12/Slowing-the-Growth-of-Coal-Power-in-China-–-the-Role-of-Finance-in-State-Owned-Enterprises.pdf

Chicago

Hervé-Mignucci, Morgan, Xueying Wang, David Nelson, and Uday Varadarajan. Slowing the Growth of Coal Power in China: the Role of Finance in State-Owned Enterprises. Climate Policy Initiative, 2015. https://www.climatepolicyinitiative.org/wp-content/uploads/2015/12/Slowing-the-Growth-of-Coal-Power-in-China-–-the-Role-of-Finance-in-State-Owned-Enterprises.pdf.

Wikipedia

{{cite report |last1=Hervé-Mignucci |first1=Morgan |last2=Wang |first2=Xueying |last3=Nelson |first3=David |last4=Varadarajan |first4=Uday |title=Slowing the Growth of Coal Power in China: the Role of Finance in State-Owned Enterprises |publisher=Climate Policy Initiative |date=December 2015 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2015/12/Slowing-the-Growth-of-Coal-Power-in-China-–-the-Role-of-Finance-in-State-Owned-Enterprises.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{hervmignucci2015slowing, author = {Hervé-Mignucci, Morgan and Wang, Xueying and Nelson, David and Varadarajan, Uday}, title = {{Slowing the Growth of Coal Power in China: the Role of Finance in State-Owned Enterprises}}, institution = {Climate Policy Initiative}, year = {2015}, month = dec, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2015/12/Slowing-the-Growth-of-Coal-Power-in-China-–-the-Role-of-Finance-in-State-Owned-Enterprises.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }