National Post
April 26, 2006

China’s old guard has decided to make its stand for central rule in the power sector and it has found an important Western ally: Canada.

Team Canada’s host in China, Premier Zhu Rongji, has performed miracles in restructuring much of China’s debt-ridden state sector. Burdened with hundreds of thousands of decrepit state companies that could neither repay their debts nor create new jobs, Mr. Zhu shut down thousands of money-losing coal mines, textile factories, and steel works, slashing 12 million jobs in the last three years. He gave the military five months to divest its business empire of trading companies, luxury hotels, and nightclubs. He granted cities greater autonomy to run their own affairs — a move credited with improving the country’s investment climate and providing new incentives for environmental cleanup. The Far Eastern Economic Review describes his reforms as “the largest transfer of industrial property since Mao Zedong nationalized industry in the 1950s.” But Mr. Zhu’s plans to bring competition to the last big holdout of the monopolists — China’s power industry — have stalled. China’s old guard has decided to make its stand for central rule in the power sector and it has found an important Western ally: Canada. Under Mr. Zhu’s plans, the power industry would no longer be run as a monopoly. State power companies operating hydro dams and nuclear stations would have to compete with private power companies for access to customers. Consumers would need to pay for transmission costs as well as generation costs, giving local power producers — who don’t need to ship power a great distance — a major cost advantage over distant suppliers. If Mr. Zhu and his reformers succeed in implementing this plan, China’s multi-billion dollar hydro and nuclear empires — long subsidized by Canadian taxpayers — could face bankruptcy.