China Investment Report
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CHINA INVESTMENT REPORT Energy Charter Secretariat 2017 DISCLAIMER Information contained in this work has been obtained from sources believed to be reliable. However, the authors do not guarantee the accuracy or completeness of any information published herein, and the authors shall not be responsible for any losses or damages arising from the use of this information or from any errors or omissions therein. This work is published with the understanding that the authors are supplying the information, but are not attempting to render legal or other professional services. The contents of this work are the authors’ sole responsibility. They do not necessarily represent the views of the Energy Charter Secretariat or any members of the Energy Charter Treaty. © Energy Charter Secretariat, 2017 Boulevard de la Woluwe, 46 B-1200 Brussels, Belgium ISBN 978-905948-197-8 Reproduction of this work, save where otherwise stated, is authorised, provided the source is acknowledged. All rights otherwise reserved. China Investment Report 2017 FOREWORD After much engagement and retaining the status of “Observer by invitation” for more than a decade, China formally took the significant step of upgrading its status within the Energy Charter Process by signing the International Energy Charter in The Hague in 2015. The Energy Charter and China have a long-standing history of cooperation, which has been recently underpinned by establishing the International Energy Charter-China Electricity Council Joint Research Centre in Beijing. China is a pivotal country in the global energy sector. The country is not only a major producer of fossil fuels, but also the world’s largest importer of fossil fuels. China is also cementing its global dominance as a producer of renewable energy. It is a major investor in several countries across the globe, as well as a significant producer of clean-energy technologies. The Energy Charter Treaty (ECT), with its vast membership and related legal instruments and institutions, is the optimal platform for China in terms of promoting regional energy cooperation and facilitating the implementation of infrastructure projects within the framework of the “Belt and Road” Initiative. The China Investment Report aims at providing detailed information on the country’s energy investment climate. The Report also illustrates investment-related aspects of complex transition of China’s energy sector. Starting with a general overview of the country’s economic, political, and social situations (Chapter 1), the Report gives insights on China’s general energy policy (Chapter 2), market structure of the energy sector (Chapter 3), investment policy and flows (Chapter 4), and domestic investment legislation (Chapter 5). Linking China’s investment policies with energy policies, this Report aims at facilitating Foreign Direct Investment (FDI) and promoting sustainable development in China. Moreover, the Energy Charter Secretariat presents this Report in order to share reliable and comprehensive information with investors who may consider investing in China’s energy sector. The information provided in the Report has the potential to influence investors’ decisions regarding FDI, ranging from the political and institutional setup to concrete legislative conditions of doing business in the country. The challenge for China’s decision-makers is to design and develop a market and regulatory frameworks that will remove barriers for foreign investors, accelerate energy transition, and attract needed investment, while avoiding stranded assets or disputes with investors. The coming few years will be essential to re-design the energy sector of China along the entire value chain. Finally, I would like to thank Li Xiang, secondee from the National Energy Administration of China, for his dedication to developing the China Investment Report and for being instrumental in strengthening relations with China. Looking forward, the Energy Charter Secretariat endeavours to continue its close cooperation with China in order to expedite its progress towards the ECT. Recognizing China’s essential role in global energy governance, the Secretariat intends to assist China in taking an active role during the next phases of the Energy Charter Process. Urban Rusnák, Secretary General of the Energy Charter Secretariat i China Investment Report 2017 ACKNOWLEDGEMENTS The publication was prepared between October 2016 and September 2017 by Li Xiang, an expert from the National Energy Administration of China during his secondment at the Energy Charter Secretariat. The core team included Ishita Pant, Zhang Ke and Tomasz Bąk. The authors are thankful to the following analysts and experts who provided crucial insight and/or data that greatly aided the research: Zhou Xiaohong (Jilin University School of Law of China), Shen Weichun & Lei Xiaomeng (China Electricity Council), Wang Haiyan (China National Petroleum Corporation), Shan Weiguo (CNPC Research Institute of Economics & Technology), Fang Deyi & Mathieu Baratier (EDF China), Li Zequan (North China Institute of Science and Technology), Wu Quan (PetroChina Planning & Engineering Institute), Zhao Jing (TBEA Co Ltd), Yang Yufeng & Liu Jianguo (Energy Research Institute of NDRC), and Zhang Jie (China Development Bank). ii China Investment Report 2017 CONTENTS LIST OF ABBREVIATIONS ..................................................................................................... v EXECUTIVE SUMMARY.......................................................................................................viii Introduction .................................................................................................................................1 1. General Information ...............................................................................................................3 Country Overview..................................................................................................................... 3 Political and Institutional Governance ........................................................................................ 4 Economy at a Glance................................................................................................................. 6 Social Development .................................................................................................................. 8 Access to Markets ..................................................................................................................... 8 2. General Energy Policy..........................................................................................................13 Energy Supply and Demand..................................................................................................... 13 Structure of the Energy Sector.................................................................................................. 16 China’s Energy Strategy by 2020 ............................................................................................. 19 3. Market Structure of the Energy Sector .................................................................................26 Coal ....................................................................................................................................... 26 Gas ........................................................................................................................................ 29 Oil ......................................................................................................................................... 34 Electricity ............................................................................................................................... 38 Renewable Energy .................................................................................................................. 43 Energy Efficiency ................................................................................................................... 46 Climate Change and Environment ............................................................................................ 48 4. Investment Policy and Flows................................................................................................51 Institutional Arrangements and Governance .............................................................................. 51 FDI Inflow in China ................................................................................................................ 52 Outward FDI .......................................................................................................................... 54 FDI Treatment and Protection .................................................................................................. 56 5. Domestic Investment Legislation .........................................................................................60 Establishment of Investment .................................................................................................... 60 Establishment of Legal Entities ................................................................................................ 62 Land and Real Estate ............................................................................................................... 63 Competition ............................................................................................................................ 64 Taxation ................................................................................................................................