Subtitle: China built the power, now it has to move it
We are hosting an upcoming China Tour from November 2 to 6 in Shanghai, Suzhou, and Hangzhou, focused on China's energy transition. Highlights include visits covering frontier nuclear fusion technology, EV infrastructure, local government state-capital ecosystems, and AI-driven electricity demand.
Interested readers can view the full itinerary and sign up here:
[small preview: https://www.baiguan.news/p/rsvp-now-2026-autumn-baiguan-china?open=false#§chinas-next-energy-and-industrial-cycle-power-ai-and-how-china-builds-nov-2-6-shanghai-suzhou-hangzhou]
When an economy slows, a specific investment strategy emerges: focus on what is still being built and identify sectors backed by genuine demand and order over the next few years.
In China right now, the reality check is straightforward. Property is still finding the bottom. Consumer stimulus is real but small. Local government balance sheets are in repair mode. In our last monthly view of Chinese equities, we noted that, given the macro, we approach Chinese equities less as a broad market allocation and more as a targeted bet on a handful of resilient sectors.
In today’s issue, we explore one such example: the power grid. Unlike many other policy-driven themes that quickly became speculative trades, this one comes with greater certainty: target numbers in the 15th Five-Year Plan, a national commitment to grid infrastructure buildout, and transparent bidding data you can check every month.
On 15 January 2026, State Grid Corporation of China announced that fixed-asset investment over the 15th Five-Year Plan (2026–2030) would reach RMB 4 trillion, up roughly 40% from the 14th FYP — about RMB 800bn a year. China Southern Power Grid followed with RMB 180bn for 2026 alone and roughly RMB 1tn over the plan period. Together, the two biggest utilities point to close to RMB 5 trillion, compared with RMB 2.85tn actually spent in the 14th FYP and RMB 2.64tn in the 13th.
Within that, State Grid has committed to commissioning 15 UHV DC projects, lifting inter-provincial transfer capacity by 35%, and supporting no less than 200GW of new renewable interconnection annually.
We think this is particularly important because historically, inclusion in China’s Five-Year Plan signifies a strategic direction that has been thoroughly vetted and backed by strong central consensus—especially when accompanied by explicit numeric targets. For investors, this provides crucial visibility: we know the power grid will benefit from guaranteed orders and sustained capital expenditure across the supply chain for at least the next five years.
This is not fiscal spending committed by the central government. So it is legally required to be in anyone's budget. Rather, the 4 trillion fixed asset investment is done through SOEs’ corporate capex, funded by "the enterprise's own capital (100%) or finance-lease funds. (State Grid, for example, carries an AAA credit rating and generates sufficient cash flow to fund these commitments.)
That distinction matters in both directions. Because funding doesn't rely on NPC approval, it remains insulated from national deficit constraints. But it is also governed by return-on-capital logic rather than political will — which, as we'll see, means not every company across the supply chain offers the same structural growth opportunity.
China regulates transmission and distribution the way most developed markets do, through a permitted revenue framework. Stripped to its essentials, the National Development and Reform Commission (NDRC)'s pricing rules — revised in late 2025 and effective for ten years from January 2026 — say this:
Permitted return = effective assets × permitted return rate
The return rate is set by the regulator. State Grid cannot move it. Which leaves exactly one lever for growing profit: make the asset base bigger. At a 5% permitted return, every additional trillion renminbi of invested assets is worth roughly RMB 50bn a year.