China’s power ‘supergrid’ gives Xi buffer against energy shocks
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China has become one of the biggest investors in power grids globally, spending heavily on infrastructure to absorb more renewables and curb its reliance on imports.
PHOTO: ST FILE
BEIJING – China’s long-running effort to build out its energy sources is getting fresh momentum from the war in the Middle East, reinforcing a strategy that has sent grid operators on a bond-selling binge and funnelled hundreds of billions of dollars into the market.
The world’s No. 2 economy has become one of the biggest investors in power grids globally, spending heavily in recent years on infrastructure to absorb more renewables and curb its reliance on imports.
Financing that growth has turned state-owned grid operators into the country’s biggest bond issuers, with sales hitting unprecedented levels and yields near historic lows.
The heavy investments highlight the central role of grids in Beijing’s strategy, which involves moving energy like wind and solar power from remote western regions into China’s industrial heartland.
Given the shock of oil supply disruptions, analysts say the pace of growth is likely to accelerate.
“China’s infrastructure build-out is far more efficient than that of most countries, and the power grid is no exception,” said Fitch Ratings senior director Penny Chen.
As surging power prices become a binding constraint on artificial intelligence and manufacturing ambitions elsewhere, that advantage is set to widen.
Already, the country’s two largest grid operators – State Grid Corp of China and China Southern Power Grid – have issued 92.5 billion yuan (S$17.2 billion) of domestic bonds so far in 2026, on top of a record 901 billion yuan sold in 2025, according to Bloomberg-compiled data.
The notes have been priced at an average of 1.7 per cent so far in 2026, an all-time low.
State Grid operates power lines covering more than 80 per cent of the country, delivering electricity to more than one billion people.
Southern Grid handles most of the rest of the nation, including economic powerhouse Guangdong.
The rush to fund power infrastructure has allowed State Grid, the world’s largest utility firm, to regain the title as the country’s largest bond issuer since 2024, overtaking major commercial banks and the state railway builder.
The firm issued a record 754.5 billion yuan of bonds domestically in 2025 alone, almost tripling the previous year’s total, after its capital spending increased by 20 per cent a year earlier.
The efforts are part of a plan by China to spend roughly five trillion yuan on electricity networks over the next five years, compounding record grid investment and borrowing since 2024 when transmission bottlenecks became more acute.
The funds will be used to help build a supergrid to ensure renewable generation is properly transported.
In some ways, the grid investments highlight how energy security – once viewed as a lofty, long-term goal of President Xi Jinping – is now becoming an immediate and crucial source of economic insulation.
China is keen to blunt impacts of a shortage of oil and gas experienced by neighbours like Japan and South Korea. But cheap and plentiful electricity requires more than just heavy spending.
China’s transmission and battery-storage assets are underutilised, and the path to market reforms that would unlock them remains unclear. Questions are also mounting over how state grids will pay back record debt loads, especially if efficiency fails to improve.
Still, the recent disruptions in the Strait of Hormuz underscore the logic behind China’s strategy.
“These incidents highlight the importance of localising energy sources to ensure security and stability,” said Professor Lin Boqiang, director of the China Institute for Studies in Energy Policy at Xiamen University.
China’s shift towards green energy is the right strategic move, he added. BLOOMBERG
