Policies for the Creation of Markets?
Recall that the set of prescribed policies could be grouped into those aimed at: (1) leveling the playing field for renewables and (2) introducing support instruments.
As for leveling the playing field for renewables vis-à-vis traditional technologies, Cherni and Kentish (2007) describe how the usual market distortions that favor traditional technologies apply to China. The cost of producing electricity with coal remains lower than generation with renewables because environmental externalities are not reflected in prices, because many older coal plants still in operation have no capital costs and because the relatively high transmission and distribution costs of coal-generated electricity are not reflected in prices. The fact that the average tariff paid to coal-fired power generators is at 0.340 RMB/kWh (0.050 USD/kWh)12 somehow reflects the low cost of producing electricity with coal (for comparison, see below for tariffs paid for renewable sources). A revamped tax on coal is being discussed and is expected for mid-2010,13 and this should help internalize the environmental costs of burning coal and bring renewables closer to market competitiveness. However, the uncertainties around such tax reform are still many.14
However, China does implement all the aforementioned support-to-deployment instruments: mandated market policies, financial incentives, and support for demand. However, as we shall detail, imperfections in implementation (with respect to “best practice”) are significant.
Within quantity-based mandated market policies, China has implemented a renewable electricity standard whereby all generating companies with installed capacity above 5 MW are required to have an installed capacity of nonhydro renewable energy of at least 3% of total by 2010, rising to at least 8% by 2020 (REN21 2009b). Note that this obligation refers not to actual power fed into the grid but merely installed capacity. This, as some interviewees have indicated, results in around 30% of the installed capacity for renewable electricity remaining dormant, while the other 70% may be operating with minimal efficiency.
Another quantity-based system for the promotion of renewables is a tendering system. This mechanism prevailed in the case of onshore wind between 2003 and 2009, and it has recently begun to operate for solar options. Here we concentrate on wind, given the short-track record of tenders in solar energy. From 2003 to 2009, there were five national tenders for wind concessions carried out by the National Development and Reform Commission (NDRC). Concessions were for projects of at least 100 MW, with wind turbines not smaller than 600 kW (GWEC 2005), and local content of 50–70% (for the wind turbines) was required. During the first three rounds, concessions were granted on the basis of the price accepted by the bidders. Later, more criteria were included in the evaluation of the bids—such as quality of inputs, management capacity, and size of turbines—but price remained the decisive factor (author's interviews). However, because tenders resulted in tariffs that were insufficient for profitability, the last round redefined the best price as not merely the lowest price, but as that price closest to the average offered by the bidders (excluding the highest and lowest tariffs). The winning prices in the five concession projects fell between 0.382 RMB/kWh and 0.551 RMB/kWh (0.055–0.080 USD/kWh). Regarding project duration, concessions were for 25 years, but the fixed tariff was guaranteed for the first 30,000 full load hours of operation—after that, the tariff was to drop to the average for the power market at that time (GWEC 2005).
Because low remuneration levels and the short duration of fixed tariffs proved insufficient for profitability (Lema and Ruby 2007; author's interviews), foreign investors were essentially barred from winning these tenders. Remuneration was either below or scarcely above what IEA (2008) identifies as a threshold for deployment of wind power (0.070 USD/kWh), and even below what had been the price for wind in China before the tender system (the earlier repayment-plus-15% profit system was paying 0.700–0.750 RMB/kWh (0.102–0.109 USD/kWh) (Lema and Ruby 2007), also below what some studies have cited as the threshold for profitability (0.566–0.703 RMB/kWh, or 0.082–0.102 USD/kWh, according to Li et al. 2006).15 Moreover, the 30,000-hour duration of the tariff corresponds to about half of a wind park's life (author's interviews). Finally, the winning of a concession does not necessarily imply that the project will generate electricity and feed it into the grid. According to REN21 (2009a), 18 projects (with 1,500 MW of operational capacity) were constructed or under construction by 2009, out of 49 projects licensed through national tendering (8,800 MW of installed capacity).
Apart from national tenders, all wind projects below 50 MW are to be approved at the provincial level,16 with the specific criteria for licensing set locally. Developments at the local level are not marginal: The aforementioned 1,500 MW capacity, installed through national tendering, constitutes only 13% of the total 2008 installed capacity. According to REN21 (2009a), the tariffs set for provincial development projects have been between 0.510/RMBkWh and 0.680/RMBkWh (0.075–0.099 USD/kWh), close to what IEA (2008) considers a minimum for deployment and below the threshold for profitability estimated by some authors (Li et al. 2006).
Turning to price-based mandated market policies in China, until quite recently, these have been less favored than quantity-based schemes. There is a FIT for biomass, set at the price of coal plus 0.250 RMB/kWh (0.036 USD/kWh) for 15 years (RELaw Assist 2007), and a FIT for wind was established in July 2009. This new wind regime establishes four geographic areas, with FITs ranging from 0.510 RMB/kWh (0.075 USD/kWh) for regions with better resources to 0.610 RMB/kWh (0.089 USD/kWh) for regions with worse resources. There are expectations that a FIT for solar will follow, to be set between 1.090RMB /kWh (0.160 USD/kWh) and 1.500 RMB/kWh (0.220 USD/kWh).17
Given an average coal price of 0.340 RMB/kWh (0.050 USD/kWh), the premium set for biomass raises its FIT to an average of 0.590 RMB/kWh (0.086 USD/kWh), which is scarcely above what IEA (2008) considers to be the minimum tariff for policy effectiveness. The FIT for wind falls also very close to the IEA's minimum tariff.18 Furthermore, although the FIT does set prices slightly above most of the tariffs that resulted from national concessions (considered as well below profitable tariffs in both the business press and author's interviews), it does not depart much from the average remuneration of independent projects negotiated locally (see above). Besides, as with tendering or the independent project systems, the fixed tariffs for wind apply to 30,000 hours of operation, or about half of the life of a park. Finally, neither pricing regulation before the 2006 Renewable Energy Law (REL; Liu, Gan, and Zhang 2002) or the REL itself contained provisions for the reduction of tariffs over time—necessary for the promotion of cost-reducing innovations (Cherni and Kentish 2007). To our knowledge, provisions for reductions of tariffs have been thus far specified only for biomass: Beginning in 2010, the bonus for this electricity source will be reduced by 2% annually for all new projects.
The Kyoto Protocol's CDM, mentioned earlier, could be the source of increased revenue and certainty for investors, and it might therefore be seen as an additional price-based measure for removing economic barriers. The CDM in China operates under the usual restrictions regarding the acceptability of projects (not all sectors are eligible, and there is a requirement of additionality). Particular to China is that the NDRC has established that the foreign share of any CDM project shall not exceed 49%, so that project ownership must be at least 51% Chinese. As Schroeder (2009) indicates, this ownership requirement would be an obstacle insofar as it precludes competition and foreign participation, thereby limiting technological and organizational improvements.
At the beginning of 2009, 25% of all registered CDMs in China were wind power projects, amounting to 5,600 MW (or almost half of all installed capacity in wind) (REN21 2009a). The extra revenue raised through CDMs in wind reaches 0.070–0.140 RMB/kW/h (0.010–0.020 USD/kW/h) (REN21 2009a). These seemingly small margins are crucial to pushing remuneration above the minimum suggested by IEA (2008) and up to profitable levels. In any case, in December 2009, the United Nations announced a halt to CDM support for wind projects in China, on the basis of nonadditionality. Wind projects could still be developed in the absence of the CDM, if the remuneration were appropriate. This aggravates worries over whether the new FIT for wind has been set at high-enough levels.
As for financial incentives, we find in China both financial support and fiscal aids. In fact, policies for the deployment of renewables included financial incentives before they included mandated market policies. Some examples of financial support are as follow. In 1997, preferential loans of 900 million RMB (130 million USD) were invested toward installation of wind turbines (Liu, Gan, and Zhang 2002). In 1999, the State Council set an innovation fund for small- and medium-sized technical enterprises, supporting efficiency and renewables by means of grants and preferential loans (1 billion RMB, or 146 million USD) (Cherni and Kentish 2007). Also, solar photovoltaic (PV) generation projects above 500 MW have been eligible, since July 2009, for the enhanced “Golden Sun” project, which includes a subsidy of 50% for all investment (and 70% for off-grid solar PV).19 The REL itself, in Article 25, dictates that “financial institutions may offer preferential loan with financial interest subsidy” to projects in renewables. Finally, there are numerous other financial aids stemming from multilateral and bilateral cooperation (Liu, Gan, and Zhang 2002).
On the fiscal side, there are tax reductions, perhaps the most relevant of which has been the 50% cut in the value added tax (VAT) rate for electricity generated by wind, granted by the Ministry of Finance (MOF) and the State Tax Administration in 2001. The VAT for wind is at 8%, whereas the normal VAT level is at 17%.20 Also, the corporate income tax for wind is at 15%, whereas the normal level is more than double that, at 33% (Lema and Ruby 2007). Furthermore, in 2008, the MOF announced it would give tax refunds for companies importing key components for wind turbines larger than 2.5 MW. Article 26 of the REL also includes tax benefits to renewables.
In any case, financial support is frequently given to the manufacturing and development of installed capacity but with scarce incentives to production, efficient use of resources, or quality improvements and cost reductions (Cherni and Kentish 2007).
Finally, China implements certain demand-enhancing schemes. Transmission companies are obliged to provide each facility with connection to the grid, at the connection point closest to the generator and, under PPAs, they are obliged to purchase all renewable electricity. Furthermore, renewable electricity has priority over other power, and therefore it need not participate in bidding against nonrenewable sources in order to be sold. Nevertheless, grid companies, while mandated to connect all renewable power plants and to buy their electricity, may prove reluctant to comply with the rules: Grid companies suffer losses from the purchase of renewable power at fixed tariffs as well as from an incapacity to pass these extra costs on to consumers.21 REL and its provisions attempt to promote the passing along of the cost;22 however, results are yet to be seen. Also, even when generators are provided with connection points, these points may be too far removed from the point of generation; this negatively affects the developer, who has to provide the line between producer and grid (author's interviews).23 Finally, the grid simply lacks the technical requirements for connecting and dispatching increasing volumes of renewable electricity (author's interviews).
In 2008, as a result of difficulties in connection, and coupled with the fact that the RPS applies to installed capacity and not dispatched power, more than 20% of the country's installed wind power capacity did not generate any electricity. Various interviews also confirmed that a relevant portion of installed capacity in wind is not yet connected to the grid.
In sum: (1) prices are set in a way that, despite advances, remains far from “internalizing” externalities; (2) mandated market policies, as well as fiscal and financial aids, focus on installing capacity instead of on feeding power into the grid, remuneration levels are low and duration of tariffs is short, and regulations do not include enough provisions for reduction of tariffs; and (3) PPAs do not ensure connection to the grid.
In order to make explicit how these divergences vis-à-vis “best practice” distance China from an LME approach to renewables, we could add that China's approach is not one of quickly perfecting markets. Instead, its approach is experimental and gradual—China has used virtually all the options in the toolbox (García 2011). Also, China's policies do not exclusively seek the promotion of (private) investment typical of LME regulations. Other goals, such as developing local industry, prevail. Furthermore, the development of local industry resists an arm's length approach; for instance, the emphasis on deploying capacity, limited remuneration and duration of support schemes, and uncertainties surrounding PPAs all assist domestic companies vis-à-vis foreign competitors (García 2011).
Market-Friendly Institutions for Renewables?
Recall that the “best” institutions for the promotion of renewables basically consist of those that allow for the good functioning of markets. Desired institutions can be grouped into those aimed at: (1) instituting good governance in renewables, (2) enhancing competition and innovation-friendly institutions in manufacturing and generation, and (3) developing knowledge and information among workers and consumers.
Concerning institutions related to the state, does general legal security exist in China? Clearly, we cannot answer such a broad question here. However, if we simply note the perceptions of investors (or potential investors) in renewable electricity—those for whom “good” institutions are necessary to increased investment—we see that China lags behind in institutional quality. Certain quantitative empirical studies (such as Lüethi 2009), together with our own interviews, indicate that foreign companies are discouraged by the general legal insecurity and/or regulatory uncertainty in China.
Regarding the capability of the bureaucracy to design, implement, and enforce goals and instruments for the promotion of renewables, recall that “best practice” would require coordination, bureaucratic skills, and limited red tape. Coordination has increased substantially because the centralization of energy regulation into new public entities (Lema and Ruby 2007) such as the National Energy Administration (NEA) or the State Electricity Regulatory Commission (SERC). However, a multiplicity of stakeholders and a lack of regulatory, supervisory, or enforcement capacities within these new energy entities continue to prevail (Downs 2008). Renewable electricity in particular has many public stakeholders in China. A simple categorization would include: (1) certain players from the central government, such as the NDRC, the Ministry of Energy, the Ministry of Environmental Protection, the Ministry of Science and Technology, or the MOF (Cherni and Kentish 2007) as well as independent governmental bodies, such as the aforementioned NEA and SERC, or the state-owned Assets Supervision and Administration Commission; (2) local governments; and (3) state-owned enterprises (SOEs) involved in generation (the “big five” stand out—see below) and transmission/distribution (the State Grid and the Southern State Grid).
Fragmentation is seen as posing at least two problems. First, it brings about uncertainty to the degree that the responsibilities of each government organism are unclear—responsibilities being either insufficiently explicit in regulations (Liu, Gan, and Zhang 2002) or failing to match those that are officially stated.24 For instance, Cherni and Kentish (2007) emphasize that SERC “lacks the independence and power necessary to maintain a fair and transparent system . . . . The roles and responsibilities of the SERC will need to be clarified, enhanced, and given assured permanence in order to ensure that investment in renewable energy is maximized” (Cherni and Kentish 2007, 3627; see also Lema and Ruby 2007; Ma and He 2008; Tsai, 2007 about the limited authority of SERC vis-à-vis the NDRC).
Second, even under the umbrella of Beijing's determination, fragmentation assists the designs of those public players who are disinterested in, or ill-suited for, the development of renewable electricity. One interviewee cited the example of a fuel tax not being introduced, in deference to certain stakeholders not in charge of policymaking in that arena, and Ma and He (2008) explain how Chinese local officials have been historically evaluated according to economic growth, deprioritizing compliance with national environmental regulations.
In relation to the multiplicity of stakeholders, there exists in China a multiplication of bureaucratic procedures. In the interviews performed, several non-Chinese businesspeople operating in renewables mentioned the necessity of dealing with many different public agencies, increasing both the uncertainty and the duration of administrative procedures. Also (again, according to interviewees), having to deal with the provinces in developing renewable electricity projects entails excessive red tape, because a different administrative process is required for each 49.5 MW project. Furthermore, the process for obtaining connection is subject to differences on a plant-by-plant basis, complicating matters to the point where it might take 3–4 months to get wind equipment hooked to the grid25 (author's interviews).
As to the quality of policies around renewables, we find that the Chinese government does indeed have specific targets for renewable electricity, as is deemed necessary by the literature. The explicit goals of the state in relation to renewable energy can be found in public documents such as the National Medium- and Long-Term Development Plan for Renewable Energy in China (2006–2020), issued in 2007 by the NDRC. Goals are as follows: 2020 targets regarding installed capacity for electricity production include 300 GW hydro, 30 GW wind (including 1 GW offshore), 1.8 GW solar PV, 200 MW solar thermal power, and 30 GW biomass generation capacity (apart from other targets in renewables unrelated to electricity production). Moreover, China recently revised its wind target to 100 GW by 2020. Regarding shares of electricity produced, nonhydro renewable power generation should reach 1% of total power generation by 2010 and 3% by 2020. Also, there is a 2010 target of 10% for renewables' share in total primary energy, and a 2020 target of 15% (excluding traditional biomass but including large-scale hydro). Nevertheless, according to Ma and He (2008), the weakness of these targets is that they are not compulsory.
Regarding predictability of policy (resulting mostly from regulation being stable, rules based, and transparent), China does not seem to rank particularly high. For instance, when it comes to clarity and transparency of rules, we find that REL includes very few regulatory details,26 and other renewable energy legislation in China also lacks specificity (Cherni and Kentish 2007; IEA 2007; author's interviews). In particular, there are critiques to the uncertainties around tariffs, which could be partially solved by measures such as the recent FIT for wind. Before this FIT, developers would remain uncertain about the final price for their output until after the license was approved, and even until after the park was built (author's interviews). Also, critiques around uncertainties commonly refer to connectivity and PPAs (negotiated case by case), to grid upgrades needed for connectivity and validity of PPAs, and to measures for enforcing laws and subsequent regulations.
Leaving aside the institutional features of the state and its policies, we now turn to the corporate structure for renewable electricity. The electrical sector reform27 started in the mid-1980s and pushed in the early 2000s, included the separation between government and business operations as well as the unbundling of generation and transmission. Also, an independent regulatory and supervisory agency (the SERC) was established whose functions for renewable electricity include: “regulating the operations of renewable energy power generation enterprises, coordinating the relationship between power generation and power grid enterprises, and supervising renewable energy power generation, connection with power grids and settlement.”28
In any case, reforms in the electric sector are widely perceived to be unfinished, mostly in the sense that free entry and competition are restricted, both in terms of transmission/distribution and generation. Regarding transmission and distribution, the State Grid and the Southern State Grid are essentially monopolies, as well as monopsonies, in their respective regions. Also, we have already mentioned the limited regulatory capacity of SERC versus NDRC; here we emphasize that SERC has limited authority over the transmission companies, given the administrative ranks of SOE managers, which parallel those of the government officials at SERC (Tsai 2007). Therefore, regulations regarding connection and PPAs (which could counterbalance the power of the monopolistic transmission companies) are not rigorously enforced. Distribution, meanwhile, has simply not been part of China's electricity industry restructuring29 (Rufín, Rangan, and Kumar 2003).
In the area of generation, legal barriers to entry were removed with the electricity reform: since 1986, IPPs have been allowed to operate in China, and an electric power law was introduced to protect the interest of new investors (Cherni and Kentish 2007). Public and private IPPs are therefore officially allowed to compete with the “big five” corporations that resulted from the 2002 unbundling of the State Power Corporation—the “big five” being China Huaneng Group, China Datang Corporation, China Guodian Corporation, China Huadian Corporation, and China Power Investment Corporation. However, competition is still very limited and “only simulated in pilot markets” (Ma and He 2008, 1704, referring not only to renewables but to the power sector in general30). Competition, we argue, is hindered by industry concentration, by public ownership and control, and by barriers to foreign competition. The latter not only restrict overall competition but also limit the technology and know-how utilized in development and generation.
The five big holding companies own close to 40% of total generation assets31 and produce about half of China's electricity.32 Much of the remaining assets belong to other companies administered by the central government (10%) or by local governments (45%). The “big five” power companies, which traditionally generate electricity with coal, also dominate the renewable power sector. For instance, under the national tender system for wind development, all the winners but one have been subsidiaries of the “big five” (Lema and Ruby 2007). And this is not likely to change in the future: seven wind mega-projects planned for construction will be led by China's “big five.” Of the 3.8 GW of the first phase of the first project under construction (started in mid-2009), Huaneng will develop 500 MW.33 Moreover, we must note that the “big five” are SOEs, and because most other generation assets (not belonging to the “big five”) are controlled by central or local governments, any semblance of market-like competition is hindered even further.
At the same time, foreign competition in development and generation remains marginal: Foreign companies (including joint ventures) produce about 6% of total electricity in China, and out of the 12 GW installed in wind in 2008, about 95% belongs to Chinese capital, with most of the remaining 5% belonging to joint ventures, and only a marginal share are wholly foreign owned (author's interviews). The scant presence of foreign developers and generators might be explained by policies already reviewed, some of which deter foreign investment (author's interviews; RELaw Assist 2007), including: (1) the fact that foreign companies cannot win concessions through national tendering (Spanish and German companies participating in the first two bids proposed tariffs at least 50% higher than the winning price; see Lema and Ruby 2007); (2) low remuneration and short duration for all incentive schemes, together with the 51% Chinese equity requirement for CDM projects; and (3) the fact that foreign projects are allowed a percentage of debt financing below the 80% permitted for domestic projects.34
Other policies and institutions reviewed here could conceivably deter the entry of any company but more so the entry of foreign competitors: grid access and PPAs that are time consuming and difficult to negotiate; the general departure of the Chinese legal and contractual framework from Rule of Law principles; administrative hurdles in licensing procedures (made worse by having to apply for a distinct license for each 49.5 MW park, as in provincial licensing for wind); institutional weaknesses of the policies for renewables, such as insufficient stability, transparency, or coordination, all damaging to the predictability of rules; and others (Cherni and Kentish 2007; author's interviews).
Concerning the obstacles to renewables deriving from the mostly Chinese (and mostly public) corporate structure in generation, it is argued that Chinese companies develop parks and generate electricity with lower standards than foreign companies would: Cheaper manufactured inputs (even lacking guarantees from suppliers, as one interviewee pointed out), cheaper technologies, and lower level skills could all hinder the efficiency and/or lifetime of parks. Cheapness of inputs also contributes to Chinese companies' acceptance of low tariffs, coupled with cross-subsidies from coal to renewables. In any case, Chinese companies are in need of technology transfers from foreign companies, which they attempt to obtain via the establishment of joint ventures or the hiring of foreign workers (author's interviews).
We now turn to manufacturing, which, while not part of electric sector reform, remains a crucial sector in the production chain for the renewable electricity industry. In manufacturing, both industry concentration and the market share of Chinese companies vis-à-vis foreign companies are lower than in power generation. In terms of wind, prior to 2004, there were fewer than five manufacturers of turbines and other wind power components in China. By the end of 2007, there were about 40 companies operating in this sector, and by the end of 2008, wind turbine manufacturers numbered 70 (REN21 2009a) (with companies producing components in the hundreds). Nevertheless, the three biggest manufacturers (Goldwind, Huyue, and DongQi) dominate, with more than half of the market.35
Within those roughly 70 companies manufacturing turbines in China, more than 50 are Chinese owned, 8 are joint ventures, and 9 are wholly foreign owned. Some major foreign companies operating in China include Suzlon, Vestas, Gamesa, and more recently Siemens. However, the presence of foreign capital in manufacturing has certainly decreased over time, whereas in 2004, the domestic market share for wind turbines was 18% (GWEC 2005), the 2007 share for domestic and joint venture companies was at 56%, increasing to 75% in 2008 (REN21 2009a). And in view of certain, recent government incentives, it is likely that in the future Chinese companies will continue to increase their market share. For instance, all majority Chinese-owned domestic manufacturers will be awarded up to $88 per kW for their first 50 wind turbines certified and connected to the grid; also, Sinovel Wind, Goldwind, and Dongfang Electric will apparently benefit most from the mega-wind farms project, accounting for about 80% of the market in the first phase.36
Foreign production of equipment faces some difficulties vis-à-vis domestic production (be it with foreign or domestic capital). Frequently mentioned policies include the 70%-local-content standard for wind turbines, and the import duties structure, also for turbines: in 2000, a 12% tariff for turbines (3% for components) was reintroduced (Liu, Gan, and Zhang 2002). Also, compared to domestic companies, foreign manufacturers face restrictions to their operations (some of which are related to policies and institutions already described). Examples of discriminatory policies would be the following: the tendering system for wind, which favors turbine price over quality; subsidies for Chinese companies only (such as the aforementioned $88 per kW bounty for the first 50 wind turbines certified and connected by Chinese-owned companies); opposition of the government to domestic companies going public in international stock markets (such as when Goldwind backed out of a U.S. initial public offering); the very recent “buy Chinese” policy wherein projects financed by the economic stimulus package—such as the seven new mega-projects for wind—must seek permission from the government before buying foreign goods and services.37
As with generation, manufacturing could experience difficulties related to the decreasing presence of foreign companies. Chinese producers suffer from technological limitations both in manufacturing (e.g., lacking the technology to make turbines above a certain size) and in innovation. At the same time, their products are not subject to certification, and the quality of their production remains to be seen (many Chinese turbines having been installed so recently that lifetime and other quality-related features are as yet untested). Consequently, China must rely on either imports or foreign direct investment (FDI) to obtain certain components and turbines. Also, Chinese companies are in need of technology transfers from foreign companies, which they seek by purchasing licenses from foreign companies (e.g., the Goldwind 750 KW is a remake of a German machine), or by directly acquiring the foreign companies altogether (as when Goldwind bought Germany's Vensys Energy in 2008, helping Goldwind to add 2.5 MW turbines to its production38). Joint ventures, while possible, are not the preferred form of entry for foreign companies, thus limiting the possibility of technology transfer through shared ownership.
In sum, China's institutions in GCRE: (1) do not display what is frequently understood as “good governance” (legal security, capable bureaucracy, and predictability of regulation) and (2) include a corporate structure that lacks competition and openness to foreign participation.
In order to make explicit how these institutional divergences vis-à-vis “best practice” distance China from an LME model, we should underline that China's approach is not that of liberal market institutions. Instead, China's uncertainties and insufficient bureaucratic coordination, or its limits to competition, could all serve as examples of “bad governance” insofar as they might hinder (private) investment. However, again, China's institutions do not exclusively seek the promotion of investment, competition, and innovation typical of LME regulations. They pursue other goals, such as promoting local industries and retaining public control (or even ownership) over the sector, for which “bad governance” or limits to competition might be more helpful than they are damaging (García 2011).