State Grid solicits social capital

China's State Grid Corporation on Tuesday announced it will open two business sectors to social capital amid the government's call to develop a diversified ownership economy.

The opening of two sectors -- distributed power grids and charging facilities for electric automobiles, will allow social capital to invest in, construct and operate projects in these fields, the first such move by the monopoly State Grid.

Company spokeswoman Wang Yanfang said the move will give full play to the market in resource allocation and promote new energy development.

The company estimated the market value of the two sectors will reach 200 billion yuan ($32.4 billion) by 2020 and drive GDP growth by 780 billion yuan.

Developing a mixed ownership economy to give more opportunities to private and social capital has been high on the government reform agenda this year.

Non-state capital will be allowed to participate in a number of projects in areas such as banking, oil, electricity, railways, telecommunications, resources development and public utilities, according to the government work report issued earlier this year.

In February, China's top oil refiner, Sinopec, decided to restructure its lucrative distribution business and allow social and private capital to take no more than 30 percent of the shares.

Compared to the Sinopec opening up, the State Grid's step was seen as a disappointment to the market as the two sectors open to social capital are not the company's core businesses.

"Despite the huge market potential of the two sectors, the current stage remains immature and the profit model unclear," said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University.

To make the two sectors more attractive to private capital, the government needs to come up with supportive policies such as price subsidies and tax breaks, Lin added.