Market liberalisation and integration of China’s domestic market are among the most widely studied topics in the past decades. While energy governance and climate change are increasingly important, the energy market integration in China has received less attention. Due to the scarcity of energy data and limited transparency of policy-making procedures, the impact of the latest China energy pricing mechanism on the energy market integration has not been established. Price convergence is one of the leading indicators for understanding the level of market integration across regions, an optimal solution for country like China, with many economic segments. This thesis inspects the Law of One Price by examining the issue of price convergence within China’s energy sector. It pays special attention to the impact of the new energy price reform policies that were enacted in 2013 and have not been investigated since. To achieve this, a comprehensive set of univariate and panel unit root tests are employed to investigate energy price convergence across regions in China, namely the bootstrapped unit root test framework. It observes the price convergence among retail products of petroleum derivatives, including diesel, gasoline, natural gas for manufacturing, public service and coke oven, and electricity for commercial and industry usage across over 60 cities in China over the period of 1st January 2006 to 31st December 2019, the largest dataset selected for understanding China’s energy system marketisation in literature. Moreover, to analyse the impacts of new energy price reform on integration, sub-samples divided by the year 2013 are applied to compare the price convergence underlying the reform policies. It adds empirical value to the portfolio of methods applied in the LOP literature and the broad context of energy market research. The findings suggest that overall, China’s energy market has become more integrated over the 2006 -2019 period as more share of the cities exhibits price convergence. However, there still lack of solid evidence to conclude that the most parts of China’s energy market are well-integrated. Despite China having achieved partial gains in fighting domestic market fragmentation in some energy sectors, like some domestic petroleum markets, conversely, it is shown that there is no or reverse progress in others, such as the electricity markets that have become less integrated according to the 2013-2019 sub-sample test results. These findings contribute to existing literature and knowledge in two parts: first, reporting on the marketisation outcome of energy market price reform by adopting the latest unique dataset and advanced unit root tests; second, the unique sub-sample investigation in this thesis demonstrates the positive and unexpected changes to the level of energy price convergence due to the impacts of enactment of new energy pricing policies since 2013. Reflecting on these findings, this thesis also presents a unique piece of work that reviews China’s energy price reform including oil, natural gas and electricity products, which is rare in literature as previous investigations only focus on one or part of the individual energy industry. It identifies the limitations of the existing pricing mechanisms and factors that hampered energy market integration over the studied period. Suggestions are made to policymakers to reconsider the design of China’s energy price formulation and focus on possible scenarios of relaxing its price control further.
| Date of Award | 6 May 2025 |
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| Original language | English |
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| Supervisor | Artur Semeyutin (Main Supervisor) |
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