CHINA Law and Practice Contributed by: Yan Gao, Yilin Wang and Zhuohui Li, Zhong Lun Law Firm
Expropriation Risk and Foreign Investor Protection Under the Land Administration Law, the state may compulsorily acquire collectively owned land for pub- lic interest purposes, which expressly includes energy infrastructure construction organised by the gov- ernment. The expropriation process requires a pre- announcement period of not less than 30 days, a cur- rent status survey, a social stability risk assessment, and the conclusion of compensation and resettlement agreements prior to formal submission for approval. Foreign-invested enterprises benefit from the protec- tions afforded by the Foreign Investment Law. Article 5 provides that the state undertakes to protect the investments, returns and other lawful rights and inter- ests of foreign investors in China. Article 20 provides that the state will not expropriate foreign investors’ investments save in special circumstances where the public interest so requires, in which case, expro- priation must be conducted in accordance with legal procedures and result in timely, fair and reasonable compensation. Article 21 further guarantees foreign investors the right to freely remit their contributions, profits, capital gains, asset disposal proceeds and other returns into and out of China, in either CNY or foreign currency. 4.5 Monopoly Rights to Provide Transmission Services The construction and operation of transmission net- works in China is in practice carried out by the three major state-owned grid enterprises, State Grid Cor- poration of China, China Southern Power Grid Com- pany Limited and Inner Mongolia Power (Group) Co, Ltd, each operating within its designated service ter- ritory, together with a number of smaller local grid enterprises operating in certain areas on a historically established basis. While Chinese law does not contain a provision expressly granting these enterprises exclusive rights over transmission within their respective territories, the position in practice is clear: the NEA has issued Electric Power Business Licences for Power Trans- mission to the three major grid enterprises in respect of their service territories, and the transmission sector is generally not open to private or foreign-invested
entities as independent transmission operators under the current regulatory framework. 4.6 Transmission Charges and Terms of Service Transmission charges in China are established and regulated by the NDRC, which approves transmis- sion tariffs across three categories depending on the nature and geographic scope of the relevant transmis- sion infrastructure. Provincial Grid Transmission and Distribution Tariffs Provincial grid transmission and distribution tariffs are governed by the Measures for Pricing Provincial Grid Transmission and Distribution Tariffs (NDRC, effective 1 January 2026). These tariffs are set on a combined transmission-and-distribution basis at the provincial level, differentiated by voltage level and user category. Tariffs are determined on a permitted revenue meth- odology, under which the NDRC calculates the total permitted revenue for each grid enterprise as the sum of its permitted costs, a permitted return on its effec- tive asset value calculated by reference to a weighted average cost of capital, and applicable taxes. The permitted cost base is subject to a dedicated cost review process under the Measures for the Supervi- sion and Audit of Costs for Power Transmission and Distribution Tariffs, which excludes assets unrelated to the core transmission and distribution function such as pumped hydro storage, electric vehicle charging facilities, and assets acquired through related-party For electricity transmitted across provincial bound- aries through regional grid infrastructure, tariffs are governed by the Measures for Pricing Regional Grid Transmission Tariffs (NDRC, effective 1 January 2026) and are structured on a capacity fee plus energy fee basis, allocated among the relevant provincial grids in proportion to their actual usage of the regional trans- mission infrastructure. Cross-Provincial Special Project Transmission Tariffs For dedicated cross-provincial or cross-regional trans- mission projects, tariffs are governed by the Measures transactions at above-market prices. Regional Grid Transmission Tariffs
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