China's electrical power industry requires substantial reform if the country's economic growth is to be sustained. The 1997 Electricity Law, the creation of a State Power Company and the abolition of the Ministry of Electric Power are important first steps on the path of reform, but it seems that a clear plan is lacking. Objectives of the reform should include increasing the capacity to deliver power, constraining the costs of the power industry, increasing end-user efficiency and minimising environmental damage. Efforts should be directed at restructuring the industry in such a way that fair competition may be introduced, at least in power generation, and at establishing a viable regulatory agency. Both tasks have the potential to be thwarted by a range of vested interests at different levels of government and industry.