(Bloomberg) — China’s long-standing effort to build up its energy resources is gaining new momentum from wars in the Middle East, reinforcing a strategy that has led grid operators to sell bonds frantically and inject hundreds of billions of dollars into the market.
The world’s second-largest economy has become one of the world’s biggest investors in power grids, investing heavily in infrastructure in recent years to absorb more renewable energy and curb reliance on imports. Financing growth has made the state-owned grid operator the country’s largest bond issuer, with sales reaching unprecedented levels and yields near historic lows.
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The huge investments underscore the power grid’s central role in Beijing’s strategy to move energy sources such as wind and solar from the far west to China’s industrial heartland. Analysts say growth is likely to accelerate given the impact of oil supply disruptions.
“China’s infrastructure construction efficiency is much higher than that of most countries, and the power grid is no exception,” said Penny Chen, senior director at Fitch Ratings. That advantage is set to expand as rising electricity prices act as a constraint on AI and manufacturing ambitions elsewhere.
China’s two largest grid operators – State Grid Corporation of China and China Southern Power Grid – have issued 92.5 billion yuan ($13.5 billion) in domestic bonds so far this year, with a record 901 billion yuan in issuance in 2025, according to data compiled by Bloomberg. The notes have been priced at an average of 1.7% so far this year, a record low.
The power lines operated by State Grid cover more than 80% of the country, providing power to more than 1 billion people. China Southern Power Grid covers most of the country, including the economic powerhouse Guangdong Province.
State Grid did not immediately respond to a request for comment.
As it rushes to fund power infrastructure, State Grid, the world’s largest utility, has regained its position as China’s largest bond issuer since 2024, surpassing major commercial banks and the state’s railway builder. Last year alone, the company issued a record 754.5 billion yuan in domestic bonds, nearly three times the previous year’s total, after a 20% increase in capital spending from the previous year.
Photographer: Shen Qilai/Bloomberg
Li Gen, founder of Beijing G Capital Private Equity Fund Management Center, said that in the next five years, the average annual bond issuance scale of State Grid may be around 1.2 to 1.4 trillion yuan. During the peak period of construction this year and next, the annual issuance volume may even exceed 1.5 trillion yuan, “firmly maintaining its position as China’s largest corporate bond issuer” and even exceeding the total issuance volume in many provinces.
The efforts are part of China’s plan to spend about 5 trillion yuan on power grid construction over the next five years, adding to record grid investment and borrowing since 2024 when transmission bottlenecks become more severe. The funds will be used to help build supergrids to ensure the proper delivery of renewable energy generation.
State Grid said in a company statement on Saturday that fixed asset investment reached 75.7 billion yuan ($11 billion) in the first two months of this year, a year-on-year increase of 81%. The company is prioritizing ultra-high voltage transmission lines, backbone grid upgrades and distribution grid projects.
In some ways, grid investments highlight how energy security—once viewed as a lofty and long-term goal by President Xi Jinping—is now a direct and significant source of economic isolation. China is keen to mitigate the impact of oil and gas shortages experienced by neighboring countries such as Japan and South Korea.
State Grid and China Southern Power Grid are expected to invest nearly 1 trillion yuan this year, and investment is expected to continue to grow by the end of this century. State-owned grid companies tend to have strong balance sheets, which leaves plenty of room to increase leverage, said Fitch’s Chen. Data from S&P Global Ratings shows that State Grid’s adjusted operating funds cover interest expenses about 14 times, exceeding the single-digit ratios of many overseas power companies.
But cheap and plentiful electricity requires more than a lot of spending. China’s transmission and battery storage assets are underutilized, and the path to market reforms to unlock them remains unclear. Questions are also growing about how National Grid will repay its record debt load, especially if efficiency cannot be improved.
Nonetheless, the recent chaos in the Strait of Hormuz highlights the logic behind China’s strategy. “These incidents highlight the importance of energy localization to ensure security and stability,” said Lin Boqiang, director of the China Energy Policy Institute at Xiamen University, adding that China’s transition to green energy is the right strategic move.
