Grid investment during the 15th Five-Year Plan period could exceed Rmb4.5tn, with UHV, distribution-grid upgrades, and digitalization driving the main incremental growth
AI summary card
Grid investment during the 15th Five-Year Plan period could exceed Rmb4.5tn, with UHV, distribution-grid upgrades, and digitalization driving the main incremental growth
The expert expects State Grid's actual investment during the 15th Five-Year Plan period to potentially exceed Rmb4.5tn, above the Rmb4.0tn plan, while investment in 2026 could surpass Rmb720bn and even approach Rmb760bn. The report identifies UHV transmission corridors, renewable energy integration, distribution-grid intelligence, and power AI computing infrastructure as the core growth areas.
- State Grid's capital expenditure grew by more than 12% year over year to Rmb310bn in 1H26.
- The original plan for the 14th Five-Year Plan period was Rmb2.3tn, while approximately Rmb2.8tn was ultimately completed; the expert expects actual investment during the 15th Five-Year Plan period to potentially exceed Rmb4.5tn.
- Grid capital expenditure in 2026 could exceed Rmb720bn and may be further raised to approximately Rmb760bn, representing year-over-year growth of more than 10%.
- The annual budget for main-grid transmission and transformation during the first two years of the 15th Five-Year Plan period is expected to be Rmb130bn-Rmb150bn.
- Demand for 220 kV equipment is slowing, 110 kV remains resilient, and 750 kV is entering a period of concentrated volume growth.
- Grid digitalization investment is expected to rise from approximately Rmb27.5bn to Rmb61.0bn and exceed Rmb100bn in 2027.
- A new round of replacement of the installed meter base is expected to begin in 2027, supporting a demand recovery over the next two years.
- The report assigns OW ratings to Nari Technology, Qingdao TGOOD Electric, Wasion Holdings, and Xuji Electric.
Report interpretation
Overview
The report summarizes an expert call concerning State Grid's capital expenditure during the 15th Five-Year Plan period. The central view is that actual investment could significantly exceed the Rmb4.0tn plan and that the investment cycle will begin earlier in 2026, with UHV, renewable energy transmission, distribution-grid upgrades, and digitalization jointly supporting demand for power equipment.
Core views
State Grid's capital expenditure reached Rmb310bn in 1H26, up more than 12% year over year, and JPMorgan expects this strength to continue through the year. The expert uses implementation of the 14th Five-Year Plan as the basis for this assessment: investment was originally planned at Rmb2.3tn but ultimately reached approximately Rmb2.8tn. Accordingly, the Rmb4.0tn plan for the 15th Five-Year Plan period likewise has upside potential, with actual investment possibly exceeding Rmb4.5tn. Incremental funding is expected to focus on capacity expansion and upgrades supporting the grid connection of large-scale renewable energy, interregional UHV transmission corridors, and distribution-grid intelligence and digitalization. Pumped-storage hydropower, new forms of energy storage, AI, power-computing coordination, and virtual power plants are also identified as faster-growing areas. The investment cadence could differ markedly from that of the 14th Five-Year Plan period. During the early part of the 14th Five-Year Plan, pandemic-related execution bottlenecks and a trough in the UHV construction cycle caused capital expenditure to rise gradually from Rmb489bn in 2021 to approximately Rmb650bn in 2025, resulting in back-end-loaded growth. The expert expects investment in 2026, the opening year of the 15th Five-Year Plan, to exceed Rmb720bn and potentially be raised further to approximately Rmb760bn, representing year-over-year growth of more than 10% and significantly exceeding the average level during the 14th Five-Year Plan period. Early-stage growth will primarily come from the concentrated commencement of UHV projects and renewable energy transmission corridors. The middle stage may remain relatively stable, supported by distribution-grid upgrades and equipment replacement demand. As the 2030 carbon-peaking milestone approaches, investment intensity is expected to increase again, with a focus on strengthening interregional transmission capacity and system flexibility resources. Budget visibility for main-grid transmission and transformation equipment is relatively high, although structural divergence will emerge among different voltage levels. During the first two years of the 15th Five-Year Plan period, the annual budget for main-grid transmission and transformation is expected to be Rmb130bn-Rmb150bn. As the number of UHV corridors increases, supporting 110-750 kV projects will need to handle the absorption, dispatch, and distribution of interprovincial and intraprovincial power. Investment drivers include backbone-grid reinforcement, load growth, new substations, expansion of main-transformer capacity, and transmission-line upgrades. Overall main-grid spending could maintain steady growth, though not as steep as UHV investment: demand for 220 kV equipment is slowing, 110 kV remains resilient, and 750 kV is entering a period of concentrated volume growth. Distribution-grid capital expenditure is expected to provide stable support during the 15th Five-Year Plan period, with demand driven by distributed solar power, electric-vehicle charging, replacement of aging equipment, improved power-supply reliability, and grid digitalization. State Grid procurement is shifting from decentralized provincial procurement to six regional procurement zones and may strengthen coordination at the headquarters level. The report believes this reform will help reduce disorderly low-price competition. As tender scoring reduces the weighting assigned to price and increases the weighting assigned to technical capabilities, leading suppliers with differentiated products and R&D capabilities will be better positioned. Transformers and electricity meters are in a phase of gradual price and volume recovery. Major manufacturers accumulated silicon steel inventory in the previous year, creating excess supply and depressing transformer unit prices. In early 2026, State Grid allowed equipment prices to recover from levels at which supplier profit margins had been compressed to 10%-20% in the previous year. Next-generation smart meters have been launched, and prices are expected to recover by 5%-25%, although they are unlikely to return to previous peaks or historically high profit margins. In terms of volume, 2026 remains a transition year. As provinces begin a new round of replacement of the installed meter base in 2027, demand is expected to recover over the next two years. Raw-material costs will not be passed through proportionately to State Grid's procurement prices. Even if input prices rise sharply, tender prices typically adjust only moderately because project contracts include buffers for material-price fluctuations, generally 5-10 percentage points for main-grid transmission and transformation projects. Projects continue when increases remain within the buffer; if they exceed the buffer range, delivery may be delayed while awaiting the normalization of material prices. Therefore, although price recovery benefits suppliers, incomplete cost pass-through will continue to affect margins and delivery schedules. Digitalization is one of the fastest-growing investment areas. Related investment is expected to rise from approximately Rmb27.5bn in 2025 to Rmb61.0bn in 2026, of which power AI computing centers and underlying computing infrastructure account for approximately Rmb18.0bn, the largest component. By 2027, total digitalization investment is expected to exceed Rmb100bn. The State-owned Assets Supervision and Administration Commission is promoting the replacement of traditional labor-intensive models with AI-intensive solutions, implying that deployment is shifting from adoption by provinces on an as-needed basis to top-down implementation. Based on rising grid investment and the structural themes described above, the report assigns OW ratings to Nari Technology, Qingdao TGOOD Electric, Wasion Holdings, and Xuji Electric.
Analysis framework
The report first uses an expert call to assess the total scale of investment during the 15th Five-Year Plan period and then conducts a historical comparison using the planned and actual investment during the 14th Five-Year Plan period and the annual capital expenditure trajectory. It subsequently breaks total investment down into UHV and main-grid transmission and transformation, distribution equipment, and digitalization businesses, analyzing the budget, demand drivers, and timing of each segment. For distribution equipment, the report further assesses suppliers' operating environment from the perspectives of procurement systems, prices, sales volumes, and raw-material cost pass-through, and finally maps the findings to the four Chinese power equipment companies under coverage.
Methodology notes
Expert Call Research
The report primarily draws on an industry expert's assessment of State Grid's plans, budgets, and project cadence during the 15th Five-Year Plan period and combines this with realized investment data from the 14th Five-Year Plan period to formulate forecasts.
Mapping Grid Capital Expenditure to Equipment Demand
The report links demand arising from UHV construction, renewable energy integration, load growth, and equipment replacement with spending on transmission and transformation equipment at different voltage levels, distribution equipment, and digital infrastructure.
Price and Sales Volume Cycles for Transformers and Smart Meters
The report separately analyzes the extent of equipment price recovery from low levels and the support provided by a new round of meter replacement for procurement volumes over the next two years to assess the path of demand and earnings recovery.
Pass-through of Raw-material Costs to Grid Tender Prices
The report examines how changes in the prices of inputs such as silicon steel affect equipment costs, tender prices, and deliveries, noting that the 5-10 percentage-point buffer in procurement contracts limits direct cost pass-through.
Grid Investment Cycle During the 15th Five-Year Plan Period
The report compares the low-then-high investment trajectory of the 14th Five-Year Plan period with the expected strong start to the 15th Five-Year Plan period and explains changes in business conditions across three stages: concentrated project commencements in the early stage, stability in the middle stage, and renewed strengthening as 2030 approaches.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Nari Technology - A（600406.SS）The report lists it as a Chinese power equipment company under coverage and assigns it an OW rating; its closing price as of August 24, 2026 was Rmb23.27.
- Comparison
- It received the same OW rating as the other three companies discussed in the report.
- Qingdao TGOOD Electric（300001.SZ）The report lists it as a Chinese power equipment company under coverage and assigns it an OW rating; its closing price as of August 24, 2026 was Rmb36.26.
- Comparison
- It received the same OW rating as the other three companies discussed in the report.
- Wasion Holdings Ltd - H（3393.HK）The report lists it as a Chinese power equipment company under coverage and assigns it an OW rating; its closing price as of August 24, 2026 was HK$16.69.
- Comparison
- It received the same OW rating as the other three companies discussed in the report.
- Xuji Electric - A（000400.SZ）The report lists it as a Chinese power equipment company under coverage and assigns it an OW rating; its closing price as of August 24, 2026 was Rmb21.87.
- Comparison
- It received the same OW rating as the other three companies discussed in the report.
Key data
- State Grid Capital Expenditure in 1H26Rmb310bnUp more than 12% year over year
- Grid Capital Expenditure During the 14th Five-Year Plan PeriodPlanned Rmb2.3tn; approximately Rmb2.8tn actually completedActual investment significantly exceeded the original plan
- Grid Capital Expenditure During the 15th Five-Year Plan PeriodPlanned Rmb4.0tn; the expert expects actual investment could exceed Rmb4.5tnUpside potential exists
- Annual Investment Changes During the 14th Five-Year Plan PeriodFrom Rmb489bn in FY21 to approximately Rmb650bn in FY25Investment growth gradually accelerated
- 2026 Grid Capital Expenditure ForecastMore than Rmb720bn, potentially raised to approximately Rmb760bnUp more than 10% year over year
- Main-grid Transmission and Transformation Budget for the First Two Years of the 15th Five-Year Plan PeriodRmb130bn-Rmb150bn annuallySupported by 110-750 kV supporting projects and UHV corridor construction
- Expected Equipment Price Rebound5%-25%A gradual recovery is expected, but prices are unlikely to return to historical peaks
- Previous Level of Supplier Margin Compression10%-20%In early 2026, State Grid allowed equipment prices to recover from this compressed level
- Material-price Fluctuation Buffer for Main-grid Projects5-10 percentage pointsDeliveries may be delayed if increases exceed the buffer range
- Digitalization InvestmentIncreasing from approximately Rmb27.5bn to Rmb61.0bnA significant increase from 2025 to 2026
- Investment in Power AI Computing InfrastructureApproximately Rmb18.0bnThe largest component of the Rmb61.0bn digitalization plan for 2026
- 2027 Digitalization Investment ForecastMore than Rmb100bnDriven by AI computing centers and top-down deployment
Impact & implications
The report believes that the higher investment scale and earlier start of the capital expenditure cycle during the 15th Five-Year Plan period will improve visibility for power equipment demand. UHV and 750 kV equipment could benefit from concentrated project commencements, while demand for 110 kV equipment remains resilient. Centralized distribution-grid procurement and a higher weighting for technical capabilities will favor leading suppliers with R&D capabilities and differentiated products, while smart-meter replacement and digitalization investment will provide additional demand growth.
Risks
- Even if transformer and smart-meter prices recover by 5%-25%, they may not return to previous peaks or historically high profit margins.
- State Grid's procurement prices will not rise proportionately with raw-material costs, and insufficient cost pass-through could compress supplier margins.
- Project deliveries may be delayed when raw-material price increases exceed the 5-10 percentage-point buffer reserved in contracts.
- Demand varies across voltage levels, with growth in 220 kV equipment slowing.
What to watch
- Track whether State Grid's capital expenditure in 2026 can exceed Rmb720bn and move further toward Rmb760bn.
- Monitor UHV approvals and project commencements, construction of renewable energy transmission corridors, and concentrated volume growth in 750 kV projects.
- Monitor whether provinces begin a new round of replacement of the installed smart-meter base on schedule in 2027.
- Monitor whether grid digitalization investment can exceed Rmb100bn in 2027 and the actual deployment progress of power AI computing infrastructure.
- Monitor the impact of State Grid's six regional procurement zones and headquarters-level coordination reforms on equipment prices and the competitive order among suppliers.