Power equipment demand is being driven by a combination of domestic and international market forces, leading to a recommendation of an "Overweight" rating for the sector.
Investment by the State Grid is growing rapidly, with intensive advancement in main grid construction and a focus on improving the reliability and digital intelligence of distribution networks. Simultaneously, the export of power equipment continues to show strong momentum.
GTHT
The key viewpoints are outlined below.
State Grid Investment Sees Rapid Growth
In the first quarter of 2026, State Grid completed fixed asset investments exceeding 1.29 trillion yuan, a year-on-year increase of 37%. Of this, investment in new energy grid-connection projects surpassed 100 billion yuan, growing over 50% year-on-year. Distribution network investment reached 568 billion yuan, accounting for 55% of total grid investment, leading to continuous improvements in urban and rural power supply reliability and service quality.
During the same period, State Grid commenced 393 projects and completed 579 projects at 110 (66) kV and above voltage levels, representing year-on-year growth of 42% and 24%, respectively. Key projects, such as the 500 kV fourth transmission channel from Chengde, were completed, contributing to the ongoing optimization of the grid structure.
Main Grid Construction Advances, Distribution Networks Focus on Reliability and Digital Intelligence
The main grid's "15th Five-Year Plan" focuses on strengthening the fundamental safety of the grid, ensuring a baseline for system planning and supply security, and supporting the achievement of energy transition goals.
First, ultra-high voltage (UHV) construction continues to progress steadily. Since 2026, projects like the Panxi UHV AC and the Anhui-Hubei DC have commenced smoothly, while others such as the Gansu-Zhejiang and Datong-Huailai-Tianjin South UHV projects have accelerated significantly. In April 2026, the Zhejiang section of the Gansu-Zhejiang ±800 kV UHV DC transmission project was fully connected. Accelerating grid construction helps meet growing electricity demand and provides robust energy support for industrial transformation and the cultivation of new productive forces.
Second, investments are also heavily focused on extra-high voltage (EHV) and high-voltage inter-provincial power exchange. In April 2026, two major projects—the Hunan-Guangdong back-to-back interconnection and the Hunan-Guizhou flexible power exchange—entered full-scale construction, marking a critical step in building the major energy interconnection arteries between the three provinces.
Third, distribution networks are prioritizing reliability and digital intelligence. Under the distribution network's "15th Five-Year Plan," the State Grid plans to enhance load-bearing capacity, reliability, power quality, and digitalization and intelligence levels. For urban grids, planning is moderately forward-looking, optimizing facility layout to continuously improve supply reliability and smart grid capabilities. For rural grids, the focus is on implementing consolidation and upgrade projects, as well as supporting grid construction for charging infrastructure.
Sustained High Momentum in Power Equipment Exports
From January to April 2026, exports of China's major power equipment products maintained strong growth. Transformer export value reached 132.1 billion yuan, up 18% year-on-year, while switchgear export value was 127.2 billion yuan, up 17% year-on-year.
Domestic and International Markets Jointly Propel Industry Demand
Domestically, the continuous push in UHV construction and significant investment in EHV/high-voltage inter-provincial exchange are key drivers. Concurrently, distribution networks are focused on enhancing reliability and digital intelligence.
Internationally, exports of China's primary power equipment products continue to exhibit strong performance.
The combined effect of domestic and international demand is driving rapid growth in the power equipment industry, supporting the "Overweight" sector rating.
Risks include potential shortfalls in domestic grid investment and lower-than-expected overseas demand.
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