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[en] With social economic reform in the past decades, the power industry of China is gradually evolving from a highly integrated one toward an electricity market, which can be characterized based on the transition of the power dispatch principle. To attract investment in the power generating industry, China introduced non-state-owned power plants to the original system of a highly vertically integrated power industry with annual power generation quota guarantees, which makes the traditional economic dispatch principle not applicable. The newly debuted energy saving power dispatch (ESPD) is an attempt to fully exploit the maximum energy savings and was implemented by an administrative code. Starting in August 2007, the pilot operation of the ESPD was implemented in five provinces, but after two years, it is still not widely applied all over the country. This paper details the transition of China's power dispatch principle with particular attention to its origin and content. Moreover, the factors that influence the ESPD's actual energy saving effect are discussed, as well as the sustainability of the policy. - Research highlights: →China has already become the second largest energy consuming country, with a high increase rate of energy demand. The electricity sector consumes more than two-thirds of the coal production of the country and plays a very important role in the energy market. →The power industry of China has been undergoing significant institutional changes toward marketization, which will greatly impact the operation of the power system. The report gains insight into the evolution of the power industry institution by reviewing the changes associated with the power dispatch principle. →The newly implemented energy saving power dispatch policy, which is still waiting for widespread implementation, has been carefully studied and the conclusions with respect to its financial sustainability and physical constraints are drawn.