Chinese government involvement in energy efficiency commenced in the 1980s and has become the largest and most comprehensive government-sponsored suite of energy efficiency programs in the world. In 2011, the government placed an energy efficiency obligation on the two large government-owned grid companies that operate electricity transmission and distribution networks and sell electricity directly to end-use customers in the majority of China. The obligation requires the grid companies to achieve energy savings of at least 0.3 percent in sales volumes plus demand savings of at least 0.3 percent in maximum load, both compared with the previous year’s results. This initiative was a departure from the existing paradigm of government involvement in energy efficiency. Previous government interventions were part of a “wide net” industrial policy aimed at technology upgrades, driven by government agencies. In contrast, the more focused energy efficiency obligation is implemented by the grid companies. This paper describes the development of policies and programs in China that eventually led to the grid company energy efficiency obligation, details the implementation of the obligation, and discusses the performance of grid companies in meeting their energy efficiency and demand reduction targets. Finally, the paper outlines recent government power sector reforms that could lead to Chinese grid companies commencing to use energy efficiency as a power sector resource.