Abstract DSM is one of the best and most practical policy tools available to China for balancing environmental protection and economic growth. The new round of electricity system reform provides a good opportunity to consolidate and integrate DSM policy and expedite its development and implementation. DSM policy can be upgraded by incorporating it into the current electricity system reform. Comparing the potential acceleration of electricity price reform with the possibility of imposing a System Benefit Charge (SBC), the author argues that support for a SBC would be much easier to gather among policymakers and stakeholders in a short time and would have a much better policy effect in the current situation. The author discusses three kinds of price discrimination related to the DSM development in China: time-based electricity pricing, electricity price discrimination for industrial structure adjustment in China (Fujian Province as a case), and direct power purchases by large customers and preferential tariff policy. These can be well designed to be combined with DSM and energy efficiency policy.