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Demand Side Management (DSM) performs a significant function in the electrically powered energy system in order to manage power demand-side resources. Although China has brought DSM for the first time in the early 1990s, its advantages have not been entirely utilized. In this study, we first present a quick history of the energy policy of China, its electricity enterprise, and reform. Based on the analysis of DSM practices in Asia- Pacific region, the DSM development and the reform of electrical energy pricing in seven countries namely, Pakistan, India, Malaysia, Singapore, Thailand, Bangladesh, and China have been discussed. The primary limitations to DSM include fallacious market-oriented DSM mechanisms, the underdeveloped power carrier industry, low motivation level of grid companies for DSM because of their conventional business model, and low motivation of electricity end-users. This paper represents a case study of China’s electricity sector reform which can probably alter power transmission and pricing of distribution scheme and enterprise model of grid companies, thereby enhancing competition. A number of rules & regulations and series of policies linked to DSM were formulated by Chinese country wide ministries. But still, there are many troubles in the implementation of DSM. The current status of DSM improvement in China is investigated from distinct factors of policies and guidelines associated with DSM, DSM improvement of representative regions and DSM organizational administration. This study has also discussed the challenges faced by the implementation of DSM and proposed feasible measures totally based on the challenges encountered in implementing of DSM. This study is beneficial in promoting the improvement of China’s DSM. Based on these findings, the possible effects of DSM reforms are; government must give more attention to DSM; grid companies might also have better incentives to invest in DSM; DSM end users of electricity motivations may also increase; demand response applications can be improved and commercial DSM business models can be proposed.