A new wave of electricity market reform was launched by the Chinese government in March 2015. One of the major objectives was to optimize the power system operation by reforming the low-efficient equal share dispatch mechanism. To provide decision-making support for the reform, we establish a mixed-integer linear programming optimization model to simulate the post-reform results, and the reform benefits are estimated by comparing them with the pre-reform results. Then, we develop a political economy framework to identify the challenges associated with implementation of economic dispatch. At last, we propose several regulatory and market measures to address these identified challenges.