The Chinese government and the national oil companies (NOCs): who is the principal?

Abstract

China has conducted six government reforms over the past three decades to separate government functions from the major industries. These reforms enabled a number of national oil companies (NOCs) to be established in the 1980s, and the NOCs were further listed in the international stock markets in the new century. However, due to the incomplete government and enterprise reforms, the government has not been very successful in playing a role as the ‘principal’ to make the NOCs as an ‘agent’ to manage China's petroleum industry on its behalf. A sensible government–NOCs relationship may be created by either further removing the NOCs’ political functions, and strengthening China's energy market mechanism, or by establishing a Super-Energy Ministry that can assert fundamental authority over the NOCs, and manage the energy sector.

Keywords::

• China
• energy ministry
• fuel price
• government reforms
• NOCs’ monopoly
• principal–agent theory

Acknowledgements

The author would like to express her great appreciation to Dr Hongyi Lai and Dr Xiaoyi Mu for their helpful insights on her draft paper. She was also highly grateful for the comments from the anonymous reviewers, which have helped improve the quality of the study significantly

Notes

^1. Four options were raised for consideration: (1) to establish a Ministry of Energy; (2) to follow the case of the USA and form a National Energy Commission; (3) to set up an Energy Office under the State Council and (4) to raise the Energy Bureau to vice-ministerial level.

^2. The State Council of PRC: ‘Circular on Cleaning up and Rectification of Small Refineries and Regulation of the Distribution Order of Crude and Refined Oil Product Markets’, 6 May 1999 and ‘The Circular on Further Rectification and Regulation of the Rectified Oil Product Market’, 31 August 2001.

Additional information

Notes on contributors

Janet Xuanli Liao

Dr Janet Xuanli Liao is Director of the Ph.D. Programme and Lecturer in International Relations and Energy Security, at the Centre for Energy, Petroleum and Mineral Law and Policy, University of Dundee. She obtained a Ph.D. in international relations from the University of Hong Kong, and studied MA in international relations at the International University of Japan. She also held BA and MA in history from Peking University, China.

Her current research interests include China's energy diplomacy (towards Central Asia, Africa and the Middle East), Sino-Japanese political/energy relations, China's climate change policy and global climate governance. She has published widely on the subjects and teaches two modules for postgraduates: ‘International Relations and Energy and Natural Resources’, and ‘The Politics of Environment and Climate Change’.