Beijing’s latest policy shows strongest resolve yet to enlist private firms to enhance national energy security
- The government’s recent directive is the strongest example yet of its resolve to mobilise entrepreneurs to help stem China’s record-high reliance on foreign oil and gas, say industry experts
- But detailed follow-up policies, law changes and time will be required if clear results are to be seen
Beijing’s directive this week to support private companies by levelling the playing field with their state-owned rivals and breaking their stranglehold in the energy sector is the strongest example yet of its resolve to mobilise entrepreneurs to help stem China’s record-high reliance on foreign oil and gas.
But detailed follow-up policies, law changes and time will be required if clear results are to be seen, according to a company boss and an analyst.
The edict issued by the State Council – China’s cabinet – on Sunday was written in stronger and clearer language than similar past policy documents, first published as far back as 14 years ago.
“This time around, the policy wordings are more concrete and unreserved on what will be done,” said Luo Lin, chairman and founder of Beijing-based Anton Oilfield Services Group, one of the largest privately-owned firms that help the state giants explore and produce oil and gas.
In the electricity, oil, natural gas, railway and telecommunications sectors – dominated by state enterprises – the edict said “continuous and regular assessment of implementation, systematic elimination of entrance barriers and red tapes, and establishment of a mechanism to introduce market competition” will be launched to enable “comprehensive market opening” to the private sector.
“In the oil and gas exploration and production sector, although Beijing has already thrown open the doors for private firms, very few have ventured in,” said Lin Boqiang, director of Xiamen University’s Centre for China Energy Economics Research. “This is because Beijing had only said it will support them, but failed to provide clear and practical measures to help them.
“What’s more, since this industry is highly risky, capital and technology-intensive, and in recent years low oil prices meant even the state-owned enterprises are making relatively modest returns, private firms have been extra cautious about taking the plunge.”