Oil industry reform enters deep water

On Sunday, the National Development and Reform Commission and the Ministry of Commerce issued two regulations that provide policy support for foreign capital to enter the oil and mineral industries. Beijing News comments:

It is a significant move of the two agencies because it helps to push forward the ongoing reform of the oil and mineral industries.

For a long time, domestic oil and mineral enterprises found it hard to independently do business due to a lack of proper technologies, while their foreign counterparts were restricted from independently developing their own businesses.

As a result, domestic and foreign oil and mineral enterprises have to work together to exploit oil and mineral resources. It is good to cooperate, but when the cooperation relies too heavily upon government policies, it might not be the best.

More important, the monopolies in the oil industry make it difficult for the market to play a decisive role in allocating resources, which pushes up the cost of domestic oil exploitation.

When monopolies come into being, they naturally defend their own interests and oppose any reform attempts. As a result, the State has to pay subsidies, while the consumers have to endure high energy prices.

This time, by breaking the oil monopolies, the two ministries will push forward a true market-oriented reform and let the market play the decisive role in allocating resources. That's not only a great leap forward for the industries, but also a milestone in China's economic history.

The reform this time is a deed of further opening-up, too. By breaking the monopolies in the oil exploitation sector, it opens further to foreign capital.

For the past four decades, the whole national economy has been benefiting from the reform and opening-up policies and its prosperity is largely caused by that. Lifting the restrictions on the oil and gas industry and breaking the monopolies means that reform has entered the deep water area.