The Chinese government is taking measures to make the country's domestic oil companies qualified enough to compete with international oil giants, as China accessed to the World Trade Organization (WTO).
In October 2001, the State Development Planning Commission linked the domestic refined oil price to the average price on the Singapore, Rotter Dam and New York markets, while in the past the price was only pegged to the Singapore market.
The move may raise the profitability of domestic refineries, most of which are under the control of China's two largest oil companies, Sinopec and PetroChina, analysts were quoted as saying.
The average price of the three market is 5 percent to 10 percent above that of the Singapore market alone.
The two companies also grasped more freedom to decide their retail price, as they are allowed to fluctuate the benchmark retail price set by the government by eight percent, rather than the five percent in the past.
In addition, the government also stipulated that only Sinopec and PetroChina could build new petrol stations.
The move will help the two companies gain enough of a stronghold before China opens its retail business three years later and its wholesale business two years later.
Moreover, the China National Offshore Oil Company (CNOOC), the country's third largest oil company was listed on overseas markets in last February and raised about US$8.7 billion by selling 1.6 billion new shares.
(People's Daily January 24, 2002)