New oil-pricing regime still leaves out public
By Ma Hongman (China Daily)Updated: 2007-02-08 10:09
Admittedly, the oil product market is strategically important, with a vital impact on the nation. It should not be fully opened to competition. But that does not mean we cannot introduce some competition.
Private enterprises, which are more dynamic, can be introduced into the market, forcing the State monopoly enterprises to improve their efficiency.
In this way, the State would also save on subsidies, public resources that many believe should not be used to finance these rich enterprises.
The government has started to tackle the problem.
The Ministry of Commerce issued a new rule on the oil product market late last year. It provides for opening up the wholesale market for oil products from the start of this year. This is a sign of loosened State control over the oil product market.
Still limited to Chinese enterprises, the market entry criteria put forward by the new rule are too demanding for many private firms to meet.
According to the rule, oil tankage must be at least 10,000 cubic meters and registration capital must be a minimum of 30 million yuan ($3.8 million).
Market investigation shows that few domestic private enterprises can meet those requirements, keeping the market a de facto forbidden zone to them. Although the market is set to open to non-State investors, the rule shows that this process has a long way to go.
The author holds a doctorate in economics from the Shanghai Academy of Social Sciences.
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