Open Journal of Social Sciences, 2014, 2, 156-160
Published Online September 2014 in SciRes. http://www.scirp.org/journal/jss
http://dx.doi.org/10.4236/jss.2014.29027
How to cite this paper: Zhang, W.J. (2014) Overview on the Distribution System of Mineral Energy Ownership in China.
Open Journal of Social Sciences, 2, 156-160. http://dx.doi.org/10.4236/jss.2014.29027
Overview on the Distribution System of
Mineral Energy Ownership in China
Weijia Zhang
China University of Political Science and Law, Beijing, China
Received May 2014
Abstract
This paper is a preliminary exploration on the attribution system of mineral energy ownership of
China. In this article, mineral energy is broken down into two categories, namely, the energy min-
erals and the products of energy minerals. Subsequently, this paper further elaborates and makes
a pectination to the energy ownership system according to the mode of acquisition of the two
types of mineral energy in China.
Keywords
Energy Ownership, Mineral Energy, Energy Minerals, Products of Energy Minerals
1. Introduction
“Energy Resources” is a rather broad concept. In view of this concept, scholars with various backgrounds have
made different interpretations. Some deem “energy resources” as a sort of “capacity” [1], others consider it
“substance or movement of substance” [2]. In recent years, “energy resources” is mostly viewed as a type of
“resources” in China’s academic circles, which means that “energy resources is all kinds of resources that is able
to produce useful energy through the conversion processes directly or indirectly, including primary energy
sources like coal, crude oil, … and secondary energy sources like electricity, heat, refined oil” [3]. According to
this definition, which is also favored by many other Chinese experts [4], energy resource s include not just the
natural resources, but also the energy products, namely, secondary energy sources. In term of mineral energy, it
can be divided into energy minerals (hereinafter referred as “EM”) as the primary energy resources and the
products of energy minerals (hereinafter referred as “PEM”) as the secondary energy resources.
According to the Appendix Catalogue of the Mineral Resources of “Rules for Implementation of the Mineral
Resources Law of the PRC” (hereinafter referred to as the “Rules”), EM includes coal, petroleum, natural gas,
etc [5]. In China, it is exclusively owned by the State.
PEM are energy converted or processed from energy resources that can be utilized directly by human beings.
For example, the mined and refined oil, petroleum coke, head coal, run coal, etc Considering PEM no longer
falls into the sphere of concerns regarding sovereign issues as EM does, therefore, the subject of ownership are
not limited to the state anymore. And the modes of acquisition are far more diverse.

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2. Ownership of EM Belongs to the State
In China, EM is always state-owned because of its important position in national economy. Professor Lee
Guoping referred such layout as “unshakable” [6]. However, since the sovereign state is not capable of partici-
pating in the civil and commercial legal relationship, the subjects to exercise the ownership of EM is not the
State anymore.
2.1. Subjects to Ex erci s e the Ownership of EM
Acquisition of the ownership of EM is initial. In other words, the State’s absolute ownership is based on the re-
quirements of national sovereignty [7]. According to China’s Constitution, Property Law, Mineral Resources
Law, and Coal Industry Law, the mineral resources are “owned by the state, that is, by the whole people” and it
“shall not change with the alteration of ownership of the land or right to use the land which the mineral re-
sources are attached to” [8]. Thus, there is simply no market for EM resources. The subject of the ownership is
restricted to the state only. In practice, such right is exercised under the representative of the State Council. In
addition, sometimes the State Council will confer it to the local government and related departments. According
to Dr. Wu yin, most property and control of the mining enterprises are decentralized to the provincial govern-
ment, yet the ones that are essential to national economy remains under the direct control of central government
[9]. Therefore, in form, the State Council, authorized local governments and relevant departments can exercise
the state ownership on behalf of the State, but in the essence the true owner of energy mine r als still remai n s the
State.
2.2. Legal Nature of the State’s Ownership of EM
It’s worth noting that the state’s ownership is different from the ownership in civil law, which is commonly as-
su med. Some Chin e se scholars consider the state’s ownership as a constitutional right [10]. As professor Gao
Fuping points out: “State’s ownership actually is rather a systematic measure to guarantee all the people of the
equity to enjoying ownership or its interests than a form of ownership in civil law sense. It is a strategy to ensure
the rational utilization of important social property and balanced, sustainable development. The significance of
the measure lies in its system value” [11]. In this sense, “the state is but the tool and agent for the people to real-
ize their goals” [12]. In my humble opinion, this means the only legitimate ground for the State to own all min-
eral energy is to make sure that the social resources will be fully used for the interests of the whole society, and
that is the limitation that the State’s ownership of EM has to endure.
3. Obtain the Ownership of PEM
Apart from EM, another important part of mineral energy is PEM which is created from the mining, processing
and conversion of EM. Compared to minerals, mineral products contain higher economic value because the hu-
man labor is added. In addition, since the sovereignty concerns no longer exist at this stage, any enterprise or in-
dividual can become the owner of energy. In this regard, the energy finally achieves its terminal utility by the
allocation of the supply-demand relation through the PEM transactions.
According to the different channels of acquisition, the source of PEM can be divided into two types: one is
the market, another is compulsory collection, which can only be exercised by the State “in the public interest”
[13]. Since the latter approach is not the normal and common practice, it will not be further elaborated in this ar-
ticle.
As to obtain the ownership of PEM in market, it comprises two methodologies: first is to create their own
PEM from scratch by exercising mineral rights, and the second is to take possessions of PEM from others
through commercial contracts.
3.1. Original Acquisition of PEM
Original acquisition of PEM means to create PEM from EM, which is based on the performance of mineral
rights. In accordance with the Rules, the mining rights “means the right to exploit the mineral resources and to
own the mineral products within the scope provided by the mining license” [14]. Further, the mining rights in-
volve the right of “selling the mineral products by themselves” [15]. It can be referred that concessionaires [16]

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158
indeed own the PEM mined by themselves. In comparison, the ownership of the exploration licensees towards
PEM is subject to more restrictions. The only mineral products they can sell by themselves are those “recycled
during the exploration operation in accordance with the project design that has been approved”. But as to “min-
erals which shall be sold to the designated units only as prescribed by the State Council”, neither the exploration
licensees nor the concessionaires has the freedom to sell at their own wishes [17]. Ownership of the said miner-
als are limited to certain extend.
In the course of exercising the mineral rights, by exploration and exploitation, along with the gradual disap-
pearance of EM, PEM is produced. Accordingly, the state’s ownership of EM is replaced by units’ or individu-
als’ ownership of PEM, which is the best way for EM to achieve its own economic energy and mineral interests.
In the terminal phase of this process, energy is no longer public goods but a private one, which is available for
sale and other forms of transference. As can be seen, the mode of original acquisition of PEM has close connec-
tion with mineral rights. Actually, knowing the acquisition pattern and market structure of mineral rights is par-
ticularly important in understanding how PEM is produced. With the increasing demand for mineral resources,
China’s mineral rights market is booming. Until 2010, China has built 15 provincial mineral rights trading plat-
form, 37 reserves accrediting bodies and 93 mining rights assessment agency.
3.1.1. Subject of Mineral Rights Market
According to “Mineral Resources Law”, the state-owned mining enterprises, collectively-owned mining enter-
prises and privately-owned mining undertakings are all possible concessionaires. However, the sphere of mining
and exploration varies. As professor Zhang Wenju points out, “In China, the legal status of the subjects of min-
eral rights are not equitable. The State-owned mining enterprises are given extra preferential protections and
they are dominant in almost all core, valuable or important mineral mining industry” [18]. In addition, China al-
so allows foreign investment to obtain mining rights. Promulgated as early as 1982, the “Regulations of the
People’s Republic of China on The Exploitation of Off-shore Petroleum Resources in Cooperation with Foreign
Enterprises” and “Regulations of the People’s Republic of China on Exploitation of On-shore Petroleum Re-
sources in Cooperation with Foreign Enterprises” in 1993 both permits foreign companies to cooperate with the
Chinese on the offshore and onshore oil exploitation. Even so, as for some important fields, however, which is
essential to national economy, foreign investment are still somehow restricted, especially the foreign-owned en-
terprises. For example, wholly foreign-owned enterprises are still banned from trading of oil, natural gas risk
exploration and development, and exploration, development of coalbed methane.
Because mineral resources are usually concealed underground with pockety distribution and the mining
process is rather complex and sometimes dangerous, therefore, the requirements of being a subject of mineral
rights are generall y higher than those of the general civil subject [19]. Requirements of an exploration licensee
are specified in the “Regulations on Administration of Geological Exploration Qualifications”, where the explo-
ration for EM is deemed as “comprehensive geological exploration”. The requirements for being a legitimate
concessionaire are regulated in Art.11, Art. 13 and Art. 14 of the Rules.
3.1.2. Obtain the Mineral Rights
The entire mineral rights market can be divided into the primary and secondary markets according to the differ-
ent origin they derive from.
In the primary market, the State or the departments authorized to exercise ownership of the mineral energy on
behalf of the State would sell the mineral rights to qualified units or individuals in exchange of appropriate fee
so that the power of EM ownership is realized. According to “Administration of Granting and Assigning Mining
Industry Rights Tentative Provisions”, “Administration of Invitation for Bids Auction and Listing of Exploration
Rights and Mining Righs Measures (Trial Implementation)” and “Notice of the Ministry of State Land and Re-
sources about Further Regulating the Management of Transfer of Mining Rights”, the modes of transfering
mining and exploration rights inlude applications , agreements, tender, auction and listing, etc.
In the secondary market, the way to obtain mineral rights is by assignment. Permission of transferring mineral
rights by assignment and build the secondary market is an important part of the 1996 amendment to “Mineral
Resources Law”. However, taking into account the peculiarities of the state’s mineral resources, the transfer of
mineral rights is still under rather strict regulations. Since 1998, the State Council and the Ministry of Land and
Resources (MLR) has successively promulgated the “Regulation for Reigstering to Explore for Mineral Re-
sources Using the Block System”, the “Administrative Measures for the Registration of Mineral Resources Ex-

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159
ploitation” and so forth to make sure nothing goes wrong in the transference [20]. Promulgations of these regu-
lations work together to build a more perfect and sound regulatory system for the secondary mineral rights mar-
ket. Judging from these regulations, China has adopted restrictionism approach to assign mineral rights, which
means the legitimate ways to assign mineral rights are restricted to sale, contributed as capital at certain value
and restructuring (listing), etc. [21].
3.2. Indirect Acquisition of PEM
Indirect acquisition of PEM means to obtain PEM from the prior holders on the basis of mutual agreement. By
the different source of PEM, it can be divided into acquisition from international trade and from domestic trade.
In 2012, China’s total value of imports of Mineral Fuels, Lubricants and Related Materials has reached
313.084 billion U.S. dollars, which is three times as much as in 2007. In addition, as the data of China Customs
Statistics from 2001 to 2008 suggests, China’s external dependence rate on foreign oil has reached 50.9% in
2008, which indicates that obtaining PEM through international trading has become the mainstay of acquiring
energy ownership. However, considering the essential status of PEM in national economy, normally countries
would adopt the policy of diversification on energy imports to ensure the security of energy supply. Therefore,
in order to import energy minerals, non-state-owned enterprises often need to comply with certain conditions
and procedures required by relevant department [22]. In addition, the import or export of PEM also needs to
stand to the “Foreign Trade Law” and the “People’s Republic of Regulation of the PRC on the Administration of
the Import and Export of Goods”.
National PEM market is the domestic source of obtaining its ownership. The PEM trading market is mainly
divided into two categories: one is refined oil markets, the other the coal markets. But in fact, never a fully
competitive refined oil market has ever been successfully established in China. From the perspective of oil mar-
keting, more than 70% of the market share is occupied by two state-owned enterprises, Petro China and
SINOPEC. Although the number of social gas stations are also quite a few，their oil are still imported from the
two monopoly enterprises. According to some experts, in the term of the whole industrial chain of refined oil,
the two groups have indeed formed de facto monopoly. In contrast, despite the problems like unprofessional
services and disqualification still exist, the national coal trading system which is basically founded upon the
state’s coal trading centre and supplemented by the regional coal market has already been established [23].
Through these two types of energy minerals trading markets, increasing number of qualified units and individu-
als has become the owner of energy.
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