Open Journal of Social Sciences, 2014, 2, 156-160
Published Online September 2014 in SciRes.
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.
Overview on the Distribution System of
Mineral Energy Ownership in China
Weijia Zhang
China University of Political Science and Law, Beijing, China
Email: sirlituo@126.c om
Received May 2014
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.
Energy Ownership, Mineral Energy, Energy Minerals, Products of Energy Minerals
1. Introduction
Energy Resourcesis a rather broad concept. In view of this concept, scholars with various backgrounds have
made different interpretations. Some deem energy resourcesas a sort of “capacity[1], others consider it
substance or movement of substance” [2]. In recent years, energy resourcesis mostly viewed as a type of
“resources” in Chinas 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.
W. J. Zhang
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 peopleand 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
2.2. Legal Nature of the State’s Ownership of EM
It’s worth noting that the states ownership is different from the ownership in civil law, which is commonly as-
su med. Some Chin e se scholars consider the states 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 States 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-
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]
W. J. Zhang
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 states ownership of EM is replaced by unitsor individu-
alsownership 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
Peoples Republic of China on The Exploitation of Off-shore Petroleum Resources in Cooperation with Foreign
Enterprisesand Regulations of the Peoples Republic of China on Exploitation of On-shore Petroleum Re-
sources in Cooperation with Foreign Enterprisesin 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 states 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-
W. J. Zhang
ploitationand 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, Chinas 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, Chinas 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 Lawand the Peoples 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 fewtheir 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
states 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.
[1] Encyclopedia Britannica (2013) Energy, in Physi cs , the Capacity for Doing Work.
[2] Xiao, Q.G. and Xiao G.X. (1996) Energy Law. Law Press, p. 21.
Gong, X. Q. (2008) On the Reform of Energy Law under the Background of Climate Change. China Democracy and
Legal System Publishing House, p. 9.
[3] Lv, Z.Y. (2008) On Energy Law. China Electric Power Press, p. 1.
[4] Sun, H.L. (2000) Encyclopedia of China Resources Science. Encyclopedia of China Publishing House, p. 548.
Liu, H. (2006) Thinkings Regarding China’s Energy Law Legislation. International Petroleum Economics. [Quoted
from Huang, Z.Z., Zhao, Q.Y. and Tan B.P. (2009) Studies of China Energy Law. Law Press, p. 4]
[5] According to Appendix Catalogue of the Mineral Resources of the Rules (hereinafter referred as “Rules”), energy
minerals include coal, coal-related gas, stone coal, oil shale, petroleum, natural gas, oil sand, natural bitumen, uranium,
thorium, geothermal resources.
[6] Lee, G.P. and Zhou, C. (2012) Definition of Property Rights of Mineral Resources in China: A Literature Overview.
Economic Issues Exploration, 6, 145-150.
[7] Mei, X.Y. (2007) Property Law Ownership. China Legal Publishing House, p. 110. (This also determined the sphere
the State owns the ener gy , the energy that concerns sovereignty)
[8] PRC Constitution, Art. 9; Property Law, Art. 45, 46, 47, 48.
Mineral Resources Law, Art. 3.
Coal Industry Law, Art. 3
[9] Wu, Y. (2009) Researching on the Reform of Chinese Mineral Resources Property Rights Institution: From the Angle
W. J. Zhang
of Central and Local Government Decentralization. Ph.D. Thesis, Southwestern University of Finance and Economics,
p. 72.
[10] Cui, J.Y., Peng C.X., Dai M.Y., et al. (2012) Study on Natural Resources Property Legal System. Law Press China, p.
[11] Gao, F.P. (2000) Legal Connotation of Public and Private Ownership. Tsinghua Law Review, 3rd Series, Tsinghua
University Press.
[12] Wang, J. (2003) The Legal Myth of the State Ownership: Analyses on the Corporatization of China’s State-owned En-
terprises. Ph.D. Thesis, China’s University of Political Science and Law, p. 17.
[13] PRC Constitution, Art. 13.
[14] Rules, Art. 6.
[15] Id, Art. 30.
[16] MacBride Jr., W. L. and Wang B. (2001) Chinese Mining Law Overview. Energy and Natural Resources Law, 19, p.
220. [According to the Rules, Art. 6, the mining license holders of a mining right are termed “concessionaires” and the
exploration license holders exploration licensee]
[17] Mineral Resources Law, Art. 34.
Rules, Art. 16, 30.
[18] Zhang, W.J. (2004) Properties and Market System of Mining Rights. Chinese Economics Geology and Mineral Re-
sources, 10, 15-25.
[19] Fang, S.K. (2013) Research on the Legal System of Exploration and Mining Rights. China Legal Publishing House, p.
[20] Other Regulations include “Measures for the Administration of Transfer of Mineral Exploration Right and Mining
Right”, Administration of Granting and Assigning Mining Industry Rights Tentative Provisions” and “Trading Rules
for Mineral Mining and Exploration Rights (Trial Implementation)”.
[21] Administration of Granting and Assigning Mining Industry Rights Tentative Provisions, Art. 6.
[22] For example, the Announcement 2013 No.72 of MOFCOM on Total Amount, Application Qualifications and Applica-
tion Procedures Concerning Brut Oil Import Quota for Non SOEs in 2014.
[23] Duan, X.M. (2012) Study of Shanxi Coal Trading Center Operations Model. Masters Thesis, Northwestern University,
p. 20.