China


Facebook logoTwitter logo

Recent analysis of global energy and mineral markets has focused on China's role as an importer of resources, often overlooking the exploitation of its own considerable mineral and petroleum reserves. The extractive sector accounted for 8 percent of gross domestic product in 2010, when China produced 3.2 billion tons of coal—more than 40 percent of global production. In 2011 China was the sixth-largest producer of crude oil, at 4.1 million barrels a day, and the ninth-largest producer of natural gas, at 9.9 billion cubic feet a day.


China's Performance on the Resource Governance Index

China received a "weak" score of 43, ranking 36th out of 58 countries. It scored particularly poorly on the Enabling Environment component.

Rank
(out of 58)
Score
(out of 100)
36 Composite Score 43
47 Institutional & Legal Setting 43
Freedom of information law 33
Comprehensive sector legislation 67
EITI participation 0
Independent licensing process 83
Environmental and social impact assessments required 0
Clarity in revenue collection 67
Comprehensive public sector balance 33
SOC financial reports required 100
Fund rules defined in law N/A
Subnational transfer rules defined in law 0
30 Reporting Practices 46
Licensing process 33
Contracts 0
Environmental and social impact assessments 0
Exploration data 100
Production volumes 50
Production value 33
Primary sources of revenue 25
Secondary sources of revenue 0
Subsidies 0
Operating company names 0
Comprehensive SOC reports 100
SOC production data 100
SOC revenue data 38
SOC quasi fiscal activities 83
SOC board of directors 100
Fund rules N/A
Comprehensive fund reports N/A
Subnational transfer rules 0
Comprehensive subnational transfer reports 67
Subnational reporting of transfers 100
39 Safeguards & Quality Controls 46
Checks on licensing process 22
Checks on budgetary process 44
Quality of government reports 63
Government disclosure of conflicts of interest 0
Quality of SOC reports 100
SOC reports audited 100
SOC use of international accounting standards 100
SOC disclosure of conflicts of interest 0
Quality of fund reports N/A
Fund reports audited N/A
Government follows fund rules N/A
Checks on fund spending N/A
Fund disclosure of conflicts of interest N/A
Quality of subnational transfer reports 33
Government follows subnational transfer rules 0
31 Enabling Environment 36
Corruption (TI Corruption Perceptions Index & WGI control of corruption) 46
Open Budget (IBP Index) 17
Accountability & democracy (EIU Democracy Index & WGI voice and accountability) 12
Government effectiveness (WGI) 60
Rule of law (WGI) 45
Satisfactory Weak
Partial Failing
To explore all data and compare
scores, use the RGI Data Tool.

Institutional & Legal Setting (Rank: 47th/58, Score: 43/100) learn more

China's "weak" score of 43 is the product of a convoluted legal framework and a marked lack of public information.

China's Constitution does not specify which authority is in charge of resource governance; both the Ministry of Land and Resources (MLR) and the National Development and Reform Commission (NDRC) grant mining licenses and publish bidding information on their websites.

The licensing process is ostensibly competitive, but state-owned companies are given a share in all oil projects. In the coal industry, unlicensed mines frequently operate with the consent of corrupt officials. The government generally receives royalties and taxes from extractive companies, but gaps in the legal framework allow companies to negotiate to have their royalty payments reduced or even waived.

There is no legal requirement that resource companies produce environmental impact assessments. The State Council issued an executive decree in 2007 on government openness and transparency, but its implementation still leaves much to be desired.

Reporting Practices (Rank: 30th/58, Score: 46/100) learn more

China received a "weak" score of 46, reflecting a lack of transparency regarding contract terms, revenue streams, and resource-funded subsidies.

There is little information available on the licensing process. The MLR advertises mines open to bidding and provides guidelines for the transfer of rights. It publishes winning bids, but not contracts. The government does not disclose how much money the MLR and NDRC receive or how the central and local governments share extractive revenues.

A variety of government agencies, including the MLR, the National Bureau of Statistics, and the Finance Ministry, publish resource data, but the information is often provided only in aggregated form. The Finance Ministry publishes disaggregated figures for special taxes; the MLR publishes information on reserves, production volumes, and estimates of investment in exploration and development, but provides no data on revenues.

Safeguards & Quality Controls (Rank: 39th/58, Score: 46/100) learn more

China's "weak" score of 46 is the product of a lack of effective oversight and the poor quality of government reports.

The legislature has no oversight role in the extractive sector and there are no procedures for appealing licensing decisions. The 2007 decree on government openness contains provisions that can exempt government officials from disclosing their financial interests in the industries they oversee. The National Audit Office reviews the accounts of state-owned companies and submits reports to the National People's Congress, but it is not clear that the legislature thoroughly reviews audited statements of resource revenues.

Enabling Environment (Rank: 31st/58, Score: 36/100) learn more

China received a "failing" grade of 36. While scoring relatively high on government effectiveness, China has low levels of democratic accountability and opaque budgets.


State-Owned Companies (Rank: 11th/45, Score: 82/100) learn more

The China National Petroleum Company and China National Offshore Oil Company are majority government-owned and dominate the petroleum sector. The coal sector is significantly more decentralized.

As publicly listed companies in China, Hong Kong and the United States, both companies must follow international auditing standards in their accounting and have independent auditors review their performance. The companies publish information on reserves, production volumes, prices, resource export values, estimates of investment in exploration, production costs, subsidiary companies, quasi-fiscal activities, production stream values, royalties, and dividends. The National Audit Office supervises the companies and publishes their audited reports.

Subnational Transfers (Rank: 25th/30, Score: 33/100) learn more

The central government transfers a percentage of resource tax revenues to provincial authorities. However, rules for revenue sharing are not published and reporting practices vary among provincial governments.

View full questionnaire for ChinaDownload questionnaire for China