Business Interest Groups in Chinese Politics: The Case of the Oil Companies

Erica S. Downs
Erica S. Downs Former Brookings Expert

July 29, 2010

Editor’s Note: National Oil Companies (NOCs), state-owned energy enterprises that behave like private corporations largely free of government control, are emblematic of the complex political arrangements that have bolstered China’s explosive state-led economic growth. Today, NOCs are one of the most powerful groups shaping in policy within China’s one-party system. Given the magnitude of China’s energy needs, the influence of NOCs is only set to grow. Although NOCs are not new in themselves, they have undergone significant changes in recent years, developing an international profile and more autonomy than ever before. In a chapter from China’s Changing Political Landscape (Brookings Institution Press, 2008), Erica Downs reevaluates the new role of NOCs and its implications for Chinese leadership.


Throughout the history of the People’s Republic of China (PRC), the oil industry has been a powerful interest group. As a strategic sector of the economy, the industry has had access to the top leadership and made its voice heard in the policymaking process. It has produced successive generations of leaders who used their accomplishments in the oil sector to advance their political careers—especially in the 1950s and 1960s when the discovery of the Daqing oil field and the achievement of self-sufficiency in oil was one of the country’s few success stories. Historically, the most prominent national leaders from the oil industry were Vice Premier Yu Qiuli and several of his associates from the State Planning Commission. Viewed as a “petroleum faction,” this group had a large impact on economic policy, especially in the 1970s.

In recent years, the industry has continued to influence decisionmaking and elite politics, but the relationship between the national oil companies (NOCs) and the party-state has changed.2 Although still subject to party-state control, the companies have become more autonomous and influential under the umbrella of China’s rapidly expanding, increasingly market-oriented, and internationalizing energy sector. Now that they have subsidiaries listed on foreign stock exchanges, global business portfolios, and an eye on the pursuit of profits, their domestic and international interests do not always coincide with those of the party-state. Moreover, they are often able to advance these interests not only because of their substantial financial, human, and political resources but also because of the unanticipated surge in China’s oil demand and imports since 2002, which has increased the value of China’s NOCs to Beijing. Some of the executives of these companies have become competitive candidates for top political posts because the managerial skills developed at the helm of some of China’s most profitable and internationally competitive state-owned enterprises (SOEs) are transferable to the government of a country integrating into the global economy.

Marketization and globalization have had an impact on the relationship between the party-state and SOEs in other sectors as well, notably telecommunications, automobiles, and steel. As a result of their growing economic might, these firms are also helping to intensify the diffusion of power in Chinese politics. This aspect of China’s changing political landscape and its implications for the state’s policies and leadership, as exemplified by the growing influence of the NOCs, is the subject of this chapter.