trevor houser is a visiting fellow at the Peterson Institute for International
Economics and Director of China Strategic Advisory’s Energy Practice. Mr.
Houser is also a visiting fellow and Adjunct Professor at the Colin Powell
Center for Policy Studies at the City College of New York. He can be reached at
The Roots of Chinese
Oil Investment Abroad
asia policy, number 5 (january 2008), 141–66
• http://asiapolicy.nbr.org •
keywords: china; oil; national oil companies (noc); energy
security; economic policy; foreign policy
This article examines the confluence of domestic factors, both economic and
political, that shape the behavior of Chinese oil companies abroad and the
implications for energy security in China and the rest of the world.
•	 Enterprise	reform,	price	liberalization,	and	the	introduction	of	management
incentives	 and	 competition	 have	 greatly	 fostered	 the	modernization	 and
marketization	 of	 China’s	 petroleum	 industry.	 These	 factors	 have	 also
blurred the relationship between the oil companies and the government
that owns and regulates them.
•	 Though	Beijing	 actively	 encouraged	overseas	 investment	 in	 the	past,	 the
companies are taking the lead today, shaping policy to suit economic
•	 The	international	competitiveness	of	Chinese	firms	stems	less	from	overt
government support than from a higher risk threshold and a willingness to
accept lower returns on investment.
•	 Because	 little	of	 the	oil	Chinese	companies	produce	abroad	comes	home
and	human	and	political	costs	of	supporting	the	firms’	activities	overseas
are	growing,	leaders	in	Beijing	are	actively	debating	the	merits	of	China’s
“going out” strategy.
•	 The	U.S.	would	benefit	more	by	focusing	on	the	incentives	facing	individual
firms	than	by	focusing	on	policy	pronouncements	from	Beijing.
•	 “Equity	agreements”	signed	by	Chinese	oil	companies	look	largely	the	same
as those s