Gong Jialong, Helmsman of Private Oil Firm, Convicted    

Gong Jialong announced the establishment of Changlian Petroleum Group on June 29th, 2005. As he unveiled the brilliant silk from the name plate of Changlian Petroleum Group together with the ambassador of Kuwait to China, the monopoly of the Chinese petroleum sector was broken by a private firm. Gong, who was Chairman of the China Chamber of Commerce for the Petroleum Industry, at that time was also the founder of Tianfa Group, a private oil firm. (CCR2005 No. 26)
    In less than 3 years, however, Gong slipped down from a VIP to a criminal. On August 5th, 2008 he was convicted of the crime of disclosing important information in violation of laws and sentenced to an imprisonment of one year and 7 months.
   At the peak of his career, Gong Jialong frequently met newsmen and talked a lot about exciting stories about breaking up the monopoly in the Chinese oil market and seeking oil resources overseas.
   At that time the policy for promoting the development of the private economy had been issued for less than half a year. Private firms were trying to get quick access to oil, iron/steel and even national defense sectors. Due to the drastic price rise of resource products in the international market and the constant price rise of oil products in the domestic market, the public was dissatisfied with monopoly groups. The media launched attacks on the two big oil groups. A great deal of hot money was accumulated in various sectors with no outlets. The oil sector became a breakthrough point for toppling monopolies in China.
   Gong Jialong whose home town is in Jingzhou, Hubei province showed up. Changlian Petroleum Group was formally established, regarded as the biggest private oil alliance in China. More than 30 private oil firms joined the alliance and a lot more were ready to follow suit.
   The China Chamber of Commerce for the Petroleum Industry, controlled by Gong, had even more ambitions to gather all private forces together. According to the then secretary-general of the chamber of commerce, private firms had acquired one third of the entire oil sector and private filling stations even accounted for 52% of the national total. There were 1.0 million employees and more than 80 000 companies in the private oil sector and the value of excellent assets reached more than RMB1 000 billion.
   The later situations were however beyond expectations. Despite constant anti-monopoly appeals and attacks made by private oil enterprises, the administrative monopoly of the oil sector was like a monolithic iron block with no signs of loosening.
   Only CNPC, Sinopec Group, CNOOC and Yanchang Petroleum Group Co., Ltd. have the rights to onshore oil recovery. Only CNPC and Sinopec Group have the right to import crude oil. Being choked upstream, private refineries and filling stations could do nothing, whatever their competitiveness in other dimensions. The two big oil groups sold oil products to private filling stations at a high price. As a result private filling stations were always the first to raise retail prices or have little supply whenever the oil products market was in shortage. This situation gave the two big oil groups a new influence on the oil products market, using the private oil firms to deliberately increase the oil price in the market.
   Due to the lifting of restrictions on oil product wholesale, the high hope placed by private enterprises on benefits from WTO accession also came to naught. The Ministry of Commerce finally decided to raise the admission threshold and barred most of private firms from participation. They were not allowed to conduct oil recovery, oil import or oil wholesale. Only with isolated refineries and filling stations in hand, private firms were having a hard time.
   The international market did not come to help either. The constant price rise of crude oil in the international market and the aggravated pressure of inflation in China brought headache to policy-makers. Could private firms maintain the market stability once the market is opened? What happened afterwards was that great quantities of filling stations in private firms were shut down or sold to the two big oil groups. With no crude oil to refine, private refineries had to either shut down or process oil products for the two big oil groups on commission.
   Gong Jialong started his career in Jingzhou. With a red cap on his head like bosses of most private firms in China in the 1980s, he tangled with local governments for several dozen years. He could not get over a pernicious habit of making no clear division between different property rights. We wonder if he was unable to shake it off or he deliberately kept it for fear of losing privileges he once had in state-owned enterprises. He finally quit Tianfa Group but was still defeated by his opponent Sinopec Group.
   What is ironic is that when China started to implement the anti-monopoly law on August 1st, 2008, Gong Jialong - once an anti-monopoly warrior - was convicted on August 5th.