From the dilemma of the National Development and Reform Commission--on the "coal oil" project
September 30 10:17:20, 2025
A source who worked at the National Development and Reform Commission (NDRC) shared with the author that the "coal-to-oil" projects have become a widespread trend across Chinese enterprises. With numerous applications flooding in from different regions, NDRC officials feel overwhelmed, caught between pressure to approve and the fear of making costly mistakes.
Approving the projects is risky. First, the construction capacity is already too large. According to data from research institutions, by 2020, China's coal-to-oil production capacity was expected to exceed 39 million tons, with investments surpassing 100 billion yuan. This capacity is nearly equivalent to the country’s current gasoline output, and many existing refineries are already idle, leading to concerns about overcapacity. Second, there's the risk of volatile international crude oil prices. Fluctuations in global markets make it hard to predict oil prices five years ahead—when these projects would begin producing. If oil prices drop below $20 per barrel, the entire project could result in total losses. Additionally, domestic coal prices are also unpredictable. Over the past few years, coal prices have risen significantly, with some areas seeing prices increase five or six times. Many of the submitted reports are based on outdated assumptions, such as the old “100 yuan per ton of coal†price.
Not approving the projects is equally challenging. Many coal-to-oil initiatives in provinces like Inner Mongolia, Yunnan, Heilongjiang, Shaanxi, Shanxi, Shandong, Ningxia, Gansu, Guizhou, Anhui, Henan, and Xinjiang have already invested heavily, often using funds from state banks. If these projects are not approved, they will be halted, leading to a waste of public resources.
This situation isn't new for the NDRC. In recent years, similar dilemmas have arisen with projects in the petrochemical industry, such as methanol, ethylene, and oil refining, all requiring national approval. These projects often push through without proper oversight, creating a culture of “forcing Gong,†where local governments and companies push for approvals regardless of feasibility.
The NDRC’s dilemma raises important questions: Why do these projects proceed despite lack of clear national guidance? The answer lies in two main factors. First, the resources and funds involved are largely state-owned, so even if there is waste, no one is held accountable. No individual faces bankruptcy for misusing public money. Second, once a project is built and completed, its decision-makers can gain recognition, promotions, and political capital. As a result, many see waste as an acceptable cost for personal advancement.
In short, the system allows for inefficiency and mismanagement, while the NDRC bears the burden. Without reform in the financial and performance evaluation systems, this cycle of waste and misjudgment will continue. It’s a critical issue that demands urgent attention.