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CIRCULAR OF THE GENERAL OFFICE OF THE STATE COUNCIL FOR TRANSMITTING THE REQUEST SUBMITTED BY THE CHINA NATIONAL PETROCHEMICALS CORPORATION AND THE MINISTRY OF FOREIGN ECONOMIC RELATIONS AND TRADE FOR INSTRUCTIONS ON CHECKING THE ACTIVITIES BY SOME UNITS IN THE COASTAL AREAS THAT TAKE ADVANTAGE OF REFUELLING AT SEA TO ENGAGE IN ILLEGAL TRANSACTION OF FOREIGN EXCHANGE

    Petroleum and its products are important means of production and export
materials, for which there shall be a unified policy and strengthened
administration. The activities by some units in the coastal areas of Guangdong
Province and of the Guangxi Zhuang Nationality Autonomous Region that take
advantage of refuelling at sea to engage in illegal transaction of foreign
exchange have not only caused economic losses to the State but also adversely
affected the normal petroleum business operations in the region encompassing
Hong Kong and Macao. Resolute measures shall therefore be adopted to check
these activities. The People's Governments of Guongdong Province and the
Guangxi Zhuang Nationality Autonomous Region shall organize the units
concerned to earnestly investigate and rectify the situation and seriously
study and carry out the four measures put forward by the China National
Petrochemicals Corporation and the Ministry of Foreign Economic Relations and
Trade, which shall in turn send their personnel to assist the Province and the
Region in doing a good job of this work.
Request of the China National Petrochemicals Corporation and the Ministry
of Foreign Economic Relations and Trade for Instructions on Checking the
Activities by Some Units in the Coastal Areas That Take Advantage of
Refuelling at Sea to Engage in Illegal Transaction of Foreign Exchange
(Excerpts)

    Since the beginning of last year, the phenomenon has become extremely
striking in which some units and unlawful merchants take advantage of
refuelling at sea to engage in illegal transaction of foreign exchange. In
order to seek exorbitant profit, some units have, without authorization,
installed offshore filling points (or stations). Among these units, there
are commercial departments, departments for aquatic products, enterprises
jointly run by the special economic zones and the inland areas, offshore
petroleum service companies as well as enterprises run by rural people's
communes and production brigades and teams.

    At present, such illegal activities are continuing to spread. Refuelling
at sea has been developed to the extent that not only fishing boats but also
oil tankers are involved and the fuels involved include not only diesel oil
for fishing boats but also kerosene. As a result of the speculative buying
and reselling on the part of unlawful merchants, such illegal activities have
developed to the extent that they are conducted not only at sea but also on
land and the amounts of foreign exchange involved are ceaselessly increasing.
In view of the above-stated situation, drastic measures must be adopted to
resolutely ban such illegal activities. Towards this end, we propose to adopt
the following 4 measures:

    1. Petroleum is an important means of production and export material and
it is therefore imperative to strengthen the administration in this respect.
From now on, the units that shall be entitled to handle the business of
refuelling at sea shall be restricted to the sales companies affiliated to
the China National Petrochemicals Corporation or the associated units of
these sales companies and the China Vessel Fuel Supplying Corporation only
(and the fuels shall only be used for refuelling sea vessels and may not be
sold to any other units). No other units shall have a hand in the handling of
this business. It is imperative for units that are authorized to handle the
business to strengthen the administration in this respect, perfect their
management system, stop loopholes and make a special effort to prevent the
occurrence of the phenomenon in which fuels to be sold at listed prices are
sold at negotiated prices. The State Administration for Industry and Commerce
shall, in accordance with the above provisions, check up on the units engaged
in petroleum business in the offshore areas of Guangdong Province and of the
Guangxi Zhuang Nationality Autonomous Region. Any units that are found at
variance with the above provisions shall be resolutely banned and units that
are in conformity with the above provisions shall go through the procedures
of registration and be issued with business licences.

    2. With respect to the supply of fuels to fishing boats of the fishermen
with dual domicile in the coastal areas of Guangdong Province, fuels that are
supplied at listed prices shall be handled in accordance with the existing
procedures whereas high-price fuels shall, without exception, be paid in
foreign exchange. All the foreign exchange revenue therefrom shall be handed
over to the Bank of China to be changed into Renminbi. With respect to the
supply of fuels to fishing boats of inland fishermen and vessels for
communications and transportation (and, it is imperative to make a distinction
between vessels engaged in inland navigation and those engaged in ocean
transportation), the departments for aquatic products and the departments for
oil supply shall formulate supply procedures so as to prevent fuels from being
smuggled out.

    3. The supply prices of fuels to be used for refuelling fishing boats at
sea shall be exclusively administered by the China National Petrochemicals
Corporation. The various offshore filling stations shall in principle fix
their prices with reference to the prevailing market prices in Hong Kong and
Macao to be published daily by the local petroleum company. The China National
Petrochemicals Corporation shall make co-ordinations between the prevailing
oil market prices in Hong Kong and Macao and the negotiated prices of fuels to
be used for refuelling fishing boats at sea. No units may compete by lowering
selling prices.

    4. The State Administration for Industry and Commerce shall strengthen the
supervision and inspection of the offshore filling stations and the Customs
shall strengthen its anti-smuggling work.

    If there is nothing inappropriate with the above proposed measures, it is
hereby requested that they be approved and transmitted to the people's
governments at various levels in the coastal areas and the units concerned
for implementation.